a

GAO

United States General Accounting Office

Report to Congressional Requesters

January 2004 INTERNATIONAL 

TRADE

Intensifying Free 

Trade Negotiating 

Agenda Calls for 

Better Allocation of 

Staff and Resources

GAO-04-233
www.gao.gov/cgi-bin/getrpt?GAO-04-233.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Loren Yager at 

(202) 512-4347 or yagerl@gao.gov. 

Highlights of GAO-04-233, a report to 

congressional requesters 

January 2004

INTERNATIONAL TRADE 

Intensifying Free Trade Negotiating 

Agenda Calls for Better Allocation of Staff 

and Resources 

The Trade Representative used 13 factors in selecting four potential FTA 

partners in 2002 (Australia; the Central American Free Trade Area, a 

subregional group of five Central American countries; the Southern Africa 

Customs Union of five countries; and Morocco). Subsequently, selected 

executive branch agencies decided to use six broad factors—country 

readiness, economic/commercial benefit, benefits to the broader trade 

liberalization strategy, compatibility with U.S. interests, 

congressional/private-sector support, and U.S. government resource 

constraints. These decisions are not mechanical, and the factors cited most 

often regarding the selected FTA partners primarily reflect U.S. trade 

strategy, foreign policy, and foreign economic development goals. 

The interagency process for selecting FTA partners now involves four 

interagency groups that use decision papers to assess potential FTA partners 

and make recommendations that eventually go to the president. This new 

process is more systematic and inclusive than the process previously used. 

The Office of the U.S. Trade Representative (USTR) reports that it routinely 

considers the Congress’s views in making selections. 

Decisions about FTA partners are made with little systematic data or 

planning regarding trade-offs with other trade priorities, even though FTAs 

are resource intensive. USTR staff and travel funds are heavily committed to 

FTAs, and USTR relies on specialists at other agencies as well. As more 

FTAs are contemplated, existing mechanisms may prove inadequate to the 

task of aggressively pursuing a bilateral FTA agenda while remaining 

engaged in regional and multilateral forums. 

USTR Sequences FTAs in Four Regions to Negotiate Ambitious FTA Agenda 

Office of the Americas

Office of Southeast Asia, Pacific, and APEC Affairs

Office of African Affairs

Office of Europe and Mediterranean Affairs

USTR regional specialists FTAs

SACU

Morocco Bahrain

Thailand

2003 2004 2005

Dominican

Chile CAFTA Republic

FTAA

Singapore Australia

Sources: GAO and MapArt.

Country not yet decided

Andean countries

Panama

Note: Actual ending dates may differ from those shown in the figure. 

Free trade agreements (FTA) 

involve trade liberalization 

between the United States and 

selected countries or regions and 

are also expected to provide 

economic and other benefits. GAO 

was asked to review how potential 

FTA partners are selected, in view 

of the increased number of FTAs 

and their growing importance to 

U.S. policy. Specifically, GAO (1) 

provided information about the 

factors influencing the selection of 

FTA partners, (2) analyzed the 

interagency process for selecting 

FTA partners, and (3) assessed 

how the executive branch makes 

decisions about the availability and 

allocation of resources to FTAs. 

GAO recommends that USTR work 

with other key trade agencies to 

develop more systematic data and 

plans for allocating staff and 

resources across the full U.S. trade 

agenda, including FTAs and other 

negotiating priorities. 

The Trade Representative agreed 

that the intensifying trade 

negotiation agenda requires 

management improvements, but he 

disagreed with our specific 

recommendation. He attributes the 

main cause of strain at USTR to the 

amount of resources. We believe 

that better data and plans will 

promote the flexibility needed to 

respond to USTR’s demanding 

multilateral, hemispheric, and 

bilateral FTA negotiations. 
Page i GAO-04-233 International Trade

Contents

Letter 1

Results in Brief 2

Background 3

Early FTA Selections Were Based Primarily on the Trade 

Representative’s Evaluation; New Interagency Process Uses Six 

Factors 7

The Administration Has Enhanced Its Interagency Process for 

Assessing Potential FTA Partners 12

Ambitious FTA Agenda Calls for Better Resource Management 16

Conclusions 27

Recommendation for Executive Action 27

Agency Comments and Our Evaluation 28

Appendixes

Appendix I: Objectives, Scope, and Methodology 31

Appendix II: European Union and United States Free Trade Agreements, 

by Region 34

Appendix III: U.S. Trade with Potential and Existing FTA Partners 35

Appendix IV: Selected U.S. Free Trade Agreement Partner Profiles 37

U.S.-Australia FTA 37

U.S.-Bahrain FTA 40

U.S.-Chile FTA 42

U.S.-Dominican Republic FTA 44

U.S.-Morocco FTA 47

U.S.-Singapore FTA 49

U.S.-CAFTA FTA 52

U.S.-SACU FTA 54

Appendix V: Comments from the Office of the U.S. Trade 

Representative 57

GAO Comments 64

Appendix VI: GAO Contacts and Staff Acknowledgment 66

GAO Contacts 66

Staff Acknowledgments 66

Tables Table 1: Fiscal Year 2003 USTR Nonstaff Costs for Negotiating 

FTAs 19
Contents

Page ii GAO-04-233 International Trade

Table 2: Estimated Agency Staff on U.S. Negotiating Teams for 

Completed Rounds of FTA Negotiations, as of October 

2003 20

Table 3: International Trade Administration Free Trade Agreement 

Resource Allocation, Fiscal Year 2003 21

Table 4: U.S. Trade with Potential and Existing FTA Partners, 

2002 35

Figures Figure 1: FTA Time Line, 1985–2003 6

Figure 2: Interagency Process for FTA Partner Selection and 

Notification to the Congress 15

Figure 3: Selected Milestones for U.S. Trade Agreement 

Negotiations, 2000–05 18

Figure 4: USTR Sequences FTAs in Four Regions to Negotiate 

Ambitious FTA Agenda 23
Contents

Page iii GAO-04-233 International Trade

Abbreviations

AGOA African Growth and Opportunity Act

APEC Asia-Pacific Economic Cooperation

ASEAN Association of Southeast Asian Nations

CAFTA Central American Free Trade Agreement

CARICOM Caribbean Community

FTA Free Trade Agreement

FTAA Free Trade Area of the Americas

GCC Gulf Cooperation Council

GSP Generalized System of Preferences

MEFTA Middle East Free Trade Area

NAFTA North American Free Trade Agreement

NEC National Economic Council

NSC National Security Council

SACU Southern African Customs Union 

TPA Trade Promotion Authority

TPRG Trade Policy Review Group

TPSC Trade Policy Staff Committee

USTR Office of the U.S. Trade Representative

WTO World Trade Organization

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Page 1 GAO-04-233 International Trade

United States General Accounting Office

Washington, D.C. 20548

A

January 12, 2004 Letr

The Honorable Max Baucus

Ranking Minority Member, Committee on Finance

United States Senate

The Honorable Calvin Dooley

House of Representatives

Free trade agreements (FTA) have recently been the subject of much 

attention as the United States undertakes negotiations with multiple 

negotiating partners. FTAs involve liberalization of trade between the 

United States and selected countries or regions and are also expected to 

provide economic and other benefits. The passage of trade promotion 

authority legislation in 2002 has positioned the United States to pursue 

more FTAs, because this authority has streamlined the agreement approval 

process through the U.S. Congress. Because FTA negotiations call upon 

many experts from the Office of the U.S. Trade Representative (USTR) and 

other agencies, they are resource intensive. The recent collapse of the 

World Trade Organization (WTO) trade talks at a September 2003 meeting 

in Cancun, Mexico, is expected to make FTAs a more important vehicle for 

accomplishing U.S. trade goals.

As a result of this increase in the number of FTAs and their growing 

importance to U.S. trade policy, you asked us to review how potential FTA 

partners are selected. More specifically, you asked us to (1) provide 

information about the factors that influence the selection of FTA partners 

and how these factors have been applied; (2) analyze the interagency 

process for selecting FTA partners, including how USTR coordinates the 

views of key trade agencies and consults with the Congress, and business 

and public interest groups; and (3) assess how the administration makes 

decisions regarding the availability and allocation of resources to FTAs and 

other trade priorities, such as the regional Free Trade Area of the Americas 

(FTAA) and multilateral talks at the WTO.

To meet these objectives, we reviewed documents from the key U.S. 

agencies involved in the process of selecting FTA partners, including USTR, 

and the departments of State, Commerce, Agriculture, and the Treasury. In 

addition, we interviewed key executive branch officials, including the U.S. 

Trade Representative. (App. I provides detailed information on our 

objectives, scope, and methodology.)
Page 2 GAO-04-233 International Trade

Results in Brief Various factors influence FTA partner selections. Four FTA partners were 

selected in 2002, primarily on the basis of the Trade Representative’s own 

evaluation of 13 factors related to U.S. political, economic, and trade 

strategy goals. After the four selections in 2002, the key trade agencies 

decided to use six broad factors to guide their future discussions on 

potential FTA partners. These factors are (1) country readiness, (2) 

economic and commercial benefits, (3) benefits to the broader trade 

liberalization strategy, (4) compatibility with U.S. interests, (5) 

congressional and private-sector support, and (6) U.S. government 

resource constraints. Senior trade officials with whom we spoke stressed 

that FTA partner decisions are not mechanical and take into consideration 

the President’s goal of making significant progress in liberalizing global 

trade within and across geographic regions. The factors cited most often 

regarding the FTA partners that were selected to date primarily reflect U.S. 

strategic, foreign policy, and foreign economic development goals.

The interagency process for selecting FTA partners has become more 

systematic since 2002 and routinely considers input from the Congress and 

the private sector. Up through 2002, only a cabinet-level group, composed 

of the Trade Representative and some counterparts in key trade agencies, 

assessed potential FTA partners. Some high-level agency officials told us 

that they provided input to these deliberations, but others said the process 

had been ad hoc and exclusive. Subsequently, in May 2003, the National 

Security Council advanced guidelines to improve the process of assessing 

potential partners by, among other things, expanding the number of 

interagency groups involved in the assessments. Agencies used this new 

process for assessing the Dominican Republic as a potential FTA partner. 

U.S. officials with whom we spoke expressed satisfaction with the new 

process because it allows wider interagency participation and uses 

decision papers to guide deliberations. USTR officials said that they keep 

the Congress apprised of the countries under consideration as FTA 

partners, and that they regularly receive input from the Congress and from 

business and nongovernmental groups on potential FTA partners as part of 

the process. 

The administration’s overall trade liberalization strategy has driven 

decisions about deploying resources to advance the U.S.’s ambitious FTA 

negotiating agenda. However, decisions to pursue FTAs have been made 

with little systematic planning regarding trade-offs with other trade 

priorities, even though FTAs are resource intensive. USTR staff and travel 

funds are heavily committed to FTAs. For example, FTA-related travel 
Page 3 GAO-04-233 International Trade

accounted for 37 percent of USTR’s travel budget in fiscal year 2003. USTR 

also relies on specialists at other agencies to assist with negotiations and 

analysis. USTR is taking steps, such as sequencing negotiations, to address 

these constraints. Because of concerns over the resources required to 

accomplish the growing FTA negotiating agenda, the consideration of 

resource constraints has now been included as one of the factors used for 

selecting FTA partners. However, decisions to pursue FTAs still come 

without systematic data or planning for the actual resources that USTR or 

other agencies require. As more FTAs are contemplated in the wake of the 

failed Cancun WTO talks, existing mechanisms may prove inadequate to 

the task of aggressively pursuing a bilateral FTA agenda while remaining 

engaged in regional and multilateral forums.

In this report, we are recommending that USTR work with other key trade 

agencies to develop more systematic data and plans for allocating staff and 

resources across the full U.S. trade agenda, including FTAs and other 

negotiating priorities.

Background Under its constitutional authority to regulate commerce with foreign 

nations, the Congress has enacted laws authorizing the President to enter 

into trade agreements with other countries to reduce tariff and nontariff 

barriers.1

 One major recent law to provide this authority is the Bipartisan 

Trade Promotion Authority Act of 2002 (TPA).2 The TPA legislation sets

1

Nontariff barriers are those that are not related to tariff levels but nevertheless impose 

obstacles to trade. Examples include quantitative restrictions (quotas) on imports and 

requirements that importers obtain licenses to import certain products.

2

Pub. L. No. 107-210, §§ 2101-13, 116 Stat. 993-1022. This act was part of larger legislation 

entitled the Trade Act of 2002, 116 Stat. 933. The trade promotion authority continues 

through June 1, 2005, or June 1, 2007, if extended by the President without disapproval of 

the Congress.
Page 4 GAO-04-233 International Trade

forth U.S. trade negotiating objectives that apply to negotiating FTAs.3 

However, the TPA legislation does not impose any specific criteria on the 

President for choosing FTA partners, except that the President must take 

into account the extent to which the negotiating partner has implemented 

or has accelerated implementation of its WTO obligations.4

Other trade legislation encourages pursuit of FTA negotiations. For 

example, in the 2000 African Growth and Opportunity Act,5

 the Congress 

declared that FTAs should be negotiated with interested sub-Saharan 

African countries. Furthermore, in the United States-Caribbean Basin 

Trade Partnership Act, the Congress declared that it was the policy of the 

United States to seek the participation of Caribbean Basin beneficiary 

countries in the FTAA or another FTA, with the goal of achieving full 

participation in any such agreement by 2005.6

USTR, the President’s principal trade policy advisor and coordinator, has 

the lead responsibility for the formulation and coordination of trade policy; 

the negotiation of trade agreements, including FTAs; and the enforcement 

of trade agreements. Under the Trade Expansion Act of 1962, President 

John F. Kennedy established an interagency trade policy organization to be 

chaired by USTR to assist with these and other trade responsibilities.7

 

Currently, this organization consists of three tiers of committees, which 

from the lowest tier to the highest tier are the Trade Policy Staff Committee 

3

The overall objectives set forth in TPA include obtaining greater market access and 

reducing or eliminating trade barriers; enhancing economic growth, raising living standards, 

and promoting full employment in the United States; ensuring that trade and environmental 

policies are mutually supportive; and promoting respect for worker rights. The principal 

objectives include expanding competitive market opportunities for U.S. exports, including 

agricultural products; reducing or eliminating barriers to international trade in services and 

foreign investment; enhancing intellectual property rights protection; obtaining wider and 

broader application of transparency; seeking provisions in trade agreements providing for 

effective dispute resolution; and preserving the ability of the United States to rigorously 

enforce its trade laws. Pub. L. No. 107-210, § 2102, 116 Stat. 994-1001. 

