GAO 

United States Government Accountability Office

Report to the Chairman, Committee on 

Finance, U.S. Senate 

INTERNATIONAL 

TRADE 

Four Free Trade 

Agreements GAO 

Reviewed Have 

Resulted in 

Commercial Benefits, 

but Challenges on 

Labor and 

Environment Remain 

July 2009 

GAO-09-439 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 2009

INTERNATIONAL TRADE

Four Free Trade Agreements GAO Reviewed Have 

Resulted in Commercial Benefits, but Challenges on 

Highlights of GAO-09-439, a report to the Labor and Environment Remain 

Chairman, Committee on Finance, U.S. 

Senate 

Since 2001, Congress has 

approved free trade agreements 

(FTA) with 14 countries. Most 

were negotiated under Trade 

Promotion Authority (TPA), 

which aims to lower trade 

barriers while strengthening the 

capacity of trading partners to 

promote respect for workers’ 

rights and to protect the 

environment. The Office of the 

United States Trade 

Representative (USTR) is 

responsible for overseeing 

implementation of the FTAs, and 

the Departments of Labor (Labor) 

and State (State) have 

responsibilities for implementing 

and managing FTA cooperation 

projects. GAO was asked to 

assess progress through FTAs in 

(1) advancing U.S. economic and 

commercial interests, (2) 

strengthening labor laws and 

enforcement in partner nations, 

and (3) strengthening partners’ 

capacity to improve and enforce 

their environmental laws. GAO 

focused on Jordan, Chile, 

Singapore, and Morocco, chosen 

because of their economic, social, 

and geographic diversity and 

relatively older FTAs. GAO 

analyzed relevant trade laws and 

trends, met with U.S. agencies 

and foreign government officials, 

conducted fieldwork in the four 

countries, and solicited input 

from the private sector. 

What GAO Recommends

GAO recommends that agencies 

update plans for implementing 

and overseeing FTAs to make the 

FTAs more effective in producing 

results. Agencies intend to do so 

but saw important progress. 

The four selected FTAs have largely accomplished the U.S. objectives of 

achieving better access to markets and strengthening trade rules, and have 

resulted in increased trade, as summarized in the table. While varying in 

details, the FTAs have all eliminated import taxes, lowered obstacles to U.S. 

services such as banking, increased protection of U.S. intellectual property 

rights abroad, and strengthened rules to ensure government fairness and 

transparency. Overall merchandise trade between the United States and 

partner countries has substantially grown, with increases ranging from 42 

percent to 259 percent. Services trade, foreign direct investment, and U.S. 

affiliate sales in the largest partners also rose. 

FTA negotiations spurred some labor reforms in each of the selected partners, 

according to U.S. and partner officials, but progress has been uneven and U.S. 

engagement minimal. An example cited was Morocco’s enactment of a longstalled overhaul of its labor code. However, partners reported that 

enforcement of labor laws continues to be a challenge, and some significant 

labor abuses have emerged. In the FTAs we examined, Labor provided 

minimal oversight and did not use information it had on partner weaknesses 

to establish remedial plans or work with partners on improvement. 

The selected partners have improved their environmental laws and made 

other progress, such as establishment of an environmental ministry and a 400-

strong environmental law enforcement force in Jordan, according to U.S. and 

foreign officials. However, partner officials report that enforcement remains a 

challenge, and U.S. assistance has been limited. Elements needed for assuring 

partner progress remain absent. Notably, USTR’s lack of compliance plans 

and sporadic monitoring, State’s lax management of environmental projects, 

and U.S. agencies’ inaction to translate environmental commitments into 

reliable funding all limited efforts to promote progress. 

FTA Commercial, Labor, and Environment Results, and U.S. Agencies’ Oversight 

Commercial Labor Environment 

Partner country results as reported to GAO 

Jordan U.S. and partner gains 

evident 

Some progress after 

serious problems 

Considerable progress 

Singapore U.S. and partner gains 

evident 

Progress Progress 

Chile U.S. and partner gains 

evident 

Some problems persist 

despite progress 

Problems persist 

despite progress 

Morocco U.S. and some partner 

gains evident 

Problems persist 

despite progress 

Problems persist 

despite progress 

Oversight status

U.S. agencies’ 

oversight 

Generally adequate Lack cooperation 

plans, sufficient 

funding, oversight 

Lack monitoring plans, 

sufficient funding 

View GAO-09-439 or key components. Source: GAO. 

For more information, contact Loren Yager at 

(202) 512-4347 or yagerl@gao.gov. 
Page i GAO-09-439 

Contents 

Letter 1

Results in Brief 4 

Background 6 

FTA Results Vary among Partner Countries, but Reveal Positive 

Economic and Commercial Outcomes Consistent with TPA 

Goals 15 

FTAs Contribute to Labor Improvements in Partners, but U.S. 

Follow-up on FTA Labor Commitments Has Been Minimal 32 

FTA Partners Have Improved Environmental Laws, but the Lack of 

Systematic U.S. Monitoring and Other Factors Impede 

Assessment of Their Impact 52 

Conclusions 68 

Recommendations for Executive Action 70 

Agency Comments and Our Evaluation 71 

Appendix I Objectives, Scope, and Methodology 74 

Appendix II Commercial/Economic Results of the Jordan 

FTA 83 

Appendix III Commercial/Economic Results of the Singapore 

FTA 94 

Appendix IV Commercial/Economic Results of the Chile FTA 105 

Appendix V Commercial/Economic Results of the Morocco 

FTA 116 

Appendix VI Average Annual Growth Rates of Bilateral 

Trade with FTA Partner Countries Compared with 

Overall U.S. Trade 127 

 Free Trade Agreements 
Appendix VII Comments from the Department of Labor 130 

Appendix VIII Comments from the Department of State 131 

Appendix IX Comments from the Office of the United States 

Trade Representative 143 

Appendix X GAO Contact and Staff Acknowledgments 147 

Tables 

Table 1: Amount of Two-Way Trade, Percent Increase in Two-Way 

Trade, and Percentage Increase in U.S. Exports and 

Imports, from Year Prior to FTAs to 2008 17 

Table 2: U.S. Exports to Jordan: Top 25 Categories by Value, Preand Post-FTA Average Annual Growth Rates, and Change 

in Growth Rates between Periods 88 

Table 3: U.S. Imports from Jordan: Top 25 Categories by Value, Preand Post-FTA Average Annual Growth Rates, and Change 

