World Economy: Free Trade and Free Trade Agreements

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World EconomyFree Trade and Free Trade
Agreements
Daniele S. Longo Vice President, Business Growth,
Healthcare Solutions, International
Affairs Northern Kentucky Chamber of
Commerce Northern Kentucky International Trade
Association
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Agenda

• Customs and Duties Background
• The Importance of Free Trade
• U.S. Free Trade Agreements Facts and Figures
• Resources

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Customs and Duties - Background

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Customs and Duties - Background

• After declaring its independence in 1776, the
  U.S, almost in bankruptcy, needed revenues.
• President George Washington, with the Tariff Act
  of July 4, 1789, authorized the collection of
  duties on imported goods.
• The Act was called "the second Declaration of
  Independence".
• Four weeks later, on July 31, the fifth act of
  Congress established Customs and its ports of
  entry.
• For nearly 125 years, Customs funded virtually
  the entire government, and paid for the nation's
  early growth and infrastructure.
• By 1835, Customs revenues alone had reduced the
  national debt to zero!

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ExamplesPurchase of Louisiana, Oregon, Florida
and AlaskaNational Road from Cumberland,
Maryland, to Wheeling, West VirginiaTranscontine
ntal RailroadLighthouses U.S. military and
naval academiesCity of Washington.

• Examples
• Purchase of Louisiana, Oregon, Florida and
  Alaska
• National Road from Cumberland, Maryland, to
  Wheeling, West Virginia
• Transcontinental Railroad
• Lighthouses
• U.S. military and naval academies
• City of Washington.

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Most of the rates of the revenue tariff were
between 5 and 10 percent, depending on the value
of the item.Secretary of Treasury Alexander
Hamilton was anxious to establish the tariff as a
regular source of government revenue and to
encourage the growth of domestic manufacturing to
lessen America's then-heavy dependence on
foreign-made products.Still a source of revenue
(over 16.00 return) to the taxpayer for every
dollar appropriated by Congress.U.S. Customs
Service was the parent or forerunner to many
other agenciesAdministration of military
pensions (Department of Veterans Affairs)
Collection of import and export statistics
(Bureau of Census) Supervised revenue cutters
(U.S. Coast Guard)Collected hospital dues to
help sick and disabled seamen (Public Health
Service)Established standard weights and
measures (National Bureau of Standards).
U.S. Customs Service - More Than 200 Years of
History(09/08/2010)  After declaring its
independence in 1776, the struggling young nation
found itself on the brink of bankruptcy.
Responding to the urgent need for revenue, the
First Congress passed and President George
Washington signed the Tariff Act of July 4, 1789,
which authorized the collection of duties on
imported goods. It was called "the second
Declaration of Independence" by the news media of
that era. Four weeks later, on July 31, the fifth
act of Congress established Customs and its ports
of entry.



                                                     

• Most of the rates of the revenue tariff were
  between 5 and 10 percent, depending on the value
  of the item.
• Secretary of Treasury Alexander Hamilton was
  anxious to establish the tariff as a regular
  source of government revenue and to encourage the
  growth of domestic manufacturing to lessen
  America's then-heavy dependence on foreign-made
  products.
• Still a source of revenue (over 16.00 return) to
  the taxpayer for every dollar appropriated by
  Congress.
• U.S. Customs Service was the parent or forerunner
  to many other agencies
• Administration of military pensions (Department
  of Veterans Affairs)
• Collection of import and export statistics
  (Bureau of Census)
• Supervised revenue cutters (U.S. Coast Guard)
• Collected hospital dues to help sick and disabled
  seamen (Public Health Service)
• Established standard weights and measures
  (National Bureau of Standards).

                                                                      
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When shipments of goods arrive at a border
crossing or port, customs officersInspect the
contentsCharge a tax according to the tariff
formula.Since the goods cannot continue on
their way until the duty is paid, it is the
easiest duty to collect, and the cost of
collection is small.

• When shipments of goods arrive at a border
  crossing or port, customs officers
• Inspect the contents
• Charge a tax according to the tariff formula.
• Since the goods cannot continue on their way
  until the duty is paid, it is the easiest duty to
  collect, and the cost of collection is small.