4

Id. § 2102(e), 116 Stat. 1004.

5

Pub. L. No. 106-200, 114 Stat. 251-75.

6

Id. §§ 202(b) and 213, 114 Stat. 276, 288. This legislation also required the President to take 

necessary steps to convene a meeting with the trade ministers of these countries to 

establish a schedule of meetings on the likely timing for initiating negotiations for entering 

into FTAs with the United States. 

7

See 19 U.S.C. § 1872.
Page 5 GAO-04-233 International Trade

(TPSC), the Trade Policy Review Group (TPRG), and the National Security 

Council/National Economic Council (NSC/NEC). Within this framework, 

USTR coordinates with Commerce, Agriculture, State, and Treasury and 

other U.S. agencies as issues needing their expertise arise. 

The United States currently has five FTAs with six nations: Israel (1985), 

Canada (1989), Mexico (1994),8 Jordan (2001), Singapore (2003), and Chile 

(2003). The United States has already begun negotiating four more 

bilateral or subregional FTAs with Central America, the Southern Africa 

Customs Union (SACU), Australia, and Morocco. USTR has announced 

that it plans to negotiate FTAs with the Dominican Republic; Bahrain; 

Panama; and the Andean countries of Colombia, Peru, Ecuador, and 

Bolivia. In addition, in October 2003, the President announced the U.S.’s 

intent to negotiate an FTA with Thailand. Other countries are under 

consideration as FTA partners. For a general time line of U.S. FTAs since 

1985, see figure 1. 

8

The U.S.-Canada FTA was suspended in 1994 and superseded by the North American Free 

Trade Agreement. 
Page 6 GAO-04-233 International Trade

Figure 1: FTA Time Line, 1985–2003

Source: GAO.

1985 1986 1987 1988 1989 1990 1991

1980s 1990s 2000s

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

4/85:

U.S. - Israel 

FTA

1/89: 

U.S. - Canada 

FTA

4/98:

FTAA 

negotiations 

begin

5/03: NSC 

issues 

interagency 

guidelines

7/03: U.S. - 

Chile FTA and 

U.S. - Singapore 

FTA 

(congressional 

approval)

8/03: 

USTR notifies 

Congress 

about 

Dominican 

Republic and 

Bahrain 

negotiations

11/03: 

USTR notifies 

Congress 

about Andean 

countries and 

Panama 

negotiations

8/02: Congress 

passes TPA

10/02: USTR notifies 

Congress about 

CAFTA and Morocco 

negotiations

11/02: USTR 

notifies Congress 

about Australia and 

SACU negotiations

12/01: U.S. - Jordan FTA

1/94:

NAFTA

CAFTA Central American Free Trade Agreement

FTA Free Trade Agreement

FTAA Free Trade Area of the Americas

NAFTA North American Free Trade Agreement

NSC National Security Council

SACU Southern African Customs Union

TPA Trade Promotion Authority

USTR Office of the U.S. Trade Representative
Page 7 GAO-04-233 International Trade

Early FTA Selections 

Were Based Primarily 

on the Trade 

Representative’s 

Evaluation; New 

Interagency Process 

Uses Six Factors 

The factors used since the 2002 selection of FTA negotiating partners have 

evolved. According to the Trade Representative and other U.S. officials, 

the Trade Representative chose the first four FTA partners on the basis of 

his own evaluation of factors and after he had consulted the President and 

certain other high-level officials in several other agencies. Subsequently, 

the NSC coordinated the views of key trade agencies, which decided to use 

six factors in a revised interagency process to recommend proposed FTA 

partners to the President. 

The Trade Representative 

Used 13 Factors for Early 

Selections

The Trade Representative told us that his early FTA proposals emerged 

from his evaluation of 13 factors he developed over time—the same factors 

that the Trade Representative and other USTR officials continue to use. 

However, he cautioned that these factors “carry no coefficients”—that is, 

they do not have relative weights. The Trade Representative described the 

factors in some detail, with examples.

• Congressional guidance. According to the Trade Representative, his 

office consults with the Congress before and after FTA selection to 

ensure support and eventual congressional approval. USTR officials 

also examine public support, including the ethnic components of such 

support.

• Business and agricultural interest. The Trade Representative 

considers the views of business and agriculture and evaluates both 

current and future economic benefits of a potential FTA.

• Special product sensitivities. The Trade Representative assesses how 

an FTA will adversely affect certain sectors and products, such as 

textiles and sugar. 

• Serious political will of the prospective partner to undertake needed 

trade reforms. The Trade Representative considers the political will in 

the foreign country to enact and implement trade reforms. He also 

assesses the country’s trade capabilities and the candidate’s track 

record in meeting current trade obligations. 

• Willingness to implement other reforms. The Trade Representative 

stated that FTAs are a development tool that may help promote other 
Page 8 GAO-04-233 International Trade

economic reforms. The United States views these reforms as links to 

market-oriented economic development and future growth. Prospective 

FTA partners are expected to show serious intention in this regard to 

ensure that they understand (1) how important it is to make this 

commitment to reform and (2) the extent of the obligations that a 

comprehensive FTA with the United States involves. 

• Commitment to WTO and other trade agreements. USTR considers a 

potential FTA partner’s commitment to the trade disciplines in the WTO 

and the commitments being discussed at the ongoing FTAA 

negotiations.

• Contribution to regional integration. The United States has put in 

place initiatives to advance U.S. goals on a regional basis and foster 

regional economic integration. The Trade Representative told us that 

the Central American Free Trade Agreement (CAFTA)—Costa Rica, El 

Salvador, Guatemala, Honduras, and Nicaragua—and Chile FTAs have 

the potential to help integrate the whole region by helping to enact and 

implement the FTAA. Similarly, the SACU FTA may also help the 

integration of these five African countries (South Africa, Botswana, 

Lesotho, Namibia, and Swaziland). 

• Support of civil society groups. The Trade Representative highlighted 

the views of labor and environmental groups as important components 

of FTA selections because these views affect prospects of congressional 

passage. 

• Cooperation in security and foreign policy. The Trade Representative 

considers the extent to which potential partners are willing to support 

U.S. security and foreign policy objectives. For example, Jordan, 

Morocco, and Bahrain support U.S. objectives in the Middle East, and 

the CAFTA nations supported U.S. objectives in Iraq. 

• Need to counter FTAs that place U.S. commercial interests at a 

disadvantage. The Trade Representative is interested in negotiating 

FTAs that will offer U.S. commercial interests opportunities on a par 

with other countries that already have FTAs. (See app. II for a list of 

European Union and U.S. FTAs.) 

• Need to do FTAs in each of the world’s major regions. The Trade 

Representative prefers to negotiate FTAs in each of the major regions of 

the world: Asia (Singapore, Australia, and Thailand); the Middle East 
Page 9 GAO-04-233 International Trade

(Jordan, Morocco, and Bahrain); Africa (SACU); and the Americas 

(CAFTA and the Dominican Republic).

• Need to ensure a mix of developed and developing countries. The 

Trade Representative also seeks FTAs with both developed and 

developing countries—for example, Australia and SACU. Developing 

countries are a key to trade growth because they account for a 

significant share of the world’s population and represent an important 

negotiating bloc in the WTO.9

• Demand on USTR resources. The Trade Representative recognizes that 

the resources needed for FTA negotiations are not unlimited.

Agencies Now Consider Six 

Factors 

As a result of discussions among relevant agencies, six factors now guide 

the discussions in selecting future FTA partners.

• Country readiness. Country readiness involves the country’s political 

will, trade capabilities, and rule of law systems.10 U.S. agencies involved 

in FTA partner selection discussions may interpret this factor somewhat 

differently, since each agency filters the information though the lens of 

its specific mission. For example, USTR may review a prospective 

candidate’s adherence to trade obligations and its leaders’ commitment 

to negotiating all trade issues that currently comprise the 

comprehensive FTAs that the United States seeks to negotiate. 

However, Treasury may look at the candidate’s overall macroeconomic 

stability and the strength of its financial and banking system.

• Economic/Commercial benefit. According to U.S. officials, the 

interagency group reviews the likely economic benefit to the United 

States. It assesses macroeconomic benefits (trade and investment 

potential) and the likely effects on specific products and sectors. (See 

app. III for potential and existing FTA partners’ share of total U.S. trade.)

9

The World Bank classifies 105 WTO members, or approximately 73 percent, as developing 

countries.

10According to the U.S. Agency for International Development, the rule of law embodies the 

basic principles of equal treatment of all people before the law and is founded on a 

predictable and transparent legal system with fair and effective judicial and law 

enforcement institutions to protect citizens against the arbitrary use of state authority and 

lawless acts.
Page 10 GAO-04-233 International Trade

• Benefits to the broader trade liberalization strategy. This factor relates 

to the prospective FTA partner’s overall support for U.S. trade goals. 

Other elements considered within this category are the potential FTA 

partner’s willingness to resolve trade problems through its participation 

in a Trade and Investment Framework Agreement with the United 

States, success in meeting its WTO obligations, and support of key U.S. 

positions in FTAA and WTO negotiations.

• Compatibility with U.S. interests. A potential FTA partner is examined 

for its compatibility with broad U.S. interests, including its support for 

U.S. foreign policy positions. One USTR official stated that sometimes a 

foreign leader’s visit can prompt serious discussions that lead to that 

country’s consideration as a future FTA partner. Likewise, the Trade 

Representative’s foreign travels also are important in bringing attention 

to a possible FTA with a particular country. However, other 

requirements, including but not limited to WTO membership and a Trade 

and Investment Framework Agreement, must still be met.

• Congressional/Private-sector support. Agencies also review the extent 

to which a particular FTA selection has garnered support from the 

Congress, business groups, and civil society.

• U.S. government resource constraints. This factor focuses primarily on 

constraints at USTR—what regional office is available to lead the 

negotiation, what staff are available, and how the timing may affect 

meeting postnegotiation TPA requirements. Other agencies’ resources 

also play a role in this discussion. 

Selections Are Not 

Mechanical; Trade Strategy 

and Foreign Policy 

Considerations 

Predominate

In terms of how the six selection factors are applied, according to officials 

that we interviewed, the broad factors guide the discussion, but they are 

not hard-and-fast decision rules. Moreover, administration decision 

makers have not set thresholds for eligibility determinations. Key officials 

told us that USTR’s views are central but that the now-standard discussion 

of the factors permits each participating executive agency to contribute its 

perspective, thus potentially adding to issues that USTR needs to address 

in the future negotiations. For example, other agencies may be aware that 

a prospective partner has engaged in money laundering or human rights 

abuses or has been slow to resolve intellectual property disputes. 

As illustrated below, the FTA selections made to date in 2002-03 primarily 

reflect U.S. trade strategy, foreign policy, and foreign economic goals. (See 
Page 11 GAO-04-233 International Trade

app. IV for more details on specific FTA partners.) According to USTR, the 

administration is working aggressively on its “competitive liberalization” 

strategy, because it seeks to spur progress by creating a positive dynamic to 

liberalize trade on multiple levels: bilaterally, regionally, and multilaterally. 

USTR also reports that the U.S.’s willingness to pursue bilateral FTAs has 

bolstered countries’ interest and encouraged them to make the changes 

necessary to enter into FTA negotiations with the United States. 

• Australia. This FTA negotiation represents the greatest immediate 

commercial benefit of any single ongoing FTA, with 1.2 percent of total 

U.S. trade in 2002. A U.S.-Australia FTA would add to the regional 

distribution of FTAs for the United States and would strengthen U.S. ties 

to a valued ally. The increased U.S. access to Australia’s market would 

likely increase trade in goods and services, enhance employment 

opportunities, and encourage additional two-way investment.

• Bahrain. Although Bahrain represents a small share of U.S. trade, an 

FTA with this U.S. ally and moderate Muslim nation would support U.S. 

security and political goals by fostering prosperity in the region. As a 

stepping-stone to an eventual Middle East Free Trade Area, Bahrain 

could become the hub of a subregional block of countries with closer 

trading relationships with the United States. An FTA with Bahrain might 

be completed relatively quickly due to Bahrain’s reform-minded outlook.

• Central American Free Trade Agreement. The commercial benefit of an

FTA with five Central American countries would be 0.95 percent of total 

U.S. trade. In the United States-Caribbean Basin Trade Partnership Act, 

the Congress declared that it was the policy of the United States to seek 

the participation of Caribbean Basin beneficiary countries in the FTAA 

or another FTA, with the goal of achieving full participation in any such 

agreement by 2005.11 CAFTA would provide regional balance among 

FTAs and add to the momentum for the hemispherewide FTAA, a major 

U.S. trade priority. It would also help lock in and broaden reforms such 

as anticorruption and government accountability measures, support 

economic integration within the region, and enable the United States to 

increase exports and gain U.S. access to more affordable goods. 

11Pub. L. No. 106-200, §§ 202(b), 213, 114 Stat. 276, 288. This legislation also required the 

President to take necessary steps to convene a meeting with the trade ministers of these 

countries to establish a schedule of meetings on the likely timing for initiating negotiations 

for entering into FTAs with the United States. 
Page 12 GAO-04-233 International Trade

• Dominican Republic. If the Dominican Republic is added to the overall 

CAFTA region, it would bring the CAFTA trade from 0.95 percent to 1.32 

percent of total U.S. trade in 2002, slightly more than that of Australia. 

The Dominican Republic had strong support in the Congress for its 

addition to the CAFTA negotiations, in part because excluding it from 

CAFTA could lead to adverse economic consequences in the Dominican 

Republic. However, according to a key participant in the discussion, the 

decision to add the Dominican Republic also included careful 

consideration of U.S. concerns about its protection of intellectual 

property rights and its status as one of the worst offenders on human 

trafficking. 

• Morocco. Although a U.S.-Morocco FTA would have minimal trade 

benefit to the United States, one USTR official stated that this FTA 

would further the administration’s goal of promoting openness, 

tolerance, and economic growth across the volatile Middle East. 

Morocco, a moderate Muslim country, also signaled its readiness to 

enter into a comprehensive FTA by demonstrating its willingness to 

liberalize its economy and make domestic reforms.