in Growth Rates between Periods 89 

Table 4: U.S. Exports to Singapore: Top 25 Categories by Value, 

Pre- and Post-FTA Average Annual Growth Rates, and 

Change in Growth Rates between Periods 99 

Table 5: U.S. Imports from Singapore: Top 25 Categories by Value, 

Pre- and Post-FTA Average Annual Growth Rates, and 

Change in Growth Rates between Periods 100 

Table 6: U.S. Exports to Chile: Top 25 Categories by Value, Pre- and 

Post-FTA Average Annual Growth Rates, and Change in 

Growth Rates between Periods 109 

Table 7: U.S. Imports from Chile: Top 25 Categories by Value, Preand Post-FTA Average Annual Growth Rates, and Change 

in Growth Rates between Periods 110 

Table 8: U.S. Exports to Morocco: Top 25 Categories by Value, Preand Post-FTA Average Annual Growth Rates, and Change 

in Growth Rates between Periods 120 

Page ii GAO-09-439 Free Trade Agreements
Table 9: U.S. Imports from Morocco: Top 25 Categories by Value, 

Pre- and Post-FTA Average Annual Growth Rates, and 

Change in Growth Rates between Periods 121 

Table 10: Average Annual Growth Rates of Bilateral Trade with 

Partner Countries Pre- and Post-FTA and U.S. Growth in 

Trade with the World for Similar Time Periods 128 

Figures 

Figure 1: U.S. Bilateral Trade with Jordan, 1998–2008 19 

Figure 2: U.S. Bilateral Trade with Morocco, 1998–2008 20 

Figure 3: U.S. Bilateral Trade with Chile, 1998–2008 21 

Figure 4: U.S. Bilateral Trade with Singapore, 1998–2008 22 

Figure 5: Market Share of the Top Five Exporting Countries to 

Jordan, 1999-2007 87 

Figure 6: Market Share of the Top Five Exporting Countries to 

Singapore, 1999-2008 98 

Figure 7: Market Share of the Top Five Exporting Countries to 

Chile, 1998 to 2008 108 

Figure 8: Market Share of the Top Five Exporting Countries to 

Morocco, 1999 -2007 119 

Abbreviations 

AFBF American Farm Bureau Federation 

AmCham American Chamber of Commerce 

APHIS Animal and Plant Health Inspection Service 

ASEAN Association of Southeast Asian Nations 

AVA Agri-Food and Veterinary Authority 

BEA Bureau of Economic Analysis 

CAFTA-DR Central America–Dominican Republic Free Trade 

 Agreement 

CITES Convention on International Trade in Endangered Species 

 of Wild Fauna and Flora 

CLDP Commercial Loan Development Program 

CONAMA National Commission for Environmental Cooperation 

DRL Democracy, Human Rights, and Labor Bureau 

EAC Environmental Affairs Council 

Page iii GAO-09-439 Free Trade Agreements
EPA Environmental Protection Agency 

EU European Union 

FDI foreign direct investment 

FTA free trade agreement 

GDP gross domestic product 

GNI gross national income 

GSP Generalized System of Preferences 

ILAB Bureau of International Labor Affairs 

ILO International Labor Organization 

IMF International Monetary Fund 

IPR intellectual property rights 

ITC International Trade Commission 

ITUC International Trade Union Confederation 

MAT marine, aviation and transport insurance 

MEFTA Middle East Free Trade Agreement 

MFN Most-Favored Nation 

MNC multinational corporation 

MOFA majority-owned foreign affiliate 

NAFTA North American Free Trade Agreement 

NGO nongovernmental organization 

OECD Organisation for Economic Co-operation and Development 

OES Oceans and International Environmental and Scientific 

 Affairs Bureau 

OMB Office of Management and Budget 

PhRMA Pharmaceutical Research and Manufacturers of America 

PPP purchasing power parity 

QIZ Qualifying Industrial Zone 

SPS sanitary and phytosanitary 

TEPAC Trade and Environment Policy Advisory Committee 

TPA Trade Promotion Authority 

UN United Nations 

UNCTAD United Nations Conference on Trade and Development 

USAID U.S. Agency for International Development 

USDA Department of Agriculture 

USTR Office of the United States Trade Representative 

WTO World Trade Organization 

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Page iv GAO-09-439 Free Trade Agreements
Page 1 GAO-09-439 

 

United States Government Accountability Office

Washington, DC 20548 

 

July 10, 2009 

The Honorable Max Baucus 

Chairman 

Committee on Finance 

United States Senate 

Dear Mr. Chairman: 

Free trade agreements (FTA) have been a major feature of recent U.S. 

trade policy. Their growth was spurred by Congress’ 2002 renewal of 

presidential Trade Promotion Authority (TPA),1

 which had the goal of 

promoting U.S. and foreign economic growth and lowering barriers to 

(liberalizing) trade through FTAs with specific partners, while 

strengthening protection of workers’ rights and the environment. 

Beginning in 2001, Congress approved FTAs with 14 countries, and all of 

these are now in effect, including 4 with the countries highlighted in this 

report—Jordan, Singapore, Chile, and Morocco. 

The current Congress faces several FTA-related questions hinging in part 

on confidence that trade agreements do indeed benefit U.S. citizens and 

that TPA’s goals, as set forth in Sections 2102(a) (b) and (c) of that statute, 

and official expectations created by the President under Sections 2105 (a), 

are being achieved. Bills to strengthen monitoring and enforcement of 

FTAs and other trade agreements to better assure effective 

implementation have been introduced. President Obama may decide to 

seek congressional approval of the FTAs with Colombia, Panama, and 

Korea that President Bush finalized. Congress may also need to decide 

whether to provide the President a new grant of trade agreement 

negotiating authority, which lapsed in July 2007. Certain members of 

Congress have said a “time out” on FTAs is in order, questioning whether 

existing agreements are having the positive commercial, labor, and 

environmental effects that were claimed, and some suggest more rigorous 

conditions should be considered for future agreements. Others are 

anxious to press on with trade accords, saying they offer American 

workers benefits and level the playing field at a time of economic 

uncertainty. 

1

Trade Act of 2002, Pub. L. No. 107-210, Title XXI, 116 Stat. 933, 993. 

 Free Trade Agreements 
 

The Office of the United States Trade Representative (USTR) is 

responsible for overseeing implementation of the FTAs as part of its 

overall responsibilities for monitoring and enforcing trade agreements. 