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The Importance of Free Trade

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The Importance of Free Trade

• Definition
• Unilateral or bilateral treaty between two or
  more countries allowing commerce in goods and
  services without tariffs.
• Examples
• NAFTA
• CAFTA
• EU

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The Importance of Free Trade

• Free Trade Agreements Unite States

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The Importance of Free Trade

• Free Trade Agreements European Union

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The Importance of Free Trade
European Union
United States
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Example TurkeyPopulation 77MAge 15-65
66PPP 12,300Imports166.3 billion
(2010)Machinery, Chemicals, Semi-finished
goods, fuels, transport equipmentFTAs EU,
Macedonia, Croatia, Bosnia-Herzegovina, Tunisia,
Morocco, the Palestinian Authority, Syria, Egypt,
Georgia and Albania

• Example Turkey
• Population 77M
• Age 15-65 66
• PPP 12,300
• Imports
• 166.3 billion (2010)
• Machinery, Chemicals,
• Semi-finished goods, fuels,
• transport equipment
• FTAs EU, Macedonia, Croatia, Bosnia-Herzegovina,
  Tunisia, Morocco, the Palestinian Authority,
  Syria, Egypt, Georgia and Albania

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Importance of Free Trade
PriceSale Price Tariff
PriceSale Price
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U.S. free trade Agreements Facts and Figures

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U.S. FTAs Facts and Figures

• Trade agreements
• Help open markets.
• Expand opportunities for American workers and
  businesses.
• Help companies enter and compete more easily in
  the global marketplace.
• Promote fair competition
• May include
• Intellectual property right protection
• Labor rights
• Government procurement
• Service sectors
• Environmental standards

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U.S. FTAs Facts and Figures

• Current FTAs

Country 2007 MMUSD 2008 MMUSD Percent Change
NAFTA 384, 806 412, 369 6.45
Canada 213,118 222,424 4.40
Mexico 119,381 131,507 10.20
CAFTA-DR 21,274 23,922 12.45
Costa Rica 4,224 5,047 19.50
Dominican Rep 5,793 6,293 8.60
Guatemala 3,872 4,493 16.00
Honduras 4,327 4,699 8.60
Nicaragua 846 1,030 21.70
El Salvador 2,209 2,357 6.70
Australia 17,916 20,948 16.90
Bahrain 565 779 37.80
Chile 7,610 11,366 49.40
Israel 9,940 10,238 3.00
Jordan 831 904 8.70
Morocco 1,333 1,506 12.90
Oman 1,034 1,380 33.40
Peru 3,764 5,686 51.10
Singapore 23,576 25,655 8.80
Total 420,348 456,319 8.60
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U.S. FTAs Facts and Figures

• Pending FTAs
• Colombia
• Panama
• South Korea
• Current Negotiations
• Malaysia
• Thailand
• United Arab Emirates
• Southern African Customs Union (SACU) which
  includes Botswana, Lesotho, Namibia, South
  Africa, and Swaziland.

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U.S. FTAs Facts and Figures

• Exports from Kentucky to FTA countries have
  increased since the year of the FTA
  implementation
• North American Free Trade Agreement 247 increase
  since 1994
• U.S.-Singapore Free Trade Agreement76 increase
  since 2004
• U.S.-Australia Free Trade Agreement12 increase
  since 2005U.S.
• Dominican Republic-Central America FTA114
  increase since 2006

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U.S. FTAs Facts and Figures

• Trade Benefits for Kentucky
• In 2008, Kentucky exported 19.1 billion in
  manufactured goods, which supported over 154,000
  manufacturing jobs.
• In 2008, Kentucky exported 1.6 billion in
  agricultural products, which supported over
  18,500 agricultural jobs.
• 77 of the 3,101 Kentucky companies that exported
  goods in 2007 were small and medium-sized
  enterprises with fewer than 500 employees.

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Resources

• www.cia.gov
• www.export.gov
• http//www.traderoots.org/