• Southern Africa Customs Union.12 Responding to congressional 

guidance in the 2000 African Growth and Opportunity Act, USTR 

inititated FTA negotiations with SACU in November 2002. This FTA 

contributes to the U.S.’s desire for regional balance among FTAs, creates 

an opportunity for the United States to build trade capacity in the 

region, and strengthens SACU’s role as a negotiating partner in other 

trade forums, such as the WTO. The commercial benefit of this FTA 

represents 0.42 percent of total U.S. trade.

The Administration 

Has Enhanced Its 

Interagency Process 

for Assessing Potential 

FTA Partners

The selection of FTA partners has evolved from a limited high-level 

consultation to a more systematic and deliberative process involving more 

U.S. officials. USTR keeps the Congress apprised of potential FTA partners 

and routinely considers the Congress’s views in making selections. 

Business and other nongovernmental groups have also provided their 

views to USTR on potential FTA partners and FTA negotiations.

12According to the WTO, a customs union is organized to permit the free exchange of goods 

among its members and has a common external tariff. 
Page 13 GAO-04-233 International Trade

Initially, the Trade 

Representative Consulted 

with Counterparts

In February 2002, the Trade Representative made recommendations for 

potential FTA partners to a cabinet-level interagency group under the 

leadership of the NSC/NEC. According to agency officials, this interagency 

group informally assessed the proposed countries and offered a consensus 

recommendation to the President, who named the four FTAs that are 

currently under negotiation (Australia, CAFTA, Morocco, and SACU). We 

found no evidence that this group used decision papers on the potential 

partners to guide its deliberations. Nevertheless, some high-level U.S. 

officials we interviewed confirmed that they provided USTR and other key 

trade agencies with input at the time and were on board with the final 

selections. Other officials, however, expressed concern that the 

discussions of the four FTAs had been ad hoc and that they had not been 

able to provide important input. 

Also, in February 2002, the cabinet-level interagency group directed their 

deputies to make the process more systematic by formalizing the factors 

that would be used for assessing future FTA partners. The desire to have a 

more systematic interagency process for assessing partners was largely 

driven by the expected growth in the number of potential FTAs that would 

follow the enactment of the trade promotion authority legislation.

Recently Enhanced 

Interagency Process Is More 

Deliberative and Inclusive

In May 2003, the NSC/NEC issued guidelines on assessing potential FTA 

partners. In addition to identifying the factors to be used, the guidelines 

make the interagency process more inclusive by supporting the use of four 

standing interagency groups for in-depth deliberations.13 Each group in 

turn is to use decision papers to assess potential FTA partners and make 

recommendations for consideration at the next level, all the way up to the 

President. After the President selects an FTA partner, he is to notify the 

Congress, through USTR, at least 90 days before he intends to start FTA 

negotiations with the selected partner. USTR consults with the 

Congressional Oversight Group before sending its notification letter about 

a prospective FTA negotiation to the Congress.

As shown in figure 2, the selection process is initiated by USTR and begins 

with the assessments of potential FTA partners by the TPSC and the TPRG. 

13In 1962, as noted in our Background section, the President established these groups under 

USTR and the NSC/NEC, respectively, for developing trade policy. Early during the present 

administration, these groups were not used for assessing FTA partners. Instead, they were 

only used during FTA negotiations, after partners had been selected.
Page 14 GAO-04-233 International Trade

The TPSC is composed of senior officials from more than 19 U.S. agencies 

and departments who bring specialized technical knowledge on trade 

issues to the deliberations. The TPRG is composed of under secretaries or 

assistant secretaries and other senior officials from all of these U.S. 

agencies and departments who contribute policy perspectives on trade to 

the discussions. Although USTR leads and coordinates interagency 

discussions, other agencies are expected to play an important role in 

developing pertinent information and discussing the pros and cons of 

potential FTA partners. 

The next level of the process consists of the Deputies Committee and the 

Principals Committee, two interagency groups that the NSC/NEC lead and 

coordinate.14 The Deputies Committee is composed of the deputies from 

all the cabinet agencies involved in trade. The Principals Committee is 

composed of the secretaries from all of these agencies, such as the Trade 

Representative and the Secretaries of State and the Treasury. Deputies and 

Principals meet and use decision papers as needed to assess potential FTA 

partners before forwarding their recommendations to the President.

14Not all of the 19 agencies that participate in the TPSC and the TPRG are cabinet-level 

agencies, for example, the U.S. International Trade Commission and the U.S. Agency for 

International Development.
Page 15 GAO-04-233 International Trade

Figure 2: Interagency Process for FTA Partner Selection and Notification to the 

Congress

USTR and other agencies used this new interagency process for the first 

time in assessing the Dominican Republic as a potential FTA partner in mid2003. Agency officials with whom we spoke expressed satisfaction that 

this process enabled their agencies to contribute to the assessment of 

potential FTA partners and strengthen the content of the decision papers. 

Nevertheless, because the process is new, it remains to be seen how it will 

continue to perform.

USTR

NSC/NEC

Delegates to TPSC/TPRG

Deputies and Principals

President Congress

• USTR

• Department of State

• Department of Commerce

• Department of the Treasury

• Department of Agriculture

• Other agencies

• Department of State

• Department of Commerce

• Department of the Treasury

• Department of Agriculture

• NSC/NEC

• Other agencies

TPSC and TPRG

Consultation and

notification

Decision

Recommendation

Recommendation

Source: GAO analysis of USTR data.

1

3

2

4

NSC/NEC National Security Council/National Economic Council

TPRG Trade Policy Review Group

TPSC Trade Policy Staff Committee

USTR Office of the U.S. Trade Representative
Page 16 GAO-04-233 International Trade

Congress and Private Sector 

Provide Input into the 

Process

Input from the Congress and the private sector is part of the process of 

selecting potential FTA partners and negotiating FTAs, according to USTR 

officials. Although the President is not specifically required to consult with 

the Congress before selecting potential FTA partners, USTR officials 

nevertheless stated that they keep the Congress apprised of the FTA 

partners under consideration through formal and informal means. 

According to these officials, the views of the Congress are very important 

to their agency and are seriously considered in FTA partner selections 

because the Congress must ultimately approve all FTAs. USTR gave us an 

extensive list of pertinent contacts between the agency and the Congress to 

confirm these discussions. As required by the TPA legislation, USTR has 

notified and consulted with the Congress about FTA negotiations. For 

instance, USTR has provided written notice to the Congress at least 90 days 

before initiating FTA negotiations since the passage of TPA.

Few Members of Congress have openly questioned choices of FTA partners 

to date, and those Members that have raised questions still expressed 

broad support for the “competitive liberalization strategy.” Nevertheless, 

certain Members of Congress have urged USTR to give greater priority to 

economic and commercial conditions in selecting future FTA partners.

Also, business and nongovernmental groups have given USTR their views 

on potential FTA partners and FTA negotiations. In late 2002, for instance, 

a major U.S. business group provided USTR with its views on potential FTA 

partners and on the factors that USTR and other U.S. agencies involved in 

trade should consider during the assessment of potential partners. Also, 

nongovernmental groups have provided input on FTA negotiations. 

However, representatives of some of these groups indicated that they were 

not sure whether USTR had seriously considered their comments.

Ambitious FTA Agenda 

Calls for Better 

Resource Management

Despite the administration’s ambitious and growing FTA agenda, USTR and 

other agencies have made resource decisions without considering resource 

trade-offs among FTAs and other trade priorities. FTAs are resource 

intensive, and USTR has taken some measures to cope with resource 

constraints. Nevertheless, the administration continues to consider new 

FTAs. Present strategies for managing staff and other resources mean that 

newly announced FTA partners will have to wait to begin negotiations until 

other ongoing negotiations are concluded. Although resource constraints 

are now one of the factors taken into account when USTR and other 

agencies select FTA partners, these interagency discussions still leave gaps 
Page 17 GAO-04-233 International Trade

because they are not based on robust data and do not specify resource 

needs or commitments.

The Administration’s Active 

FTA Agenda Drives 

Resource Deployment

The administration’s ambitious trade agenda has driven its resource 

decisions about FTAs and other trade priorities. Since the enactment of 

TPA in August 2002, the administration has stepped up its pursuit of 

bilateral and subregional FTAs as part of its overall strategy of competitive 

liberalization. As shown in figure 3, the United States now has numerous, 

simultaneous FTA negotiations under way, with ambitious target dates for 

completion. Although it took 2 years to negotiate two FTAs with relatively 

advanced partners (Chile and Singapore), USTR currently has FTAs under 

negotiation with four partners, three of which (Australia, Morocco, and 

CAFTA) are slated to be completed within 1 year. Negotiations for the 

fourth partner (SACU) will be conducted through 2004, as will negotiations 

for Bahrain. In addition, USTR officials hope to complete negotiations with 

the Dominican Republic in early 2004.
Page 18 GAO-04-233 International Trade

Figure 3: Selected Milestones for U.S. Trade Agreement Negotiations, 2000–05

Note: USTR has not specified ending dates for the Bahrain or Dominican Republic negotiations or for 

the implementation of the potential CAFTA agreement.

The administration’s decisions to pursue these FTAs have been made with 

little formal consideration for potential resource trade-offs, even though 

the WTO and FTAA negotiations are scheduled to finish by January 1, 2005. 

Source: GAO.

2000 2003 2001 2002 2004 2005

12/00

12/00

1/03

1/03

3/03

12/03

12/03

1/04

1/04

1/04

1/04

12/03

6/03 12/04

1/05

11/01 1/05

Bahrain

SACU

WTO Doha Round

FTAA

Australia

Morocco

Dominican Republic

CAFTA

Chile

Singapore

Target date to start negotiations

Start of negotiations

Implementation

Target date to complete negotiations

Period of FTA development

Passage 

of Trade 

Promotion 

Authority

CAFTA Central American Free Trade Agreement

FTA Free Trade Agreement

FTAA Free Trade Area of the Americas

SACU Southern African Customs Union 

WTO World Trade Organization
Page 19 GAO-04-233 International Trade

As a result, USTR has had to deploy its resources in a reactive manner. 

According to agency officials, the four FTAs currently being negotiated 

were selected before any explicit resource decisions were made because 

USTR officials assumed that resources would be identified afterward to 

carry out these priority negotiations. According to USTR, in these cases 

the resources were “made to fit” the priorities.

FTAs Are Resource 

Intensive

FTA negotiations require intensive effort on the part of USTR and other 

trade agencies such as Agriculture, Commerce, State, and Treasury. For 

example, our analysis of the U.S. negotiating team suggests that on average 

each of the six FTAs under negotiation in 2003 involved 11 percent of 

USTR’s 209 full-time staff. In addition, USTR estimates prepared for us 

show that the nonstaff costs of negotiating rounds in fiscal year 2003 were 

$1.7 million, of which approximately 68 percent were travel costs (see table 

1). Moreover, FTA travel comprised 37 percent of USTR’s total travel costs 

in fiscal year 2003, and USTR estimates that it will constitute 42 percent of 

its total travel costs in fiscal year 2004. 

Table 1: Fiscal Year 2003 USTR Nonstaff Costs for Negotiating FTAs 

Source: USTR.

Note: Costs do not include staff time for working on negotiations.

a

Cost refers to logistical support provided by the State Department when USTR officials travel to 

countries.

Although USTR takes the lead for all negotiating groups except financial 

services, it relies on other agencies, such as Agriculture, Commerce, State, 

and Treasury, for analysis, expertise, and staff to support its negotiations. 

Dollars in thousands

FTA Employee travel

Interpretation/

Translation

Videoconferencing Fiscal dataaRepresentation 

costs Total cost

Chile $104 $151 $15 $4 $9 $283

Singapore 162 0 4 5 1 172

CAFTA 258 80 0 3 0 341

Morocco 137 198 2 0 2 339

Australia 246 0 10 9 1 266

SACU 214 0 0 28 1 243

Middle East 63 1 3 23 1 91

Total $1,184 $430 $34 $72 $15 $1,735
Page 20 GAO-04-233 International Trade

For example, other trade agencies regularly provide staff on a 

nonreimbursable “detail” (loan) basis to USTR. USTR currently has more 

than 30 such detailees. In addition, of the 134 U.S. officials present for the 

first five rounds of the Australia FTA negotiations, 22 were from USTR and 

the rest (112) came from other agencies. In fact, table 2 shows that other 

agencies comprised an average of 76 percent of all members of U.S. FTA 

negotiating teams.

Table 2: Estimated Agency Staff on U.S. Negotiating Teams for Completed Rounds of FTA Negotiations, as of October 2003

Source: GAO analysis of USTR data.

Notes:

Morocco and SACU numbers were based on GAO analysis of the USTR negotiating lists. SACU 

numbers were based on lists from two negotiating rounds.

Percentages are rounded to the nearest percent.

However, while table 2 conveys the wide range of officials who are part of 

an FTA negotiating team, it does not capture “staff effort” to support the 

team because none of the agencies involved routinely tracks staff time 

devoted to FTA negotiations, and only one agency was able to produce 

estimates for us. According to USTR officials, nearly all USTR staff are 

involved in each FTA before, during, or after negotiating sessions. One 

USDA official said its delegates to the negotiating team were just the tip of 

the iceberg because many other people at Agriculture were involved in 

providing complex analyses during the negotiations. Commerce data 

Free Trade 

Agreement

Number of 

negotiating 

rounds (as 

of 10/03)

Number and percentage of staff

USTR Commerce Agriculture Treasury State Other

Total for all 

agencies

Australia 5 22

(16%)

20

(15%)

8

(6%)

16

(12%)

23

(17%)

45

(34%)

134

(100%)

CAFTA 7 20

(27%)

10

(13%)

7

(9%)

3

(4%)

12

(16%)

23

(31%)

75

(100%)

Chile 14 25

(22%)

16

(14%)

5

(4%)

8

(7%)

10

(9%)

48

(43%)

112

(100%)

Morocco 5 21

 (16%)

19

(15%)

7

(5%)

8

(6%)

19

(15%)

56

(43%)

130

(100%)

SACU 3 22

(47%)

6

(13%)

2

(4%)

2

(4%)

6

(13%)

9

(19%)

47

(100%)

Singapore 11 26

(19%)

23

(17%)

1

(1%)

16

(12%)

22

(16%)

50

(36%)

139

(100%)
Page 21 GAO-04-233 International Trade

prepared for us (see table 3) show that a large number of staff support 

FTAs, but their total staff hours translate into fewer full-time equivalents. 