The Departments of Labor (Labor) and State (State) have key 

responsibilities for ongoing cooperation with FTA partners on labor and 

the environment. 

To inform these debates and address the concerns that have been raised as 

to whether the FTAs are achieving Congress’ objectives and meeting 

expectations established by Congress and the President for U.S. agencies, 

you asked us to provide an assessment of the progress that has been made 

through FTAs in (1) advancing U.S. economic and commercial interests, 

(2) strengthening labor laws and enforcement in partner nations, and 

(3) strengthening partners’ capacity to improve and enforce their 

environmental laws. This work builds on GAO’s past reports on 

monitoring and enforcement of trade agreements, factors influencing FTA 

partner selection, and the overall commercial significance of FTAs 

pursued under TPA and the effectiveness of TPA-related mechanisms 

calling for active and meaningful consultations with Congress and the 

private sector on trade negotiations.2

To address these objectives and associated U.S. agency responsibilities 

and performance in a concrete manner, we have focused on pre- versus 

post-FTA progress related to four FTAs enacted since 2001 with Jordan, 

Chile, Singapore, and Morocco. These four nations are economically, 

socially, and geographically diverse, and their FTAs are among those in 

force longest. We analyzed the text (agreements and associated annexes) 

of the U.S.-Jordan, U.S.-Chile, U.S.-Singapore, and U.S.-Morocco FTAs; 

related but separate agreements between the United States and each of the 

 

2

See GAO, International Trade: Further Improvements Needed to Handle Growing 

Workload for Monitoring and Enforcing Trade Agreements, GAO-05-537 (June 30, 2005); 

GAO, International Trade: Strategy Needed to Better Monitor and Enforce Trade 

Agreements, GAO/NSIAD-00-76 (Mar. 14, 2000); GAO, International Trade: Intensifying 

Free Trade Negotiating Agenda Calls for Better Allocation of Staff and Resources, 

GAO-04-233 (Jan. 12, 2004); and GAO, International Trade: An Analysis of Free Trade 

Agreements and Private Sector Consultations under Trade Promotion Authority, 

GAO-08-59 (Nov. 7, 2007). 

Page 2 GAO-09-439 Free Trade Agreements
 

four countries on environmental cooperation;3 and reports or subsequent 

officially agreed proclamations or plans by the United States and these 

FTA partners associated with the FTAs and cooperative mechanisms, such 

as work plans or plans of action; TPA and other relevant laws, regulations, 

executive orders, Federal Register notices, and congressional guidance; 

and reports submitted to Congress in response to TPA requirements, 

including those submitted in conjunction with FTA implementing 

legislation. From testimonial evidence from officials and experts and from 

secondary sources, we identified and reported on partner laws that were 

passed or changed in connection with or after each FTA’s entry into force, 

and relied on characterizations of those changes, the partner’s 

enforcement, and remaining challenges from officials and experts. Thus, 

the information on foreign law in this report does not reflect our 

independent legal analysis. We used official U.S. and partner data to 

analyze trends in U.S., international, and national trade and investment 

data with selected partners; and reviewed pertinent academic literature 

and authoritative reports. We met with U.S. agencies and foreign 

government officials and conducted fieldwork in the four selected FTA 

partner nations, and solicited input on experience with FTAs from 

members of the private sector and intergovernmental advisory committees 

that are charged with advising USTR, the President, and Congress on trade 

policy. We also interviewed selected experts, as well as several umbrella 

organizations of business, labor, and environmental groups. The fieldwork 

to partner nations included interviews with in-country U.S. and foreign 

government officials, business groups such as chambers of commerce and 

industry, officials of international organizations such as the International 

Labor Organization (ILO), economists, and trade union and environmental 

groups. Finally, where possible missed opportunities for progress or 

material gaps in agency documentation and internal controls became 

evident in the course of GAO’s efforts to establish and evaluate FTArelated progress, consistent with generally accepted government auditing 

standards, we also report on these deficiencies. 

 

3

For the purposes of this report, we use the term "environmental cooperation 

agreements" to refer to the U.S.-Jordan Joint Statement on Environmental Technical 

Cooperation, Washington, Oct. 24, 2000; the Environmental Cooperation Agreement 

between the Government of the United States of America and the Government of Chile, 

Santiago, June 17, 2003; the Memorandum of Intent between the Republic of Singapore and 

the United States of America on Cooperation in Environmental Matters, Washington, June 

13, 2003; Morocco’s Joint Statement on Environmental Cooperation, Rabat, June 28, 2004; 

and the Memorandum of Intent between the Republic of Singapore and the United States of 

America on Cooperation in Environmental Matters. 

Page 3 GAO-09-439 Free Trade Agreements
 

Key limitations of our work are that the findings are largely limited to the 

partners, private sector representatives, time period, and information 

reviewed. While we considered data on trends after FTA implementation 

and opinions on FTA-induced effects, we did not seek to quantitatively 

isolate FTA-induced effects. We did not independently assess partners’ 

laws. Although we gathered information through December 2008, the data 

and foreign interviews do not generally capture the full impact of the 

deterioration in trade that ensued as a result of the global financial crisis 

and economic downturn occurring during 2008-2009. Moreover, while our 

overall goal is to shed light on whether FTAs are living up to their official 

goals, this report was not designed to assess legal compliance by the 

United States or its partners with FTAs or other requirements. We 

conducted this performance audit from April 2008 to June 2009, in 

accordance with generally accepted government auditing standards. Those 

standards require that we plan and perform the audit to obtain sufficient, 

appropriate evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that the evidence 

obtained provides a reasonable basis for our findings and conclusions 

based on our audit objectives. For a fuller description of our objectives, 

scope, and methodology, see appendix I. 

The four selected FTAs have largely accomplished U.S. commercial 

objectives. While varying in some details, these FTAs have all eliminated 

import taxes (tariffs) on goods, lowered obstacles to services such as 

banking, increased protection of U.S. intellectual property rights (IPR) 

abroad, and strengthened rules to ensure fairness and transparency in 

government regulation and procurement. Overall merchandise trade 

between the United States and partner countries has substantially 

increased, generally exceeding what was experienced prior to FTA 

implementation. Since FTA implementation, two-way trade with the 

partners has shown actual increases ranging from 42 percent to 259 

percent. Moreover, growth in U.S. exports of many leading agricultural 

goods—such as grains, corn, and almonds—and manufactured goods has 

accelerated, resulting in U.S. suppliers securing a larger share of partner 

country purchases from abroad. Agriculture and machinery in particular 

have seen widespread increases and improvements in U.S. market share. 

In two partner countries, Singapore and Chile, trade in services increased, 

as did the stock of foreign direct investment and the sales of foreign 

affiliates of U.S.-based companies. Representatives of a broad range of 

U.S. industries generally expressed satisfaction with FTA results. For 

example, industry representatives in the agricultural sector reported that 

they have seen benefits in a variety of products. In the services and IPRResults in Brief 

Page 4 GAO-09-439 Free Trade Agreements
 

related industries, gains in sales, market share, or legal treatment due to 

the agreements were reported by U.S. express delivery, financial services, 

information services, telecommunications services, and pharmaceutical 

firms. However, disappointments (such as with Chile’s IPR 

implementation) and potential import disruptions were also noted in 

several sectors in the United States (such as fruits and vegetables and 

cotton), prompting calls for U.S. agencies to continue to work with partner 

governments to pursue further improvements. 

During and after the FTA negotiations, all of the four countries we 

reviewed enacted improvements to their labor laws. For example, 

according to a Labor report on Morocco’s labor rights, Morocco enacted a 

long-stalled overhaul of its labor code, bringing it into closer alignment 

with international norms and TPA goals. Nevertheless, significant labor 

abuses were confirmed by Jordan’s government in its export garment 

industry several years after FTA implementation, related to poor 

enforcement of labor laws and an ongoing failure to provide full labor 

rights for migrant workers; Jordan has since begun to correct these 

problems. Other FTA partner countries also reported enforcement 

challenges in key export sectors. U.S. labor rights reviews, conducted 

before the FTAs were implemented, provided information on some of 

these problems, but U.S. agencies did not translate them into remedial 

plans or work with partners on labor improvements. Labor’s 

appropriations for technical cooperation on labor issues (excluding those 

related to the elimination of child labor) were mostly eliminated just as the 

FTAs with Chile and Singapore entered into effect in 2004. Consequently, 

U.S. assistance to strengthen country capacity to enforce labor laws has 

since been ad hoc and very limited. In addition, U.S. agencies have 

provided minimal oversight and engagement on labor commitments under 

the FTAs, despite expressed interest by or known problems in some 

partner countries. 

The selected trade partners have made several improvements to 

environmental laws since their FTAs were signed, according to U.S. and 

partner government officials. Although most changes were not made in 

direct response to requirements in the FTA, partner officials stressed that 

having environmental obligations in FTAs had brought attention to 

environmental protection and heightened the urgency of taking action. 

Nevertheless, officials in most of the selected trade partner countries 

reported that enforcement of environmental laws remains a challenge, and 

that some environmental concerns—such as the impact of apparel 

production on Jordan’s water and pollution from salmon farming and 

other resource-intensive exports in Chile—have grown. Our fieldwork 

Page 5 GAO-09-439 Free Trade Agreements
 

revealed examples of environmental progress, such as establishment of an 

environmental ministry and a 400-strong environmental law enforcement 

force in Jordan, partly due to U.S. assistance. However, some experts said 

that without more U.S. resources, commitment, and oversight, 

environmental provisions in FTAs and the accompanying cooperation 

agreements will do little to help strengthen environmental protections in 

partner countries. USTR’s sporadic monitoring of partner implementation 

of FTA environmental provisions, State’s lack of a systematic means to 

monitor FTA environmental projects, and U.S. agencies’ collective failure 

to translate FTA environmental commitments into reliable funding have 

also undercut efforts to promote partner progress in strengthening 

environmental capacity. For example, in Chile, expected U.S. follow-up to 

the initial pilot projects did not occur and, in Morocco, just 8 of the 24 

planned cooperative activities were completed. 

To build and improve upon the mixed record of FTA progress in these 

areas, GAO recommends that agencies review and update their plans for 

implementing and overseeing FTAs with a view to making the plans more 

effective in producing expected results such as labor and environmental 

progress. 

USTR, State, and Labor indicated that they intend to improve monitoring 

and enforcement of FTAs. However, State urged GAO to give partner 

governments and U.S. agencies more credit for post-FTA improvements in 

partners’ structural and institutional capacity to protect the environment 

and labor rights. State and USTR also took issue with the basis and 

balance for some of GAO’s findings and provided technical corrections. 

GAO made several adjustments in response, but continues to believe more 

a robust approach to FTA implementation is needed to address the 

remaining challenges three of the four partners’ face in assuring labor and 

environmental protection. 

Background 

FTAs Are a Major 

Component of Recent U.S. 

Trade Policy 

Expanding trade by lowering tariffs and other less tangible barriers to 

trade offers Americans potential benefits such as enhanced efficiency, 

lower prices, and greater choice. But such trade liberalization can involve 

costs and has often proved controversial. Export growth was one of the 

few bright spots in U.S. economic performance in 2008, and the 

importance of trade to the U.S. economy has grown markedly over the 

past decade. Yet, polls show growing U.S. public skepticism of trade’s 

Page 6 GAO-09-439 Free Trade Agreements
 

benefit amidst concerns over manufacturing job losses and rising income 

inequality. 

FTAs—which phase out barriers to trade in goods with particular 

countries or groups of countries and contain rules designed to improve 

access for U.S. services, investment, and IPR—have been a major 

component of U.S. trade policy in recent years. After an 8-year gap that 

began shortly after the North American Free Trade Agreement (NAFTA) 

entered into effect in 1994, TPA for the President was restored by the 

Trade Act of 2002 and extended through July 1, 2007.4

 FTAs were 

aggressively pursued as part of a three-pronged U.S. strategy to liberalize 

trade and level the playing field abroad for U.S. producers and workers: 

multilaterally at the World Trade Organization (WTO), regionally, and 

bilaterally. President Clinton began the endeavor shortly before leaving 

office in early 2001, finishing negotiations with Jordan and announcing the 

start of negotiations with Singapore and Chile. President Bush finalized 

these and other accords and secured their passage by Congress. 

Meanwhile, global negotiations at the WTO have been slow and regional 

negotiations such as toward a Free Trade Area of the Americas have 

foundered. FTAs are thus one of the major results of U.S. trade 

liberalization efforts over the past decade, along with negotiating WTO 

accessions by China, Vietnam, and others. 