Table 3: International Trade Administration Free Trade Agreement Resource Allocation, Fiscal Year 2003

Source: Commerce.

Note: The Chile and Singapore FTAs are complete; therefore, travel expenditures and staff time were 

higher in previous years.

The conclusion of negotiations does not mean that the work is completed 

on a given FTA. Additional demands, such as legal checks and translation 

activities, continue. For example, USTR officials reported that 

negotiations in the Americas have been slowed because of follow-up work 

after the signing of the Chile FTA. The increase in the number of FTAs is 

also likely to result in higher implementation-related needs, such as 

monitoring, enforcement, and dispute resolution. Our prior work has 

highlighted concerns about the increasing monitoring and enforcement 

workload at trade agencies,15 and USTR estimates that every three 

additional disputes require an additional legal specialist. 

FTAs in progress FTAs signed

Australia Bahrain CAFTA

Dominican 

Republic Morocco SACU Chile Singapore

Total number of 

staff involved 71 21 76 22 61 55 91 60

Total number of 

full-time 

equivalents 4.16 0.53 7.24 0.6 3.53 4.42 8.51 3.5

Total fiscal year 

2003 travel 

expenditures $43,074 $0 $88,046 $0 $17,626 $48,515 $38,118 $32,737

15See U.S. General Accounting Office, International Trade: Strategy Needed to Better 

Monitor and Enforce Trade Agreements, NSIAD-00-76 (Washington, D.C.: Mar. 14, 2000).
Page 22 GAO-04-233 International Trade

USTR Is Taking Measures to 

Cope with Resource 

Constraints

USTR’s approach to dealing with resource constraints is sequencing one set 

of negotiations per region at a given time in order to leverage the expertise 

of its negotiators. As a result, as depicted in figure 4, USTR’s Office for the 

Americas will not start negotiating with the Dominican Republic until after 

the CAFTA negotiations have been completed.16 Similarly, although 

Bahrain was ready to begin negotiating immediately with the United States, 

USTR’s Office of Europe and the Mediterranean will postpone those 

negotiations until the completion of negotiations with Morocco. USTR has 

indicated that it will continue to schedule negotiations in each region after 

the current set of FTAs is completed. Thus, regional negotiators will 

remain fully occupied, and the queue of countries waiting to negotiate with 

the United States will likely grow. 

16This office is also working on the resource-intensive FTAA. 
Page 23 GAO-04-233 International Trade

Figure 4: USTR Sequences FTAs in Four Regions to Negotiate Ambitious FTA Agenda

Note: Actual ending dates may differ from those shown in the figure.

Office of the Americas

Office of Southeast Asia, Pacific, and APEC Affairs

Office of African Affairs

Sources: GAO and MapArt.

Country not yet decided

Office of Europe and Mediterranean Affairs

Functional specialists USTR

regional specialists FTAs

Agriculture

Customs

Environment

 

Government 

procurement

 

Industry

 

Intellectual 

property rights

 

Investment

 

Labor

 

Legal

 

Legislative

 

Market access

 

Services

 

Telecommunications

 

Textiles

SACU

Morocco Bahrain

Thailand

2003 2004 2005

Dominican

Republic

Andean countries

Panama Chile CAFTA

FTAA

Singapore Australia

World Trade Organization

Doha Round

Functional 

specialists are 

involved in multiple 

regions, resulting in 

limited availablility 

throughout.

CAFTA Central American Free Trade Agreement

FTA Free Trade Agreement

FTAA Free Trade Area of the Americas

SACU Southern African Customs Union

USTR Office of the U.S. Trade Representative
Page 24 GAO-04-233 International Trade

In addition, USTR officials reported that they are using past agreements as 

a template for the ongoing negotiations.17 This strategy has progressed to 

the point that USTR now believes it can save resources by having countries 

accede to already negotiated FTAs. This process, called “docking,” means 

that negotiators will not have to spend time renegotiating every area. For 

example, USTR officials stated that the Dominican Republic will be 

integrated into the U.S.-CAFTA FTA and that only market access issues 

should require separate, detailed negotiations. Although CAFTA will 

require 1 year to complete, USTR expects that docking the Dominican 

Republic onto the agreement will take considerably less time. USTR is also 

considering how to integrate separate FTAs as it works toward a U.S.-

Middle East Free Trade Area.

USTR is taking other measures to save resources. For example, USTR 

officials noted that they regularly combine various missions in one trip 

abroad and that they use extensive teleconferencing. In addition, USTR 

officials reported that they have cut costs by holding meetings in a central 

location18 and conducting negotiations in English when possible to avoid 

interpretation expenses. USTR is also improving its system for tracking 

TPA requirements for each FTA. To facilitate interagency collaboration, 

USTR developed a negotiations calendar listing the various bilateral, 

regional, and multilateral negotiating rounds so that negotiators may better 

identify competing demands. 

Finally, concerns that the FTA agenda would continue to be busy led to 

resource constraints’ inclusion as a factor used for FTA partner selection 

during the interagency process. This step represents an improvement over 

the past situation, in which no formal discussion of resource constraints or 

trade-offs preceded FTA partner selection even though USTR and other 

trade agencies already faced human capital challenges.19 As a result, 

resource constraints are now a standard part of interagency FTA partner 

selection discussions. One official welcomed this development because it 

has enabled assumptions regarding resource allocations to be made ahead 

17For example, according to USTR officials, much of the CAFTA text is similar to the Chile 

FTA. 

18Several of the meetings for the Singapore negotiations were in London, for example, and 

two of the negotiating rounds for the Australia FTA were held in Hawaii.

19See GAO/NSIAD-00-76.
Page 25 GAO-04-233 International Trade

of time and for consideration to be given to how resources are currently 

devoted to ongoing bilateral and regional efforts. 

Present Resource 

Management Efforts Leave 

Gaps 

Despite USTR’s efforts to better manage resource constraints, important 

gaps remain. For example, decisions about staffing and funds for FTA 

negotiations lack formal data and systematic consideration of their likely 

impact on other trade priorities. Moreover, USTR is continuing to make 

specific requests for resources from other agencies on a case-by-case basis, 

after FTA partners are selected, making it difficult for these agencies to do 

their own resource planning for FTAs.

Resource Decisions Are Made 

with Limited Data and Planning

USTR’s resource data are not sufficiently robust for resource planning, and 

this limits USTR’s flexibility in meeting its resource needs. When assigning 

resources for the current set of FTAs, USTR officials did not have clear data 

on hand regarding what was needed and what resources were available. 

We reported in 2002 that valid and reliable data are critical to assessing an 

agency’s workforce requirements and to heighten an agency’s ability to 

manage risk by allowing managers to (1) spotlight areas for attention 

before crises develop and (2) identify opportunities for enhancing agency 

results.20 In 2003, we also noted the importance of considering human 

capital challenges by relying on valid and current data and reported that the 

absence of such data can seriously undermine efforts to respond to current 

and emerging challenges.21 USTR has indicated that it is developing a new 

system for tracking spending according to different trade priorities, 

including FTAs, but this system is not yet operational. In addition, although 

staff time is a major resource devoted to FTAs, USTR officials informed us 

that they have no plans to track the time staff spend working on FTAs.

The importance of systematic data and planning can be seen in the 

constraint imposed by limited numbers of functional experts, who focus on 

areas such as intellectual property rights, agriculture, and market access. 

These experts are often needed to support multiple, concurrent 

negotiations. However, the offices in which these staff work at USTR 

20See U.S. General Accounting Office, A Model of Strategic Human Capital Management, 

GAO-02-373SP (Washington, D.C.: March 2002).

21See U.S. General Accounting Office, High Risk Series – Strategic Human Capital 

Management, GAO-03-120 (Washington, D.C.: January 2003).
Page 26 GAO-04-233 International Trade

average only eight people each, so they often represent a limiting factor to 

completing FTA negotiations. 

USTR officials reported that they make many resource management 

decisions informally on an ongoing basis, in addition to those decisions 

based on advance planning that took into account the U.S.’s various trade 

priorities. For example, although regional assistant U.S. trade 

representatives provide staff and travel estimates as part of the annual 

budget cycle, they frequently bring specific resource requests to USTR 

management throughout the year. USTR officials, who must mediate 

among these often competing priorities, told us that they looked at several 

factors—for example, negotiating deadlines and the need for specific 

expertise—to make these resource decisions. If there were competing 

demands for staffing for the Morocco and SACU negotiations, for example, 

USTR management might consider that the need would be more pressing 

for the Morocco negotiator because of that negotiation’s shorter deadline 

for completion (e.g., the end of 2003 versus the end of 2004 for SACU). If 

USTR managers identify a lack of available staff to cover certain issues, 

they then turn to other agencies to supplement their own staff. This 

informal, reactive approach may no longer be adequate to meet the needs 

of increasing numbers of negotiations, particularly if the U.S.’s trade 

strategy shifts to an emphasis on bilateral agreements in the wake of the 

failed Cancun ministerial of the WTO. Moreover, this approach also affects 

resource management at other trade agencies.

USTR Makes Staffing Requests 

to Other Agencies on a Case-byCase Basis

The revised interagency process has not made requesting and securing staff 

from other agencies more systematic because participants do not address 

specific staffing needs or other cost estimates in detail in the formal 

interagency meetings, such as the TPSC and the TPRG, that are used to 

select FTA partners. Instead, the discussion of resource constraints 

focuses more on matters like timing for multiple FTAs in the same region, 

such as Morocco and Bahrain.

Specific requests for and commitments of resources by other agencies still 

occur after FTA partners are selected. According to USTR, after an FTA 

partner country is selected, the Trade Representative’s office asks the 

assistant U.S. trade representatives for a listing of officials at USTR and 

other agencies they propose to constitute the U.S. negotiating team. On the 

basis of these lists, USTR managers report that they talk to their respective 

counterparts at other agencies regarding USTR’s needs. These discussions 

generally begin just before USTR notifies the Congress about the FTA and 

are ongoing thereafter as negotiations get under way. According to USTR, 
Page 27 GAO-04-233 International Trade

the ad hoc nature of these requests is due in part to USTR’s varying needs 

for different agencies’ involvement, depending on the topics being 

negotiated and the changing requirements over time.

USTR’s reactive method for requesting staff from other agencies makes it 

difficult for their own resource planning. Commerce officials, for example, 

noted that the department had much less notice about FTA staffing needs 

than it did about the need for staff support during NAFTA negotiations. 

Agencies report that they were generally able to comply with USTR’s 

requests but noted that the requests sometimes strained their resources. At 

times it was necessary for agencies to make trade-offs, if the same person 

was requested for concurrent negotiations, agency officials told us. 

According to Treasury officials, they have had to “perform triage” on some 

operations due to the heavy FTA workload. Other agencies also noted the 

burden of travel costs. Although agencies continue to respond to USTR’s 

informal method of requesting resources, it is unclear how well this system 

will continue to function in light of the intensifying FTA agenda.

Conclusions After selecting the first several FTA partners with limited interagency 

consultation, the administration has adopted a more rigorous and inclusive 

process to implement its FTA agenda. This framework for interagency 

discussions appears to be promoting fuller deliberations and wider 

involvement in the FTA partner selections. However, other management 

challenges remain. In particular, USTR and other agencies have reported 

that FTA negotiations are already straining available resources. Several 

steps have since been taken to deal with resource constraints associated 

with FTAs. However, present mechanisms still leave important gaps 

because they do not involve systematic data or interagency resource 

planning. As the United States sets its sights on more bilateral agreements, 

especially in light of the breakdown of the September 2003 Cancun 

negotiations, the importance of managing trade priorities at USTR and 

other trade agencies becomes increasingly significant. Managing 

resources, especially across diverse agencies, is paramount in meeting the 

competing demands of a complex and intensifying U.S. trade agenda.

Recommendation for 

Executive Action

In light of USTR’s limited resources and management systems to track 

those resources, we recommend that the Office of the U.S. Trade 

Representative work with other key trade agencies to develop more 
Page 28 GAO-04-233 International Trade

systematic data and plans for allocating staff and resources across the full 

U.S. trade agenda, including FTAs and other negotiating priorities.

Agency Comments and 

Our Evaluation

We provided a draft of this report to the departments of State, Commerce, 

Agriculture, and the Treasury. State and Treasury did not provide 

comments. We received written comments on a draft of this report from 

the U.S. Trade Representative (see app. V). USTR, Commerce, and 

Agriculture also provided technical comments, which we incorporated in 

the report as appropriate.

In his response to our draft report, the Trade Representative emphasized 

the administration’s competitive liberalization strategy and the role of FTAs 

in the strategy. He laid out the steps his office is taking to promote 

liberalized trade and described what the administration is doing in several 

regions throughout the world. He referred to resource pressures when he 

noted that his office is pressing forward with global, hemispheric, and five 

subregional or bilateral FTA negotiations simultaneously; while at the same 

time, USTR litigation activities have soared, with WTO disputes doubling 

over the last 5 years.

The Trade Representative agreed with us that the intensifying trade agenda 

requires continual management improvements at USTR and supporting 

agencies, and he acknowledged that increased pressures demand “nothing 

less than a transformation of USTR.” However, he did not agree with our 

recommendation that USTR and other key trade agencies develop more 

systematic data and plans for allocating staff and resources across the full 

trade agenda. The Trade Representative wrote that our emphasis on a 

better allocation of staff and resources reflects an inaccurate assessment of 

how to allocate limited resources most effectively and efficiently. 

According to the Trade Representative, the main cause of strain at USTR is 

the amount of available resources, not their allocation. The Trade 

Representative maintained that USTR must be “agile, flexible and 

adaptable—not bureaucratic.” We believe that aligning goals and resources 

promotes the flexibility needed to respond to evolving circumstances. Our 

recommendation focuses on setting priorities among the multilateral, 

hemispheric, and FTA negotiations that take into account available staff. It 

also calls for coordinating those staff allocations with other agencies 

whose resources USTR routinely calls upon during the course of 

negotiations. Resource management fundamentally involves taking a given 

(and limited) amount of resources and deploying (allocating) it over 
Page 29 GAO-04-233 International Trade

program objectives aligned with the agency’s overall priorities. This 

approach frees managers to focus on its core program, not on continually 

reacting to the daily fluctuations of resource needs.