 

4

Pub. L. No. 107-210. TPA is authority periodically given by Congress to the President. It 

establishes conditions and procedures under which the President can submit legislation 

approving and implementing trade agreements such as FTAs that Congress can approve or 

disapprove but cannot amend or filibuster. Previously known as “fast track” negotiating 

authority, it was in effect from 1975 to 1994 and is considered critical to congressional 

passage of FTAs and global trade agreements. For a further discussion of Congress’ 

decision to launch a reciprocal trade agreements program in 1934 and to enact “fast track” 

in 1974 and periodically thereafter, despite its fundamental authority under the 

Constitution for regulating international trade, see Committee on Ways and Means, U.S. 

House of Representatives, Overview and Compilation of U.S. Trade Statutes, iv-v. 

Page 7 GAO-09-439 Free Trade Agreements
 

FTAs with 14 countries have entered into effect since 2001,5 bringing the 

total number of countries with FTAs in effect to 17. Three more await a 

decision by President Obama on whether to seek congressional action on 

legislation approving and implementing these FTAs.6

 While most are 

individually small, collectively they account for a significant share of U.S. 

trade and foreign direct investment—31 percent in 2008 and 25 percent in 

2007, respectively. 

Numerous FTAs 

Containing Labor and 

Environmental Provisions 

Are Now in Effect 

Controversy over labor and the environment was a major factor in 

Congress’ allowing the President’s TPA negotiating authority (sometimes 

called “fast track” authority) to lapse during the 1994–2002 period. The 

inclusion of worker protection language had been a part of congressional 

trade policy goals for decades. But passage in 1993 of NAFTA and its 

accompanying agreements on labor and the environment did not assuage 

critics concerned that competition with developing Mexico would result in 

a “race to the bottom” for U.S. workers and producers. Passed in August 

2002, TPA represents the deal struck by Congress to balance U.S. 

commercial interests with other U.S. goals and values, such as protecting 

the environment and workers. 

FTAs Selected for This 

Report Reflect Diverse 

Range of U.S. FTA 

Partners 

The countries with which FTAs have been concluded vary considerably. In 

a November 2007 report,7

 we noted that the FTA partners were selected by 

the President and USTR for a variety of geopolitical and commercial 

reasons and represent a diverse mix. Some partners, such as Australia, are 

both high income and highly developed, according to widely reported 

indicators such as the United Nations’ Human Development Index. 

However, many of the agreements are with developing nations with much 

lower income and human development levels. FTA partner governments’ 

records of economic and political freedom also range widely. Many were 

chosen in part due to their embrace of market-oriented reform and 

willingness to lead regionally and globally on key U.S. interests such as 

 

5

According to USTR, the United States had the following FTAs in effect in 2008: Israel, 

Canada, Mexico, Jordan, Chile, Singapore, Australia, Morocco, the Dominican Republic, El 

Salvador, Guatemala, Honduras, Nicaragua, and Bahrain. Three of these entered into force 

prior to 2001 (Israel, Canada, and Mexico). President Bush proclaimed the entry into force 

of FTAs with Costa Rica, Peru, and Oman effective February 1, 2009, in the closing months 

of his administration. 

6

Those with Colombia, Panama, and Korea. 

7

See GAO-08-59. 

Page 8 GAO-09-439 Free Trade Agreements
 

fostering peace, countering terrorism, and liberalizing trade. Indeed, 

several already had or have since concluded FTAs with key U.S. 

competitors such as the European Union (EU), Canada, or Japan. 

The four partners on which we chose to focus—Jordan, Singapore, Chile, 

and Morocco—were selected after considering variables such as 

development status and dates for entry into force, and reflect a cross 

section of the larger group’s country characteristics and the regional 

dispersion of U.S. FTAs across Asia, Latin America, and the Middle East. 

Yet each has unique characteristics, including the following: 

• Singapore, a diverse city-state and trading hub with a highly developed 

economy where trade in services plays a very significant role, is the United 

States’ twelfth largest export market, with a positive U.S. trade balance in 

2008. 

• Chile, is a resource-rich, middle-income economy with a transparent and 

liberal trade and investment regime that has made impressive inroads in 

reducing poverty. Chile represents our twenty-fourth largest export 

market in 2008 and has a strong complementary trading relationship with 

the United States, notably in agriculture. 

• Morocco, a lower middle income developing country that represented only 

about 0.1 percent of U.S. exports in 2008, has typically been a closer 

trading partner with the EU due to cultural, language, transportation, and 

social ties, especially to France. 

• Jordan, a resource-poor small developing country with which the United 

States now has a trade deficit, acceded to the WTO in 2000, and was the 

first Arab country associated with the Middle East peace process to sign 

an FTA with the United States. This FTA is less comprehensive in scope 

than post-TPA agreements. 

Such country differences, as well as the length of time FTAs have been in 

force, likely affect FTA results. Jordan’s FTA has been in effect longest 

(since December 2001). Chile and Singapore’s FTAs entered into effect on 

January 1, 2004. Morocco’s FTA has been in effect since January 1, 2006. 

FTA Provisions Vary but 

Reflect TPA Commercial, 

Environmental, and Labor 

Goals 

TPA sets a series of economic/commercial, environmental, and labor 

negotiating objectives, as well as procedures for action of legislation 

approving and implementing trade agreements. These range in specificity 

from broad to highly detailed. The objectives provide guidelines the 

Page 9 GAO-09-439 Free Trade Agreements
 

administration is to consider in negotiating FTAs and have generally been 

reflected in the FTAs we reviewed. They also provide perspective for 

evaluating how progress through FTAs compares with established 

congressional expectations for the FTAs and the U.S. agencies that 

administer them. 

Generally, TPA’s commercial objectives call for lowering barriers to U.S. 

exports, securing a more level playing field abroad for U.S. exporters, and 

strengthening trade rules through actions such as by improving protection 

abroad of U.S. intellectual property rights and investment. The Jordan FTA 

predates TPA. Though just 19 pages long, it eliminates tariffs on most 

goods, liberalizes services, and strengthens IPR. It was also the first 

agreement to include labor and environmental provisions in the body of 

the FTA; these provisions were a partial basis for TPA and subsequent 

FTAs. The FTAs negotiated since then generally reflect TPA guidance and 

tend to follow a similar format. For example, in the 200-plus page body of 

the Singapore FTA, 16 chapters address trade, investment, and other 

commercial issues; 3 chapters cover general transparency, administration, 

and dispute settlement; and 1 chapter each addresses labor and the 

environment. Following the economic and commercial goals of TPA since 

2002, FTAs contain similar elements of market liberalization, including 

eliminating barriers on trade in goods and services, opening trade to 

agricultural products, protecting investments, strengthening IPR and 

enforcement, and increasing regulatory and administrative transparency, 

in many cases immediately. They also provide for rules of origin and 

dispute settlement. The labor and environment provisions of the FTAs 

generally are less prescriptive and more aspirational than some of the 

commercial provisions.8

 Notably, nearly all of the more extensive 

commercial commitments are subject to dispute settlement and possible 

trade measures for failure to comply, versus one commitment in the postTPA FTAs’ environment and labor chapters—that a party shall not fail to 

effectively enforce its labor/environmental laws, through a sustained or 

 

8

A bipartisan trade deal reached between Congress and the executive branch in May 2007 

resulted in a new trade policy template that created a more detailed delineation (beyond 

TPA) of FTA provisions on labor and the environment, as well as clarifications intended to 

assure proper balance between commercial and other societal goals in the areas of 

intellectual property, investment, government procurement, and port services. For 

example, FTA partners are to maintain in their law and practice five basic internationally 

recognized labor principles, and the FTAs incorporate specified multilateral environmental 

agreements. FTA obligations on labor and environment also became fully enforceable on 

par with commercial provisions. This new guidance was applied to the Peru, Colombia, 

Panama, and Korea FTAs; Peru has since been approved and has entered into effect. 

Page 10 GAO-09-439 Free Trade Agreements
 

recurring course of action or inaction, in a manner affecting trade between 

the parties. To address the rest of the commitments in the environment 

and labor chapters, TPA calls for and the FTAs establish consultative or 

diplomatic means to strengthen partners’ capacity to respect labor rights 

and protect the environment over time. 

Consistent with TPA priorities and FTA requirements, cooperation 

mechanisms were developed with each partner on labor and 

environmental matters. Among other things, these were to exchange 

information, establish priorities, develop specific activities or projects, and 

generally promote implementation of goals agreed in discussions under 

the mechanism on labor and the environment. The form of these 

mechanisms varies. For example, after all four FTAs were concluded, 

separate agreements on environmental cooperation were reached with 

these FTA partners.9

 However, for Chile, Singapore, and Morocco, the 

environmental cooperative agreements state that the realization of 

cooperation activities is contingent on the availability of necessary 

resources. 

The President must submit reports explaining how the FTAs make 

progress toward TPA objectives when he submits FTAs to Congress for 

approval. In each instance, the President attested that the FTAs advanced 

TPA’s U.S. commercial objectives and helped assure labor and 

environment protection. For example, in a June 2005 report he explained 

that each FTA negotiated under TPA includes labor and environmental 

chapters with obligations aimed at ensuring that FTA partners meet the 

 

9

After the parties entered into the U.S.-Jordan FTA, the parties entered into the United 

States-Jordan Joint Statement on Environmental Technical Cooperation which created a 

Joint Forum on Environmental Technical Cooperation to broaden and deepen effective 

cooperation on technical environmental issues. After the parties entered into the U.S.-Chile 

FTA, the parties entered into the Agreement Between the Government of the United States 

of America and the Government of the Republic of Chile on Environmental Cooperation to 

establish a framework for cooperation between the Parties to promote the conservation 

and protection of the environment, the prevention of pollution and degradation of natural 

resources and ecosystems, and the rational use of natural resources, in support of 

sustainable development. After the parties entered into the U.S.-Singapore FTA, the parties 

entered into the Memorandum of Intent between the Republic of Singapore and the United 

States of America on Cooperation in Environmental Matters to identify environmental 

issues of mutual interest to the two governments, and to establish a mechanism through 

which the two governments can pursue cooperative efforts in those areas. After the parties 

entered into the U.S.-Morocco FTA, the parties entered into the U.S.-Morocco Joint 

Statement on Environmental Cooperation which established a Working Group on 

Environmental Cooperation to broaden and deepen effective cooperation on environmental 

issues. 

Page 11 GAO-09-439 Free Trade Agreements
 

labor and environmental objectives of TPA. He further stated that 

mechanisms for ongoing labor and environmental cooperation were 

negotiated and that all of these FTAs call for cooperative projects to 

support environmental protection. The formal advisory committees on 

trade policy and negotiation generally concurred with this assessment, 

with some caveats or objections. Notably, the Labor Advisory Committee 

consistently raised concerns that the labor chapters in post-TPA FTAs did 

not meet TPA objectives, in part due to their limited enforceability, and 

several concerns were raised by certain environmental, industry, and 

intergovernmental advisors. TPA does not generally require subsequent 

reports,10 although a one-time report was required as a condition of the 

extension of TPA through June 2007 requested by the President. USTR 

nonetheless has an ongoing requirement to provide reports to the 

President and Congress on the operation of trade agreements. 

Several U.S. Agencies Are 

Responsible for FTA 

Implementation and 

Monitoring 

Several U.S. agencies play key roles in FTA implementation and 

monitoring. The United States Trade Representative is the President’s 

principal adviser and spokesperson on trade and has lead responsibility 

for negotiating trade agreements, including FTAs, as well as developing 

and coordinating U.S. trade policy and issuing policy guidance related to 

international trade functions. It is responsible to the President and 

Congress for the administration of trade agreements.11 USTR coordinates 

the administration’s monitoring of foreign government compliance with 

trade agreements and pursues enforcement actions with the aim of 

ensuring that these agreements yield the maximum benefits for Americans 

and create a fair, open, and predictable trading environment. According to 

USTR, this includes asserting U.S. rights, vigorously monitoring and 

enforcing bilateral agreements, providing technical assistance to trading 

partners, and promoting U.S. interests under FTAs, including labor and 

environmental interests. 

 

10Ongoing reporting on the Dominican Republic-Central America Free Trade Agreement 

was required as part of its implementing legislation. See Dominican Republic-Central 

America-United States Free Trade Agreement Implementation Act, Pub. L. No. 109-53, §403, 

119 Stat. 462, 496 (2005). 

11Generally, the trade agreements program includes all activities consisting of, or related to, 

the negotiation or administration of international agreements that primarily concern trade 

and that are concluded pursuant to the authority vested in the President by the 

Constitution, 19 U.S.C. 1351, the Trade Expansion Act of 1962, and the Trade Act of 1974, 

as amended. 