The resources that USTR requested in fiscal year 2004 appear to have been 

justified based on its needs for completing the ongoing four FTAs 

(Australia, Morocco, CAFTA, and SACU). Since then, negotiations with the 

Dominican Republic, Bahrain, Panama, and the Andean countries have 

been announced. This increasing workload with its related demand for 

staff and travel can be better managed with (1) the collection of data to 

help managers understand what resources are linked to accomplishing 

agency objectives and (2) the use of these data in advance planning for 

future resource allocation, which can help USTR managers coordinate with 

other agencies whose own resources are affected by USTR negotiations. 

The Trade Representative listed several steps that USTR has taken to 

address its resource limitations. Although we recognize and encourage the 

steps that USTR has already taken to make improvements, we note that 

many of these efforts are already recognized in this report and are not 

sufficient to address our concerns for forward planning.

The Trade Representative pointed to the fact that we did not identify any 

“misallocation of funds.” Solid data would permit sound conclusions about 

how federal funds are managed at USTR. The limited information that 

USTR and Commerce finally provided us had to be specially tabulated for 

this report because it is not routinely tracked. Our data show that FTAs 

involved considerable resources at both USTR and other agencies. 

Specifically, 37 percent of USTR travel funds were used for FTA-related 

travel in 2003, and 11 percent of USTR’s staff were involved in each of the 

six FTAs completed or negotiated FTAs in 2003. These data also show that 

other agencies account, on average, for more than three-fourths of the 

members of U.S. FTA negotiating teams, which averaged 106 members. 

Thus, USTR and other agencies commit significant resources on trade 

initiatives that cover 8 percent of total U.S. trade. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to interested congressional 

committees, the U.S. Trade Representative, the Secretary of Commerce, the 

Secretary of the Treasury, the Secretary of State, and the Secretary of 

Agriculture. Copies will also be made available to others upon request. In 
Page 30 GAO-04-233 International Trade

addition, the report will be available at no charge on the GAO Web site at 

http://www.gao.gov.

If you or your staff have any questions about this report, please contact me 

on (202) 512-4128. Other GAO contacts and staff acknowledgments are 

listed in appendix VI.

Loren Yager

Director, International Affairs and Trade
Page 31 GAO-04-233 International Trade

Appendix I

Objectives, Scope, and Methodology AAppenednxidexiIs

Senator Max Baucus, Ranking Minority Member of the Senate Finance 

Committee, and Representative Calvin Dooley asked us to examine the 

factors and process used to make decisions regarding the selection of free 

trade agreement (FTA) negotiating partners and the allocation of 

negotiating resources. In response, we (1) provided information about the 

factors that influence the selection of FTA partners and described how they 

were developed; (2) analyzed the interagency process for selecting FTA 

partners, including how the Office of the U.S. Trade Representative (USTR) 

coordinates the views of key agencies and consults with the Congress and 

business and nongovernmental groups; and (3) assessed how the executive 

branch makes decisions regarding the availability and allocation of 

resources to FTAs and other trade priorities, such as the regional talks of 

the Free Trade Area of the Americas (FTAA) and the multilateral talks at 

the World Trade Organization (WTO).

To provide information about the factors that influence the selection of 

FTA partners and how they were developed, we reviewed pertinent 

documentation from key U.S. agencies involved in assessing potential FTA 

partners, such as USTR and the departments of State and Commerce. For 

example, we reviewed pertinent USTR documentation from 2000 to 2003 

on FTAs, including public speeches, articles, and agency documentation on 

FTA partners. We also reviewed U.S. International Trade Commission 

documents on FTAs and Congressional Research Service reports on U.S. 

trade and FTAs. In addition, we interviewed knowledgeable officials at the 

key agencies involved in the process of assessing potential FTA partners. 

For instance, we interviewed the U.S. Trade Representative, the Deputy 

U.S. Trade Representative, and several assistant U.S. Trade 

Representatives; the Director of the Office of International Economics at 

the National Security Council (NSC); the Under Secretary for Economics, 

Business, and Agricultural Affairs at the Department of State; the Assistant 

Secretary for International Affairs at the Department of the Treasury; the 

Under Secretary of Farm and Foreign Agricultural Services at the 

Department of Agriculture; and the Under Secretary for International Trade 

at the Department of Commerce.

To analyze the interagency process for selecting FTA partners, including 

how USTR coordinates the views of key trade agencies and consults with 

the Congress and business and nongovernmental groups, we reviewed 

pertinent documentation from key U.S. agencies involved in the process of 

selecting FTA partners. For example, we reviewed USTR documentation 

from 2000 to 2003 on FTAs, including public speeches, articles, agency 

documents, records of contacts with the U.S. Congress, records of public 
Appendix I

Objectives, Scope, and Methodology

Page 32 GAO-04-233 International Trade

hearings, and papers on FTA partners prepared for the consideration of the 

Trade Promotion Staff Committee and Trade Promotion Review Group. 

Also, we interviewed officials at the key agencies involved in the process of 

assessing potential FTA partners. For example, we interviewed the U.S. 

Trade Representative, the Deputy U.S. Trade Representative, and several 

assistant U.S. Trade Representatives; the Director of the Office of 

International Economics at the NSC; the Under Secretary for Economics, 

Business, and Agricultural Affairs at the Department of State; the Assistant 

Secretary for International Affairs at the Department of the Treasury; the 

Under Secretary of Farm and Foreign Agricultural Services at the 

Department of Agriculture; and the Under Secretary for International Trade 

at the Department of Commerce. In addition, we obtained information 

from business and nongovernmental organizations, including the U.S. 

Chamber of Commerce, the Washington Office on Latin America, Oxfam 

America, Public Citizen, World Vision, and the Center for International 

Environmental Law.

To assess how decisions are made regarding the availability and allocation 

of resources to FTAs and other trade priorities, we reviewed pertinent 

documentation from key U.S. agencies involved in assessing FTA partners, 

such as USTR and State and Commerce. For example, we reviewed USTR 

documentation from 2000 to 2003 on FTAs, including papers on potential 

FTA partners, lists of FTA negotiating teams, and budget and personnelrelated data. Because negotiating lists were not complete for four of the 

negotiations, we asked USTR to provide summary numbers of the 

participating agencies. For the other two negotiations, we did our own 

analysis of agency staffing based on the negotiating lists provided by USTR. 

As noted in the text, these data merely identify the number of individuals 

involved and do not necessarily reflect staff effort. We determined that 

USTR data were sufficiently reliable for purposes of our assessment, even 

though, as our recommendation indicates, we determined that these data 

are not sufficiently robust for agency decision making and should be 

improved. Moreover, we interviewed knowledgeable officials at the key 

agencies involved in the process of assessing potential FTA partners. For 

instance, we interviewed the U.S. Trade Representative, the Deputy U.S. 

Trade Representative, and several assistant U.S. Trade Representatives; the 

Director of the Office of International Economics at the NSC; the Under 

Secretary for Economics, Business, and Agricultural Affairs at the 

Department of State; the Assistant Secretary for International Affairs at the 

Department of the Treasury; the Under Secretary of Farm and Foreign 

Agricultural Services at the Department of Agriculture; and the Under 

Secretary for International Trade at the Department of Commerce.
Appendix I

Objectives, Scope, and Methodology

Page 33 GAO-04-233 International Trade

Despite repeated requests to the NSC, we were unable to obtain key 

documents from the February 2002 and May 2003 meetings that provided 

guidance to the interagency efforts to formalize the criteria and enhance 

the process for developing recommendations to the President for selecting 

potential FTA partners. 

We conducted our review from June to November 2003 in accordance with 

generally accepted government auditing standards.
Page 34 GAO-04-233 International Trade

Appendix II

European Union and United States Free Trade 

Agreements, by Region ApendxiI

FTAs

Bulgaria

Croatia

Czech Republic

Estonia

Faroe Islands

FYROM

Hungary

Iceland

Latvia

Liechtenstein

Lithuania

Norway

Poland

Romania

Slovak Republic

Slovenia

Switzerland

FTAs

Europe

Algeria

Bahrain

Egypt

Israel

GCC

Jordan

LebanonMorocco

Palestinian Authority

Syria

Tunisia

Current European Union FTAs

Current FTA partner

Future FTA partner

Source: GAO.

The Americas Africa

Future European Union FTAs (under negotiation)

Current United States FTAs

Future United States FTAs (under negotiation)

Current European Union FTAs

Future European Union FTAs (under negotiation)

Current United States FTAs

Future United States FTAs (under negotiation)

Canada

Chile

Colombia 

Costa Rica

Dominican Republic

El Salvador 

Guatemala

Honduras

MERCOSUR

Mexico

Nicaragua

Middle East/North Africa

BotswanaLesotho

Namibia

South Africa

Swaziland

Asia/

Pacific Misc.

Australia

Singapore

Overseas 

countries andterritories (EU)

FTA Free Trade Agreement

 

FYROM Former Yugoslav Republic of Macedonia

 

 

GCC Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab 

 Emirates)

 

MERCOSUR Common Market of the South (members: Argentina, Brazil, Paraguay, and Uruguay)

Greenland, New Caledonia, French Polynesia, French Southern and Antarctic Territories, 

Wallis and Futuna Islands, Mayotte, Saint Pierre and Miquelon, Aruba, Netherlands Antilles, 

Anguilla, Cayman Islands, Falkland Islands, South Georgia and South Sandwich Islands, 

Montserrat, Pitcairn, Saint Helena, Ascension Island, Tristan da Cunha, Turks and Caicos 

Islands, British Antarctic Territory, British Indian Ocean Territory, and the British Virgin Islands

Overseas countries 

and territories 

(European Union)
Page 35 GAO-04-233 International Trade

Appendix III

U.S. Trade with Potential and Existing FTA 

Partners ApendxiI

The following table presents trade data that describe the percentage and 

amount of total U.S. trade with current and potential FTA partners, as well 

as with non-FTA countries. 

Table 4: U.S. Trade with Potential and Existing FTA Partners, 2002

Dollars in millions

U.S. trading partners

Percentage 

of total trade

Total trade 

(exports+imports)

Total exports 

(goods+services)

Total imports 

(goods+services)

Potential FTA partners

FTAA (excluding the North American Free 

Trade Agreement (NAFTA) and Chile) 5.25 $119,135 $53,119 $66,017

Andean 0.71 16,075 6,464 9,611

 Bolivia 0.02 342 182 160

 Colombia 0.38 8,727 3,345 5,382

 Ecuador 0.16 3,612 1,496 2,116

 Peru 0.15 3,394 1,441 1,953

Central American Free Trade Agreement 

(CAFTA) 0.94 21,269 9,423 11,846

 Costa Rica 0.27 6,038 2,891 3,146

 El Salvador 0.16 3,583 1,608 1,976

 Guatemala 0.21 4,761 1,976 2,785

 Honduras 0.26 5,786 2,524 3,262

 Nicaragua 0.05 1,101 423 677

Dominican Republic 0.36 8,276 4,109 4,167

Panama 0.07 1,594 1,299 295

Remaining FTAA 3.17 71,921 31,825 40,097

Southern African Customs Union (SACU) 0.41 9,215 3,674 5,541

 Botswana 0.00 61 32 30

 Lesotho 0.01 323 2 321

 Namibia 0.00 111 54 57

 South Africa 0.38 8,594 3,576 5,018

 Swaziland 0.01 126 11 114

Australia 1.18 26,830 17,496 9,334

Bahrain 0.04 803 407 395

Morocco 0.04 970 560 410

Thailand 0.94 21,221 5,615 15,606

Subtotal 7.85 $178,174 $80,872 $97,302
Appendix III

U.S. Trade with Potential and Existing FTA 

Partners

Page 36 GAO-04-233 International Trade

Source: Commerce.

Notes: 

Imports are imports for consumption at customs value; and exports are domestic exports at freealongside-value. Detailed 2002 services data by country are available only for Argentina, Australia, 

Brazil, Canada, Chile, Israel, Mexico, Venezuela, Singapore, South Africa, and Thailand.

“Remaining FTAA countries” are Antigua and Barbuda, Argentina, the Bahamas, Barbados, Belize, 

Brazil, Dominica, Grenada, Guyana, Haiti, Jamaica, Paraguay, St. Kitts and Nevis, St. Lucia, St. 

Vincent and the Grenadines, Suriname, Trinidad and Tobago, Uruguay, and Venezuela.

Excluding the FTAA negotiation, the current FTA negotiating partners 

(CAFTA, SACU, Morocco, Australia, the Dominican Republic, Bahrain, 

Thailand, Panama, and the Andean countries) collectively account for 

about 4.7 percent of total U.S. trade. Of these nine partners, Australia 

contributes almost 1.2 percent, or about 25 percent of their combined 

trade. Chile and Singapore account for another 2.0 percent of U.S. trade. In 

contrast, NAFTA brought together the U.S.’s top two trading partners 

(Canada and Mexico), representing about 28 percent of total U.S. trade. 

Completing the FTAA negotiations would bring an additional 3.0 percent of 

total trade under FTA disciplines.

Existing FTA partners

NAFTA 28.33 $642,934 $268,815 $374,119

 Canada 17.44 395,769 166,837 228,932

 Mexico 10.89 247,165 101,978 145,187

Chile 0.34 7,777 3,499 4,278

Israel 0.95 21,587 7,567 14,020

Jordan 0.04 809 397 412

Singapore 1.62 36,670 20,484 16,186

Subtotal 31.28 $709,777 $300,762 $409,015

Trade with non-FTA countries 60.87 $1,381,187 $527,460 $853,728

Total U.S. Trade (all countries) 100.00 $2,269,138 $909,094 $1,360,045

(Continued From Previous Page)

Dollars in millions

U.S. trading partners

Percentage 

of total trade

Total trade 

(exports+imports)

Total exports 

(goods+services)

Total imports 

(goods+services)
Page 37 GAO-04-233 International Trade

Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles ApendxiIV

In this appendix, we describe the background, considerations in FTA 

partner selection, milestones, features, concerns, and FTA partner 

participation for six countries with which the United States has or intends 

to have FTAs. We also describe those components for two regional 

entities—CAFTA and SACU.

U.S.-Australia FTA

Background The United States and Australia are among the world’s most open 

economies. Both countries are prominent supporters of trade 

liberalization and have maintained a stable commercial relationship, having 

brought only a few dispute resolution cases against each other in the WTO. 