Page 12 GAO-09-439 Free Trade Agreements
 

In earlier reports on USTR’s monitoring and enforcement efforts, GAO 

noted that experts and officials agree U.S. government monitoring and 

enforcement efforts should attain three broad goals: ensuring foreign 

compliance, providing credible deterrence, and inspiring confidence. 

Specifically, they agreed that vigorous U.S. efforts are necessary to ensure 

foreign partners fulfill trade agreement obligations and that U.S. firms fully 

realize the improvements in market access these agreements offer. 

Credible deterrent efforts improve the likelihood foreign partners will fully 

implement their commitments. A reliable, well-functioning monitoring and 

enforcement effort helps sustain congressional and public confidence in 

the President’s trade strategy and fosters support for continued trade 

liberalization. Indeed, as the USTR General Counsel testified before the 

Senate Committee on Finance, “Without enforcement, a trade agreement is 

just a piece of paper.”12 Though he went on to assure the committee that 

USTR is “committed to using every tool in the U.S. trade arsenal to ensure 

a level playing field for American workers, farmers, and entrepreneurs,” 

our past GAO reports found both signs of, and room for, improvement in 

U.S. monitoring and enforcement efforts. We further identified several key 

steps in monitoring and enforcing trade agreements, notably (1) 

identifying problems, (2) setting priorities, (3) gathering and analyzing 

information, (4) developing responses, and (5) taking enforcement 

action.13 While the agencies’ goal is to identify important trade agreement 

compliance problems (rather than monitor all aspects of every 

agreement), both reactive and proactive efforts are used. The trade 

principles at stake are often considered equally or more important than 

the amount of trade involved. 

USTR is designated as the principal contact point under each FTA 

agreement. Among other things, USTR plans and conducts meetings, with 

partners, of general FTA oversight mechanisms. USTR is also the contact 

point for FTA environmental provisions. Many of the specific functions 

and requirements established in TPA were delegated by the President to 

USTR. One specific requirement to provide a report to Congress on plans 

for implementing and enforcing FTAs was delegated to USTR and then 

 

12Statement of Warren Maruyama, General Counsel, Office of the United States Trade 

Representative before the Senate Finance Committee, May 22, 2008. 

13See, for example, GAO-05-537, GAO/NSIAD-00-76, especially 15-16 and appendix II, and 

GAO, International Trade: Improvements Needed to Track and Archive Trade 

Agreements, GAO NSIAD-00-24 (Dec. 14, 1999). 

Page 13 GAO-09-439 Free Trade Agreements
 

redelegated to the Director of the Office of Management and Budget.14

Among other things, these plans were to identify the resources necessary 

to implement the accords. 

Other agencies, notably the Departments of Commerce (Commerce), 

Labor, and State, play important roles in FTA oversight and 

implementation, including the following: 

• Commerce is responsible for monitoring compliance with economic and 

commercial aspects of the agreements. Commerce’s Market Access and 

Compliance unit, for example, prepared the prevote reports analyzing how 

FTAs advance U.S. commercial objectives and has detailed matrixes of 

FTA commercial requirements and the status of implementation. It also 

issues intermittent analysis of trade trends with FTA partners. 

Commerce’s Foreign Commercial Service advocates on behalf of U.S. 

business and works with other parts of the agency and foreign 

counterparts to assist firms facing FTA implementation difficulties and 

promote U.S. exports abroad. 

• Labor has the lead on FTA labor matters, except in the case of Jordan. 

Labor’s Bureau of International Labor Affairs (ILAB) is designated as the 

point of contact for implementation of the labor provisions of all but the 

Jordan FTA, as well as for the labor cooperation mechanisms.15 Prior to 

implementation, Labor’s responsibilities include preparing reports (in 

consultation with USTR and State) on FTA partners’ labor rights 

protections, the potential employment impact of agreements on U.S. 

workers, and FTA partners’ child labor laws. After FTAs enter into force, 

Labor’s responsibilities as contact point include receiving, reviewing, and 

acting upon any concerns raised about partner compliance with FTA labor 

obligations and assisting partners seeking to strengthen their capacity to 

promote respect for core labor standards. Under TPA Labor has an 

ongoing responsibility for planning, developing, and pursuing cooperation 

with partners on labor matters. Labor does not have an in-country 

presence overseas, instead relying on periodic staff travel, as well as 

outreach and reporting by State personnel. 

 

14See 19 U.S.C. § 3808 and Notice of Redelegation of Authority and Further Assignment of 

Functions, 67 Fed. Reg. 71,606 (Dec. 2, 2002). 

15Among other things, the office serves as a point of contact with agencies of the U.S. 

government, other FTA parties, the public, governmental groups, business representatives, 

labor organizations, and other nongovernmental organizations. 

Page 14 GAO-09-439 Free Trade Agreements
 

• Several bureaus at State play roles in FTAs. State’s Democracy, Human 

Rights, and Labor Bureau (DRL) coordinates State’s in-country labor 

officers, who carry out regular monitoring and reporting and day-to-day 

interaction with foreign governments on labor matters. With USTR and 

Labor, DRL is a member of the interagency team that negotiates the labor 

chapters of FTAs, contributes critical input to the research and analysis of 

labor reports produced by Labor, as required under TPA, and provides 

technical assistance funding to strengthen some countries’ labor capacity. 

State’s Oceans and International Environmental and Scientific Affairs 

Bureau (OES) has the responsibility to lead on international 

environmental and scientific agreements generally and on ongoing 

cooperative mechanisms, as well as overseeing and facilitating U.S. efforts 

with FTA partners to strengthen environmental capacity. It is supported by 

agencies with line environmental responsibilities, such as the 

Environmental Protection Agency (EPA) and the Department of Interior, 

as well as the U.S. Agency for International Development (USAID), which 

execute and sometimes fund capacity-building projects. State’s Economics 

Bureau and regional desks and economics officers are also involved in the 

commercial aspects of FTAs. 

FTA Results Vary 

among Partner 

Countries, but Reveal 

Positive Economic 

and Commercial 

Outcomes Consistent 

with TPA Goals 

Merchandise Trade 

between the United States 

and FTA Partner Countries 

Increased 

U.S. merchandise (goods) trade with the four FTA partners increased 

substantially following the FTAs’ entry into force. Total two-way trade, 

U.S. exports, and partner country exports for the four selected FTAs all 

rose. Annual average rates of merchandise trade growth increased 

substantially for the United States and three of the four FTA partner 

countries in the period since the FTAs came into force, compared with 

rates for a similar period prior to the agreements. We also observed higher 

annual average rates of growth for top product categories for both U.S. 

exports and partner country imports. In some cases, these also translated 

into U.S. gains in its share of partner country markets relative to the share 

Page 15 GAO-09-439 Free Trade Agreements
 

of other competitors. (More detailed commercial/economic results for the 

four FTAs are examined in apps. II through V.) 