In 2002, Australia accounted for more than $13 billion in U.S. exports. Total 

two-way trade between the United States and Australia was almost $20 

billion in that year as well. The United States and Australia have signed 

two bilateral agreements—the settlement on leather products trade in 1996 

and the understanding on automotive leather subsidies in 2000. For several 

years, Australian officials told U.S. policy makers about Australia’s interest 

in an FTA with the United States. The current Prime Minister also raised 

this matter in meetings with President Bush. Until recently, though, the 

Bush administration had expressed interest but had not committed to begin 

negotiations. However, the FTA negotiations between the United States 

and Australia are starting from a strong base, given the similarity of the 

structure of their economies and the compatibility of their trade policies.

Considerations in FTA 

Partner Selection in FTA 

Partner Selection

USTR highlighted several reasons why Australia was selected as an FTA 

partner in 2002. First, two-way trade between the United States and 

Australia grew significantly in the past decade. In 2002, the United States 

exported $13.1 billion to Australia, the 13th largest destination of U.S. 

exports. It also imported $6.5 billion from Australia, the 28th largest source 

of U.S. imports. Second, the increased U.S. access to Australia’s market 

made possible by an FTA would further boost trade in both goods and 

services, enhancing employment opportunities in both countries. Third, an 

FTA would encourage additional foreign investment between the United 

States and Australia, adding to the many jobs that the significant 

investment flows between the two countries currently support. Fourth, an 

FTA would result in greater business integration, especially in the 

information technology sector, increasing efficiency and the 
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 38 GAO-04-233 International Trade

competitiveness of the U.S. industry. Overall, U.S. manufacturers and 

services providers support these FTA negotiations. Finally, an FTA would 

address barriers that U.S. exports to Australia face today, including 

Australia’s use of sanitary and phytosanitary measures as a means of 

restricting agricultural trade.

FTA Milestones In November 2002, USTR notified the Congress that the United States 

intended to enter into FTA negotiations with Australia in at least 90 days. 

In February 2003, the United States and Australia started the first of six 

planned negotiating rounds. The United States and Australia had intended 

to complete the negotiations by the end of 2003, but negotiations will 

continue into 2004.

FTA Features The WTO requires that an FTA, at a minimum, substantially eliminate tariffs 

and other restrictions on mutually traded goods and services. However, the 

U.S.-Australia FTA is likely to be more comprehensive given the broad 

negotiating objectives that the governments have announced will cover 

agriculture, industry, and services issues. The U.S.-Australia FTA will 

negotiate 20 broad, trade-related issues, including market access for goods, 

agriculture, textiles, rules of origin, customs administration, sanitary and 

phytosanitary measures, technical barriers to trade, trade remedies, 

services, investment, telecommunications, financial services, competition 

policy, government procurement, electronic commerce, intellectual 

property, labor, environment, transparency, and institutional arrangements 

and dispute settlement. USTR leads the U.S. delegation with other 

delegation members, including the NSC; the departments of State, 

Commerce, Agriculture, Labor, Justice and the Treasury; the 

Environmental Protection Agency; and the Federal Trade Commission. 

FTA Concerns The United States and Australia have a firm trade relationship, and their 

tariffs on most products are already very low. Therefore, critical issues in 

the FTA negotiations will be nontariff barriers and other issues. According 

to trade policy experts, agricultural issues will be the greatest challenge 

during these negotiations. For example, agriculture accounted for only 2.2 

percent of U.S. exports to Australia but for 29.2 percent of U.S. imports 

from Australia in 2002. Some in the U.S. agricultural community oppose 

the negotiations. The most recent round of negotiations took place in 
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 39 GAO-04-233 International Trade

October 2003. Each side has presented its own proposals and raised 

concerns regarding agricultural issues. 

Australia takes issue with U.S. tariff-rate quotas on dairy products, sugar, 

beef, and many other products. Australia announced that it would seek the 

removal of these quotas during the FTA negotiations. Government-run 

commodity boards control Australian exports of wheat and rice. Because 

these boards restrict U.S. exports, the United States has targeted them for 

removal during the FTA negotiations. Separately, the United States has also 

targeted specific Australian sanitary and phytosanitary measures because 

they are highly restrictive and have adversely affected U.S. exports of 

citrus, apples, pears, corn, stone fruit, chicken, and pork. These bilateral 

discussions are proceeding on a parallel track to resolve the sanitary and 

phytosanitary issues between the United States and Australia.

Because all foreign investment in Australia is subject to government 

screening and approval, the United States has noted Australia does not 

conform to the principle of national treatment—that is, treating foreign 

investors no less favorably than domestic investors. As a result, the United 

States will seek the elimination or reduction of these trade-distorting 

investment measures.

Even after resolving these irritants, U.S. officials are concerned that, after 

the implementation of this FTA, the United States may face many disputes 

on agricultural matters and other issues with Australia, one of its closest 

allies.

FTA Partner Participation in 

Other Trade Agreements

Australia is a WTO member and has had FTAs with New Zealand since 1966 

and with Singapore since 2003. Australia and the United States are 

founding members of the Asian-Pacific Economic Cooperation (APEC) 

forum, an organization of 21 countries that has established the goal of free 

trade and investment in that region by 2020. 
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 40 GAO-04-233 International Trade

U.S.-Bahrain FTA

Background Bahrain is an emerging regional financial center in the Persian Gulf region. 

The United States has been holding talks on economic policy with the Gulf 

Cooperation Council (GCC), of which Bahrain is a member, through the 

U.S.-GCC Economic Dialogue. In 2001, the United States and Bahrain 

signed a bilateral investment treaty. On June 18, 2002, the two countries 

signed a Trade and Investment Framework Agreement, which enabled the 

United States to increase its engagement with Bahrain on economic 

reforms and on bilateral trade and investment issues. 

Considerations in FTA 

Partner Selection

USTR emphasized several reasons for selecting Bahrain as an FTA partner. 

First, an FTA with Bahrain would support U.S. security and political goals 

by increasing prosperity and globalization in the region. Second, the 

executive branch views the U.S.-Bahrain FTA as a stepping-stone to an 

eventual Middle East Free Trade Area (MEFTA). Bahrain could become the 

hub of a subregional block of countries that might develop closer and more 

open trading relationships with the United States. Third, Bahrain has been 

an important U.S. ally in the region. Fourth, USTR emphasized Bahrain’s 

readiness to undertake an FTA with the United States, particularly in 

comparison with other states in the Persian Gulf region. U.S. officials 

emphasized the commitment among the highest levels of the Bahraini 

government to make strong economic and political reforms to facilitate 

trade. Bahrain made economic reforms in areas such as property rights 

and copyright laws and is an emerging regional financial center. The 

country also made political reforms, such as strengthening its parliament. 

According to USTR officials, an FTA could be completed relatively quickly 

with Bahrain because of its small size and reform-minded outlook. Finally, 

USTR officials emphasized that an FTA with Bahrain would generate 

opportunities for U.S. business.

FTA Milestones In January 2003, the King of Bahrain raised the idea of an FTA in a meeting 

with President Bush. In May 2003, the USTR met with the Bahraini Crown 

Prince and announced the executive branch’s plans for negotiating an FTA 

with Bahrain. On August 4, 2003, USTR notified the Congress of the 

administration’s intent to initiate negotiations for an FTA with Bahrain. 

The target date for beginning negotiations is January 2004.
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 41 GAO-04-233 International Trade

FTA Features The U.S.-Bahrain FTA is expected to be a key part of the U.S.-MEFTA that 

the United States is supporting to address the related problems of terrorism 

and poverty in the region. According to the World Bank, unemployment in 

the Middle East is estimated conservatively at around 15 percent, and the 

labor force could expand by as much as 40 percent in the next 10 years. In 

addition, USTR notes that the region has extremely low rates of internal 

trade. The United States hopes that MEFTA could encourage economic 

reforms that would spur investment and increase opportunities in the 

region. In Jordan, for example, which signed an FTA with the U.S. in 2001, 

exports to the United States grew by 72 percent in 2002, and the United 

States is now Jordan’s biggest trading partner. USTR has outlined a stepby-step approach to building a MEFTA that takes into account the different 

developmental and economic levels of the countries in the region. These 

steps include supporting the potential partner country’s membership in the 

WTO; expanding the Generalized System of Preferences (GSP) Program1

 to 

increase U.S. trade with the Middle East; signing bilateral investment 

treaties, trade and investment framework agreements, and ultimately FTAs; 

and providing financial and technical assistance for trade capacitybuilding. The President’s Middle East Partnership Initiative will help direct 

more than $1 billion per year from U.S. government agencies to support 

trade in the Middle East. 

FTA Concerns Despite Bahrain’s and the U.S.’s interest in establishing an FTA, the U.S. 

government officials with whom we spoke described regional influences 

that may serve as potential obstacles to countries in the Persian Gulf region 

that would like to make progress on trade with the United States.

FTA Partner Participation in 

Other Trade Agreements

Bahrain is a member of the GCC customs union, which is still developing 

its trade rules. In 1989, the European Commission and the GCC signed a 

Cooperative Agreement that contains a commitment from both sides to 

enter into FTA negotiations. The two entities are now actively pursuing 

FTA talks. 

1

The GSP program is a unilateral program that extends duty-free entry of certain imports 

from developing countries.
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 42 GAO-04-233 International Trade

U.S.-Chile FTA

Background Preceding the U.S.-Chile FTA negotiations, which began in December 2000, 

Chile undertook political and economic reforms. These reforms positioned 

the country to implement a comprehensive trade agreement. Before the 

negotiations, Chile deregulated and restructured its economy and opened 

its trade ties to industrial countries. For example, in 1994 Chile reacted 

positively to the possibility of becoming a party to NAFTA but negotiations 

ceased, due in part to the expiration of the U.S. President’s fast-track 

negotiating authority.2

 However, the Congress did not grant the President 

such authority for 8 years; with this delay, the accession of Chile to NAFTA 

did not occur. Despite this delay, the U.S.-Chile Joint Commission on Trade 

and Investment was founded on the occasion of President Clinton’s visit to 

Chile in 1998. The commission established a work program to address a 

variety of bilateral trade and investment issues and facilitated the exchange 

of trade information. Thus, both countries were prepared to negotiate a 

comprehensive FTA when the negotiations began. 

Considerations in FTA 

Partner Selection

A variety of factors may have contributed to the U.S.’s decision to initiate 

an FTA with Chile. First, U.S. exports faced a 6 percent Chilean tariff, while 

exports from Chile’s existing FTA partners entered the Chilean market 

duty-free. Chile had therefore reduced its purchases of U.S. exports by 

almost one-third from $4.38 billion in 1997 to $3.13 billion in 2001 in favor 

of relatively cheaper goods from its FTA partners. An FTA with Chile 

provided the opportunity to reduce this tariff that had disadvantaged U.S. 

exports. USTR noted that the FTA would ensure that U.S. businesses and 

investors received treatment equal to or better than Chile’s other FTA 

partners. Second, Chile adopted economic reforms, such as the 

elimination of price controls and the privatization of state-owned 

enterprises, that signaled that Chile was willing to implement a mutually 

beneficial FTA by solidifying these reforms. Finally, through FTA 

negotiations, the United States hoped to build Chile’s support for important 

issues in the FTAA negotiations. For example, the U.S.-Chile FTA 

2

Although the Congress granted the President the authority to negotiate trade agreements 

with expedited implementation procedures, known as Fast Track, almost continuously 

since 1974, this authority lapsed in 1994. Similar authority was reauthorized under the Trade 

Act of 2002.
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 43 GAO-04-233 International Trade

negotiations better defined key negotiating issues in areas such as labor 

and the environment and demonstrated to other countries participating in 

the FTAA negotiations the U.S.’s interest in furthering trade liberalization. 

FTA Milestones On November 29, 2000, the Clinton administration announced its intention 

to negotiate a comprehensive FTA with Chile. Negotiations began on 

December 6, after U.S. and Chilean officials agreed on the initial list of 

topics to be discussed and the organization of negotiating groups. During 

the negotiations, and following the change in U.S. administration, the U.S. 

and the Chilean presidents declared their intention on April 16, 2001, to 

complete the agreement by the end of that year with meetings scheduled to 

occur approximately once a month through the end of 2001. However, due 

to the complexities of some trade topics, the negotiations would require an 

additional year and would include 14 negotiating rounds. Following the 

completion of these negotiating rounds, on December 11, 2002, USTR 

announced that an agreement had been reached. On June 6, 2003, USTR 

and the Chilean Foreign Minister signed the agreement. USTR then 

submitted draft FTA implementing bills to the Congress on July 15, 2003. 

The House of Representatives and the Senate passed the U.S.-Chile Free 

Trade Implementation Act on July 24 and July 31, 2003, respectively. 

President Bush signed the act on September 3, 2003. USTR expects the 

FTA to be implemented on or after January 1, 2004.

FTA Features The FTA is comprehensive in its treatment of industrial and agricultural 

products and, according to USTR, provides a template to demonstrate to 

other FTA partners the U.S.’s high expectations with regard to the scope of 

FTAs. For example, the negotiations encompassed trade in all goods, with 

approximately 85 percent of U.S.-Chilean trade in industrial and 

commercial goods becoming duty-free upon the agreement’s 

implementation. In addition, 75 percent of trade in agricultural products 

will become duty-free during the first 4 years following implementation. 

The FTA will also increase each country’s market access to a wide range of 

services. 

FTA Concerns Some Members of Congress and certain nongovernmental organizations 

have expressed concern about the use of the U.S.-Chile FTA as a model for 

negotiations with other FTA partners, particularly with regard to the 

agreement’s provisions concerning labor standards and the temporary 
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 44 GAO-04-233 International Trade

entry of professionals. For example, certain Members and labor interests 

have argued that the FTA’s labor provisions may be adequate for countries, 

such as Chile, that maintain stringent labor standards but such provisions 

may not be as appropriate for other countries that have not maintained or 

enforced strong labor laws. In addition, certain Members have raised 

concern with regard to the FTA’s provisions facilitating the entry of 

professionals, stating that such provisions touch upon immigration laws 

that are within the purview of the Congress and should not be amended 

through trade agreements. 

FTA Partner Participation in 

Other Trade Agreements

Successive Chilean governments have pursued trade liberalization 

strategies and export-oriented development policies, resulting in FTAs with 

Canada in 1997; Mexico in 1999; Central America and the European Union 

in 2002; and South Korea in 2003. In addition, Chile signed economic 

complementation agreements with Argentina in 1992; Venezuela, Colombia, 

and Bolivia in 1993; Ecuador in 1994; and Peru in 1998. Chile has also 

enacted an association agreement with the member countries of the 

Southern Common Market in October 1996. Finally, Chile joined the APEC 

organization in 1992 to boost commercial ties to Asian markets and is 

currently involved in negotiations for an FTAA in the western hemisphere. 

U.S.-Dominican 

Republic FTA

Background The Dominican Republic is the largest economy in the Caribbean Basin 

region. The trading relationship between the United States and the 

Dominican Republic has been shaped by the Caribbean Basin Initiative, 

which is a series of U.S. laws and programs beginning in 1983 that 

established unilateral U.S. trade preferences for goods from the Dominican 

Republic and 23 other countries in the region. In October 2002, the two 

countries held their first meeting under the U.S.-Dominican Republic Trade 

and Investment Council to deepen trade relations. When the United States 

began pursuing an FTA with the five Central American countries in 2002, 

the Dominican Republic expressed concern that it would suffer adverse 

economic consequences if it were not also included in the agreement. 

However, the United States did not support the request, in part because it 

did not believe the Dominican Republic had exhibited sufficient 
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 45 GAO-04-233 International Trade

commitment to negotiate and implement a comprehensive FTA with highlevels of commitment. In response, the Dominican government took steps 

to address some problematic issues, and aligned themselves more with the 

United States in multilateral trade forums. 

Considerations in FTA 

Partner Selection

According to USTR officials, the Dominican Republic was the first FTA 

partner that was selected under the new interagency process established in 

May 2003. USTR has emphasized several reasons for the selection of the 

Dominican Republic as an FTA partner. First, according to USTR, an FTA 

with the Dominican Republic would help support the broader U.S. trade 

strategy of competitive liberalization because the Dominican Republic 

would continue to uphold U.S. positions in the WTO and FTAA 

negotiations. Second, the FTA could bring economic and commercial 

benefits to the United States by increasing market access and creating 

more jobs. The Dominican Republic is the largest U.S. trading partner in 

the Caribbean, and USTR has described the country as an economic engine 

in the region. The combined markets of the Dominican Republic and the 

CAFTA countries would be larger than Brazil and would become the 

second-largest U.S. trading partner in Latin America. Third, the Dominican 

Republic was selected because the FTA would support U.S. efforts to 

strengthen democracy and the rule of law. For example, the United States 

plans to push for the inclusion of strong anticorruption and transparency 

requirements in the agreement. Fourth, the Congress has instructed the 

executive branch through the Caribbean Basin Initiative to enter into 

mutually advantageous FTAs with countries included in this initiative.3 

Fifth, there appears to be broad bipartisan support in the Congress for this 

FTA. Sixth, the Dominican Republic has made clear progress in terms of its 

readiness to negotiate an FTA with the United States, according to USTR. 

For example, the Dominican government familiarized itself with the U.S.-

Chile FTA and improved its protections of intellectual property rights, 

including satellite broadcasts and antipiracy provisions, in response to U.S. 

concerns. According to USTR, there is a clear willingness at the highest 

levels of the Dominican government to meet U.S. requirements for FTA 

3

The Caribbean Basin Initiative collectively refers to the Caribbean Basin Economic 

Recovery Act of 1983, the Caribbean Basin Economic Recovery Expansion Act of 1990, and 

the U.S.-Caribbean Basin Trade Partnership Act of 2000. The countries include Antigua, 

Aruba, the Bahamas, Barbados, Belize, British Virgin Islands, Costa Rica, Dominica, the 

Dominican Republic, El Salvador, Grenada, Guatemala, Guyana, Haiti, Honduras, Jamaica, 

Montserrat, Netherlands Antilles, Nicaragua, Panama, St. Kitts and Nevis, St. Lucia, St. 

Vincent and the Grenadines, and Trinidad and Tobago.
Appendix IV

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Profiles

Page 46 GAO-04-233 International Trade

partners. Seventh, there is strong support for an FTA among U.S. industry 

and agricultural exporters, including from such groups as the U.S. Chamber 

of Commerce. 

FTA Milestones The Dominican President met with President Bush in July 2002 to request 

an FTA with the United States. In a joint statement issued at a March 2003 

meeting of the U.S.-Dominican Republic Trade and Investment Council, the 

United States acknowledged the steps that the Dominican Republic had 

taken so far to improve its trade policy and stated its willingness to 

consider adding the Dominican Republic to CAFTA. On August 4, 2003, 

following a meeting with the Congressional Oversight Group, the Trade 

Representative formally notified the Congress of the executive branch’s 

intent to initiate FTA negotiations with the Dominican Republic. The target 

date for starting negotiations is January 2004. USTR hopes to conclude 

negotiations in March 2004.

FTA Features USTR plans to integrate the Dominican Republic into the FTA it is already 

negotiating with five Central American countries. Officials will propose 

that the Dominican Republic accede to the framework of CAFTA as it is 

being discussed, after which the talks will focus on market access issues. 

USTR hopes to present the Congress with one agreement for CAFTA 

countries and the Dominican Republic.

FTA Concerns Given the short time frame, integrating the Dominican Republic may be 

challenging. In fall 2003, USTR is to consult with the Dominicans about the 

Chile and Singapore FTAs to explore the extent of Dominican support in 

adopting provisions similar to those in these agreements.

Other concerns involve the State Department’s identification of the 

Dominican Republic as a country that does not fully comply with minimum 

standards in the trafficking of persons.
Appendix IV

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Profiles

Page 47 GAO-04-233 International Trade

FTA Partner Participation in 

Other Trade Agreements

The Dominican Republic has FTAs with the Caribbean Community 

(CARICOM)4 and the Central American countries.

U.S.-Morocco FTA

Background Morocco is a U.S. ally in the war against terrorism and a long-time 

democratic partner in the Arab world. The U.S.-Morocco Bilateral 

Investment Treaty, signed in 1991, provided protections to U.S. investors in 

Morocco. In 1995, the United States signed a trade and investment 

framework agreement with Morocco to promote freer trade, increased 

investment, and stronger economic ties between the two countries. 

Moreover, the 2001 “open skies” agreement between the United States and 

Morocco supported increased air passenger and cargo links between the 

two countries. According to USTR, Moroccan supporters of an FTA with 

the United States cited the benefits that Jordan attained after it signed an 

FTA in 2001 as a reason for desiring a U.S.-Morocco FTA.

Considerations in FTA 

Partner Selection

USTR emphasized several reasons for selecting Morocco as an FTA partner. 

First, USTR officials noted that a trade agreement with Morocco would 

further the executive branch’s goal of promoting openness, tolerance, and 

economic growth across the Muslim world. Second, Morocco has been a 

staunch ally in the war against terrorism. Third, the agreement would 

ensure stronger Moroccan support for U.S. positions in the WTO 

negotiations. Fourth, according to USTR, an FTA with the United States 

would enable Morocco to strengthen its economic and political reforms, 

such as its recent program to liberalize and privatize key sectors, and help 

promote sustainable development and environmental protection. The FTA 

would emphasize transparency, which would help make Morocco’s 

government institutions more accountable. Fifth, the United States is 

expected to benefit economically from an FTA with Morocco because the 

agreement would eliminate tariffs and other unjustified barriers to trade 

between the two countries. Morocco currently taxes U.S. products at an 

4

CARICOM members include Antigua and Barbuda, the Bahamas, Barbados, Belize, 

Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, St. Kitts and Nevis, St. Lucia, St. 

Vincent and the Grenadines, Surinam, and Trinidad and Tobago.
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 48 GAO-04-233 International Trade

average of 20 percent, while the United States only poses a 4 percent tariff 

on Moroccan products. A U.S.-Morocco FTA would also help protect U.S. 

investments in Morocco and level the playing field with the European 

Union, with which Morocco has an association agreement. Growth 

prospects for U.S. products and services, such as energy and tourism, also 

exist. Finally, USTR officials noted that Moroccan negotiators were well 

prepared to undertake FTA negotiations with the United States because 

they had studied the U.S.-Jordan FTA.

FTA Milestones On April 23, 2002, President Bush and the Moroccan King announced that 

their two countries would seek an FTA. USTR notified the Congress of its 

intent to negotiate an FTA with Morocco on October 1, 2002. On November 

21, 2002, USTR convened a public hearing on the U.S.-Morocco FTA. 

Negotiations started on January 21, 2003. On July 22, 2003, four U.S. 

legislators announced the creation of the Moroccan Caucus, whose 

purpose is to support increased trade and stronger ties between the United 

States and Morocco. Because the target date for completing negotiations 

of December 2003 was not met, negotiations will continue in 2004.

FTA Features The executive branch views the U.S.-Morocco FTA as a key to underpinning 

the President’s broader Middle East trade strategy. The agreement builds 

upon the FTAs with Jordan and Israel and might serve as a model for other 

North African and Middle Eastern countries interested in increased trade. 

U.S. executive branch officials hope that Morocco will become a hub for 

subregional integration and in turn serve as one of several subregional 

centers that could be built into a MEFTA. 

The U.S. Agency for International Development will provide assistance for 

trade capacity-building programs to help Morocco meet the obligations 

involved in signing and implementing an FTA with the United States. The 

United States will also provide technical assistance in areas such as 

agriculture sector reform, which are likely to be sensitive. U.S. assistance 

will also focus on civil society and business groups in order to strengthen 

public input to the negotiating process and maximize the benefits of an FTA 

for Morocco. The U.S. Agency for International Development estimates 

that these activities will cost between $40 million and $48 million over 5 

years. 
Appendix IV

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Profiles

Page 49 GAO-04-233 International Trade

FTA Concerns Morocco may face complex decisions in its agricultural sector, which 

employs 40 percent of Morocco’s workforce. 

FTA Partner Participation in 

Other Trade Agreements

Morocco signed the Euro-Mediterranean Association Agreement with the 

European Union in 1996. As part of the Barcelona Process, which 

envisions a free trade zone stretching across Europe and in North Africa by 

2010, Morocco has signed FTAs with several other North African countries. 

According to USTR, agriculture was generally excluded from the 

association agreement with the European Union, and U.S. exporters could 

gain significant advantages under an FTA with Morocco.

U.S.-Singapore FTA

Background Singapore has been a long-time proponent of trade liberalization. However, 

a U.S. trade official noted that the announcement of the intention to 

negotiate a U.S.-Singapore FTA at the APEC conference in November 2000 

was unexpected, but the selection was based on the Clinton 

administration’s interest in completing an FTA with a relatively large 

trading partner that maintained an open economy. In addition, as 

Singapore’s economy did not include many sectors sensitive to U.S. 

producers, the Clinton administration hoped to conclude the FTA quickly, 

while establishing a model for future FTAs.

Considerations in FTA 

Partner Selection

The negotiation of a U.S.-Singapore FTA in 2000 may have been motivated 

by various factors. First, an FTA with Singapore furthered the Clinton 

administration’s emphasis on access to big emerging markets. The year 

negotiations began, Singapore was the 10th largest U.S. trading partner, and 

the value of U.S.-Singapore trade had doubled since the early 1990s, 

according to Commerce. In addition, many U.S. corporations invest in 

Singapore as a regional base for exports and production, thereby making 

the United States the largest foreign investor in Singapore. Second, an FTA 

with Singapore is the first such agreement between the United States and 

an Asian country, and this agreement offered an opportunity to strengthen 

U.S. relations with a region experiencing economic integration and 

expanding trade. For example, as Singapore has undertaken efforts to 

liberalize trade and attract multinational corporations, USTR noted that 
Appendix IV

Selected U.S. Free Trade Agreement Partner 

Profiles

Page 50 GAO-04-233 International Trade

this FTA may serve as a foundation for the Enterprise for ASEAN Initiative.5 

Third, both countries maintain mutual security interests, and since 1992 the 

U.S. military has had access to facilities in Singapore, which facilitates 

military deployments to strategic locations. In addition, Singapore has 

supported the U.S. military’s continued presence and opposes any ASEAN 

defense arrangements that might withdraw U.S. armed forces from Asia. 

Fourth, the Congress and the U.S. business community undertook efforts 

to support an FTA with Singapore. For example, before the negotiations, 

legislation was introduced in the Congress that would have authorized the 

President to enter into an FTA with Singapore and would have provided for 

expedited congressional consideration of the agreement. Business support 

included a 1999 visit to Singapore by 22 U.S. business executives to discuss 

with the Singaporean Prime Minister the possibility of establishing an FTA 

and strengthening U.S.-Singapore ties.

FTA Milestones President Clinton and the Prime Minister of Singapore announced an 

agreement to negotiate an FTA during the APEC conference in November 

2000. Negotiations then began under the Clinton administration in 

December 2000 and concluded under the Bush administration in November 

2002. Following 11 rounds, USTR announced on January 15, 2003, that 

agreement had been reached; on January 30, 2003, the executive branch 

notified the Congress of its intent to sign the FTA. President Bush and the 

Singaporean Prime Minister signed the agreement on May 6, 2003. USTR 

sent the draft FTA implementing legislation to the Congress in June 2003, 

and the House and Senate passed the legislation on July 24 and July 31, 

2003, respectively. President Bush signed the FTA implementing legislation 

on September 3, 2003. January 1, 2004, is the scheduled date for the FTA’s 

implementation. 

FTA Features Preceding the FTA negotiations, the United States and Singapore had 

signed a Trade and Investment Framework Agreement, and 99 percent of 

U.S. exports already entered Singapore duty-free. In addition, both 

countries have maintained relatively open investment regimes. Thus, the 

FTA is expected to have relatively little impact on U.S. exports, and the 

elimination of nontariff barriers will provide the majority of benefits. 

5

In October 2002, President Bush announced the Enterprise for ASEAN Initiative, which is a 

new trade initiative to establish a network of bilateral FTAs with those ASEAN member 

countries that are committed to enacting economic reforms and maintaining openness. 
Appendix IV

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Page 51 GAO-04-233 International Trade

However, USTR has commented that the FTA serves as a model for future 

FTAs due to its comprehensive scope and the inclusion of commitments 

not covered in earlier FTAs. For example, according to USTR officials, the 

text of the U.S.-Singapore FTA has served as a template to demonstrate to 

future FTA partners the comprehensive scope that the United States 

expects in FTAs. 

FTA Concerns Certain Members of Congress and some labor and environmental groups 

have expressed concern over (1) the possible impact of the U.S.-Singapore 

FTA and (2) the use of the FTA as a template for other agreements. Specific 

concerns include the potential threat to U.S. producers in importcompeting sectors, such as U.S. manufacturers of electronic equipment and 

other machinery, and the possible negative environmental effects, such as 

increased pollution from industrialization. In addition, certain Members 

have also expressed concern about some of the agreement’s provisions, 

including those relating to the temporary entry of professionals, which they 

say impinge on U.S. immigration law without congressional input, and the 

agreement’s Integrated Sourcing Initiative, which some Members claimed 

expands trade benefits under the U.S.-Singapore FTA to territories outside 

of Singapore, although these territories have not assumed key obligations 

that the Congress has insisted should be included in FTAs.6

FTA Partner Participation in 

Other Trade Agreements

Singapore is party to many preferential trade agreements, with the majority 

of these agreements only recently implemented. For example, while 

Singapore has been a member of the ASEAN Free Trade Area since 1992, 

only since January 2001 has Singapore entered into an FTA with New 

Zealand. In addition, in January 2002, Singapore concluded an FTA with 

Japan, which excludes agricultural products; effective January 2003, 

Singapore implemented an FTA with the European Free Trade Association. 

In February 2003, Singapore signed an FTA with Australia and has been 

negotiating FTAs with Mexico and Canada since 2000 and 2001, 

6

For a limited number of information technology products and medical devices that already 

are duty-free in the United States and Singapore, the Integrated Sourcing Initiative 

eliminates the requirement that these products meet specific “rules of origin” when shipped 

between the United States and Singapore. This customs procedure is streamlined and the 

burden on the importer is reduced, with respect to completing certification paperwork or 

paying merchandise processing fees.
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Selected U.S. Free Trade Agreement Partner 

Profiles

Page 52 GAO-04-233 International Trade

respectively. In addition, a study group was established in November 2002 

to explore a possible FTA between Singapore and South Korea.

U.S.-CAFTA FTA

Background Since the late 1980s, the countries of Central America have been moving 

from civil conflict toward peace and democracy. The U.S.-Central 

American trading relationship has been shaped by the Caribbean Basin 

Initiative, which promotes economic growth in the region through a series 

of unilateral U.S. trade preferences for 24 countries. President Clinton 

stressed the commitment of the United States to expanding trade between 

the United States and Central America at a 1997 summit with leaders from 

Central America and the Dominican Republic. President Bush has 

continued the push for increased free trade with Central America. 

Considerations in FTA 

Partner Selection

USTR emphasized several reasons why the CAFTA countries (Costa Rica, 

El Salvador, Guatemala, Honduras, and Nicaragua) were selected as FTA 

partners. First, CAFTA would help lock in and broaden the economic and 

political reforms made in these countries throughout the 1990s. For 

example, elements of the FTA that require increased transparency could 

help counter corruption and support government accountability in the 

CAFTA countries. Second, pursuing an FTA with the CAFTA countries 

would complement U.S. goals in the FTAA and the WTO, particularly given 

the support of CAFTA countries for U.S. negotiating positions. The 

agreement would also support the ongoing economic integration of the 

region. Third, an FTA would enable the United States to address market 

access barriers in the CAFTA countries and thus promote U.S. exports to 

the region and increase U.S. access to more affordable goods. Under the 

Caribbean Basin Initiative, U.S. tariffs on Central American goods are 

already low, with 74 percent of CAFTA country imports entering the United 

States duty-free in 2002. An FTA would enable the United States and the 

CAFTA countries to have reciprocal tariff levels and would remove the 

requirement that Caribbean Basin Initiative preferences be reviewed every 

year. A fourth reason for the selection is country readiness. The CAFTA 

countries are familiar with U.S. approaches to trade because they have 

concluded a NAFTA-like agreement with Mexico in 2000. Fifth, the 

Congress has instructed the executive branch through the Caribbean Basin 

Initiative to enter into mutually advantageous FTAs with Central American 
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Selected U.S. Free Trade Agreement Partner 

Profiles

Page 53 GAO-04-233 International Trade

countries. Finally, the U.S. business community is interested in the 

potential gains they could see from CAFTA. Some 40 percent of total goods 

imported by Latin America come from the United States, thereby making 

the region an important market for some U.S. sectors. 

FTA Milestones In September 2001, the Bush administration held talks on free trade with 

the CAFTA countries. In January 2002, Bush announced that the United 

States would explore an FTA with these countries. Starting in February 

2002, USTR held seven workshops with the CAFTA countries to ensure 

they would be able to develop and implement an FTA with the United 

States. In October 2002, following a meeting of the Congressional 

Oversight Group, President Bush formally notified the Congress of his 

intention to begin FTA negotiations with the CAFTA countries. USTR 

convened a public hearing on CAFTA in November 2002. Working-level 

negotiations started in January 2003 and concluded in December 2003, 

without Costa Rica. The United States hopes to sign the agreement—

which could include a component with the Dominican Republic—by spring 

2004. 

FTA Features There are five negotiating groups7

 for the CAFTA negotiations. The 

decision to establish only five negotiating groups reflects the CAFTA 

countries’ interest in consolidating the negotiations, given their limited 

negotiating resources. In addition to these five working groups, there is 

also a nonnegotiating, multiagency effort responsible for trade capacitybuilding. This capacity-building effort includes projects to increase citizen 

access to trade negotiations, support the negotiating teams, strengthen 

food safety inspection systems, and enhance the implementation of labor 

laws. As part of these efforts, each country identified its needs in a 

National Trade Capacity Building Strategy. Other agencies involved in 

trade capacity-building include the U.S. Agency for International 

Development and the Inter-American Development Bank. The executive 

branch made a $47 million budget request for U.S. capacity-building 

assistance in the region in 2003. 

7

The negotiating groups cover (1) market access, (2) investment and services, (3) 

government procurement and intellectual property, (4) labor and environment, and (5) 

institutional issues.
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Profiles

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FTA Concerns Some civil society groups and Members of Congress are concerned that the 

CAFTA agreement will not adequately address their labor and 

environmental concerns in the CAFTA countries. There is concern that 

USTR may support language of the U.S.-Chile FTA, which calls for 

countries to enforce their domestic labor laws. Some civil society groups 

and Members believe this approach is not appropriate for the CAFTA 

countries because their labor laws are not as stringent as Chile’s laws. 

Similarly, some civil society groups claim that the environmental 

commitments stemming from the FTA may not build upon existing 

programs or preclude investor lawsuits that could undermine 

environmental laws. Finally, there is concern that there has not been a 

sufficient mechanism for public input. 

Market access for agricultural goods and textiles is another potential area 

of contention. Two Members have expressed concern that the CAFTA 

countries are reluctant to lower tariffs on U.S. agricultural products. The 

U.S. sugar industry and some U.S. textile and apparel producers have also 

expressed concern about heightened competition from CAFTA suppliers.

FTA Partner Participation in 

Other Trade Agreements

The CAFTA countries are members of the Central American Common 

Market. In addition, these countries have negotiated more than 20 FTAs 

with such countries as Mexico, Canada, and several South American 

countries.

U.S.-SACU FTA

Background The Southern African Customs Union, which is comprised of Botswana, 

Lesotho, Namibia, South Africa, and Swaziland, accounted for almost onehalf of the gross domestic product in sub-Saharan Africa and for $2.5 billion 

in U.S. exports to the region in 2002. Total two-way trade between the 

United States and SACU was more than $7 billion that year. South Africa 

has the largest economy among the SACU countries and the United States 

and South Africa have had a trade and investment framework agreement 

since 1999. The 2000 African Growth and Opportunity Act (AGOA)8

8

Pub. L. No. 106-200, § 116, 114 Stat. 266-67.
Appendix IV

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Profiles

Page 55 GAO-04-233 International Trade

declares that FTAs should be negotiated with sub-Saharan African 

countries to serve as catalysts for trade and for U.S. private-sector 

investment in the region. As a result, by moving from one-way trade 

preferences to a reciprocal FTA with SACU, the United States expects to 

build on the success of AGOA and to deepen U.S. political and economic 

ties to sub-Saharan Africa. The United States also hopes to lend 

momentum to U.S. development efforts in the region by encouraging 

greater foreign direct investment and promoting regional integration and 

economic growth. 

Considerations in FTA 

Partner Selection

USTR noted several reasons why the SACU countries were selected as FTA 

partners. For instance, in pursuing an FTA with SACU, the executive 

branch responded to Congress’s direction to negotiate FTAs with subSaharan countries, as expressed in AGOA. USTR emphasized that the 

SACU countries are ready, individually and collectively, to be free trade 

partners. An FTA with the SACU countries would strengthen growing 

bilateral commercial ties between the United States and these countries 

and address barriers in these countries to U.S. exports. These barriers 

include high tariffs on certain goods, overly restrictive product licensing 

measures, inadequate protection of intellectual property rights, and 

restrictions the SACU governments impose that make it difficult for U.S. 

service firms to do business in these countries. An FTA would offer an 

opportunity to improve southern Africa’s commercial competitiveness and 

to better position the region for success in the U.S market and the global 

economy. In addition, an FTA would help the SACU countries attract 

much-needed new foreign direct investment because international 

investors prefer access to a large and integrated market. An FTA might also 

level the playing field in areas where U.S. exporters are disadvantaged by 

the European Union’s FTA with South Africa. Finally, this FTA would 

reinforce the economic reforms that have taken place in the SACU 

countries and might encourage additional progress where needed. 

FTA Milestones In November 2002, USTR notified the Congress that the United States 

intended to enter into FTA negotiations with SACU in at least 90 days. The 

United States and SACU intend to complete the negotiations by December 

2004.
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Profiles

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FTA Features A U.S.-SACU FTA agreement is likely to be comprehensive because the 

governments have announced broad negotiating objectives that cover 

agriculture, industry, and services issues. The United States is committed 

to providing the technical assistance necessary for SACU countries to 

assume the responsibilities of full partnership and to share in the benefits 

of free trade. The United States and SACU have established a special 

cooperative group on trade capacity-building specifically for these 

negotiations, with $2 million in initial funding from the U.S. Agency for 

International Development. This group is to meet regularly during the 

negotiations to identify needs and swiftly direct technical assistance 

resources to help SACU countries better prepare for and participate in 

negotiations, implement agreed-upon commitments, and take advantage of 

free trade.

FTA Concerns Several groups representing U.S. retailers, food distributors, and metal 

importers have supported the reduction of U.S. tariffs on SACU goods. 

Groups representing service industries and recycled clothing have favored 

removing tariff and nontariff barriers in the SACU market. However, other 

groups have opposed the additional opening of U.S. markets to SACU 

goods. Agriculture, steel, and the textile and apparel industries are 

expected to monitor negotiations closely.

FTA Partner Participation in 

Other Trade Agreements

The SACU countries are members of the WTO. South Africa has had an 

FTA with the European Union since 2000.
Page 57 GAO-04-233 International Trade

Appendix V

Comments from the Office of the U.S. Trade 

Representative ApendxiV

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 58 GAO-04-233 International Trade
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 59 GAO-04-233 International Trade
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 60 GAO-04-233 International Trade

See comment 1.
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 61 GAO-04-233 International Trade

See comment 2.

See comment 3.
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 62 GAO-04-233 International Trade

See comment 4.
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 63 GAO-04-233 International Trade
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 64 GAO-04-233 International Trade

The following are GAO’s comments on the U.S. Trade Representative’s 

letter dated December 3, 2003.

GAO Comments 1. As the Trade Representative states, if the 43 percent of U.S. trade that is 

accounted for by the EU-25, Japan, Korea, and China is excluded, then 

current and announced FTA negotiations account for 69 percent 

(according to our calculation) of the remainder of total U.S. trade. 

However, U.S. trade with existing FTA partners (Canada, Chile, Jordan, 

Mexico, Israel, and Singapore) accounts for the majority of this. The 

trade data can be segmented in several ways, but the data show that 

trade partners with which the U.S. has begun or has announced FTA 

negotiations account for $178 billion in two-way trade with the United 

States, or about 8 percent of the $2.3 trillion total U.S. trade. 

2. We believe that given its admittedly limited available resources, USTR 

needs to better manage its staffing and funds to implement its growing 

and complex trade negotiating agenda. As discussed in this report, 

USTR’s main strategy for undertaking multiple FTA negotiations 

appears to be working on one FTA per region at a time. Assistant 

USTRs in four regional offices lead FTA negotiations in each of four 

regions. With the announcement of three new FTA negotiations—the 

Dominican Republic, the Andean countries, and Panama—in Latin 

America alone, it is not clear how USTR will be able to meet its new 

and ongoing negotiating demands in a timely fashion. We have noted in 

this report that one factor that constrains negotiations is a limited 

number of regional and functional specialists. To address these 

challenges, USTR would do well to develop a resource strategy across 

its entire negotiating agenda that is based on solid data and planning. 

3. While we appreciate USTR’s efforts in pursuing intensive trade 

negotiations in an often unpredictable international environment, this 

situation makes it all the more important to make staffing and resource 

decisions based on valid and reliable data and planning. Relying on 

informal, ad hoc decision making increases risk and reduces the chance 

that the agency will accomplish its goals. The human capital model that 

we developed calls for organizations, regardless of size, to use solid 

data to determine the current and future human capital required to 

support their mission and goals. 

4. Just like other federal agencies, USTR is responsible for standard 

accountability procedures to manage its program and federal funds. 
Appendix V

Comments from the Office of the U.S. Trade 

Representative

Page 65 GAO-04-233 International Trade

Our recommendation calls for a result—not specific procedures or 

output measures. Since its own and other agencies’ expert staff are the 

most substantial resources for FTA negotiations, improving upon the 

present lack of systematic data would better position USTR and other 

agencies to make decisions that involve staffing trade-offs among 

competing priorities. In addition, travel is an important resource 

component and must be programmed in advance. While we recognize 

and encourage the steps that USTR has already taken to make 

improvements, we note that these efforts are already recognized in this 

report and are not sufficient to address our concerns for forward 

planning.
Page 66 GAO-04-233 International Trade

Appendix VI

GAO Contacts and Staff Acknowledgment ApendxiVI

GAO Contacts Kim Frankena, (202) 512-8124

Judy Knepper, (202) 512-8554

Staff 

Acknowledgments

In addition to those named above, Martin De Alteriis, Francisco Enriquez, 

Bradley Hunt, Rona Mendelsohn, Juan Tapia-Videla, Timothy Wedding, and 

Eve Weisberg made major contributions to this report.

(320208)
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