In the four FTAs we reviewed, consistent with the TPA objectives, a large 

percentage of goods became duty-free immediately. For example, in the 

Morocco FTA, duties on more than 95 percent of all consumer and 

industrial products were eliminated immediately. In the Chile FTA, the 

agreement allowed for immediate duty-free market access into Chile for 

about 85 percent of all U.S. consumer and industrial goods, with about 75 

percent of all agricultural products entering duty-free. The remaining 

goods represent sensitive products of which barriers were removed using 

staged or scheduled tariff elimination categories over a period of years. 

The Jordan FTA, although in force before TPA, is like its post-TPA 

counterparts we are examining and is consistent with the TPA goals of 

liberalizing and expanding trade.16

Prior to the agreements, U.S. trade barriers were lower on average 

compared with FTA partner countries. For example, prior to the Jordan 

FTA, the United States had a mean unweighted tariff rate of 6 percent, 

while Jordan had a mean unweighted tariff rate of 16 percent.17 Many 

partner country imports already entered the United States duty free, 

including over 90 percent of imports from Singapore and 70 percent of 

imports from Chile,18 in part because the United States had granted them 

benefits under one-way preferential trade programs such as the U.S. 

Generalized System of Preferences (GSP). 

Total two-way trade (U.S. imports plus U.S. exports), U.S. exports, and 

U.S. imports each increased substantially after implementation of the four 

FTA agreements we examined.19 As shown in table 1, growth in two-way 

Overall Trade Increased with 

Four FTA Partner Countries 

 

16Unlike post TPA agreements, however, the Jordan FTA does not include an investment 

chapter due to the preexistence of a Bilateral Investment Treaty with Jordan. 

17This tariff rate represents the Permanent Normal Trade Relations rate (referred to as the 

Most-Favored Nation [MFN] rate in other countries) to all countries at that time and does 

not include any preferences programs. 

18For example, for products entering the United States from Chile, the only significant 

duties were on agricultural products and food; most manufacturing products had tariffs 

that averaged below 2 percent. 

19Given the number of factors that affected trade between the United States and these 

nations, we did not attempt to isolate the effects of FTAs. Instead, we analyzed trends in 

descriptive trade and investment data and provided statistical and graphic summaries of 

the changes in trade before and after the FTAs. 

Page 16 GAO-09-439 Free Trade Agreements
 

trade since implementation ranged from 42 percent for the Singapore FTA 

(from 2003 to 2008) to 259 percent for the Jordan FTA (from 2001 to 2008). 

Increases in U.S. exports ranged from 72 percent for Singapore to 365 

percent for Chile since implementation. U.S. import increases ranged from 

10 percent for Singapore to 397 percent for Jordan. These post-FTA 

increases do not isolate the effects of the FTAs from other trade factors 

and are based on the total changes in actual trade volumes subsequent to 

implementation. As a result, they are not directly analogous to the 

statutorily required studies prepared by the International Trade 

Commission (ITC) prior to their implementation, which predicted 

generally positive but small effects on the U.S. economy and trade overall 

from these FTAs. 20 The ITC models did seek to isolate the effects of the 

FTAs on trade, but they could neither measure certain difficult to quantify 

factors, such as nontariff barriers, nor estimate the effects of certain ex 

post factors such as the beneficial impacts of new products being traded 

due to the agreements. 21

Table 1: Amount of Two-Way Trade, Percent Increase in Two-Way Trade, and Percentage Increase in U.S. Exports and 

Imports, from Year Prior to FTAs to 2008 

Dollars in millions 

Two-way trade 

Partner country and year prior 

to FTA implementation 

Year prior to 

FTA 2008

Increase in 

two-way trade

Increase in U.S. 

exports 

Increase in U.S. 

imports

Jordan (2001) $568 $2,043 259% 167% 397%

Morocco (2005) 988 2,387 141 190 87

Chile (2003) 6,422 19,549 204 365 106

Singapore (2003) $29,181 $41,374 42% 72% 10%

Sources: GAO analysis using data from Commerce and ITC. 

 

20Studies referenced are: ITC, U.S.-Morocco Free Trade Agreement: Potential 

Economywide and Selected Sectoral Effects (Washington, D.C.: ITC Pub. No. 3704, June 

2004); ITC, U.S.-Chile Free Trade Agreement: Potential Economywide and Selected 

Sectoral Effects (Washington, D.C.: ITC Pub. No. 3605, June 2003); U.S.-Singapore Free 

Trade Agreement: Potential Economywide and Selected Sectoral Effects (Washington, 

D.C.: ITC Pub. No. 3603, June 2003); ITC, Economic Impact on the United States of a U.S.-

Jordan Free Trade Agreement (Washington, D.C.: ITC Pub. No. 3340, September 2000). 

21For a discussion of how different studies on trade agreement effects compare and differ, 

see ITC, “The Effects of Fast-Track Trade Agreements on the U.S. Economy,” USITC 

International Economic Review, USITC Pub. 3638, September/October 2003. 

Page 17 GAO-09-439 Free Trade Agreements
 

Note: Changes in two-way trade are measured from the dates just prior to implementation of the 

agreement to 2008. For Jordan, since implementation was in December 2001, we measured growth 

in two-way trade from 2001 to 2008. 

Moreover, across partner countries, we found that post-FTA average 

annual growth rates for U.S. exports were all higher than pre-FTA annual 

average growth rates and, in some instances, average growth went from 

negative to positive.22 For example, the post-FTA average annual U.S. 

export growth rate for Chile was 32.6 percent, compared with the pre-FTA 

growth rate, which was -9.1 percent. For U.S. imports, we found that 

average annual growth rates were higher or less negative in three out of 

the four partner countries in the post-FTA period, with Jordan having a 

higher rate of pre-FTA growth. (For a more detailed explanation of this 

analysis, see app. VI.) 

Figure 1 shows the dramatic increase in U.S. imports since 2000 from 

Jordan, as well as the increase in U.S. exports. Of the four FTAs, U.S. 

imports from Jordan have experienced the largest increase, from $229 

million in 2001 to over $1.139 billion in 2008, while U.S. exports increased 

from $339 million prior to the FTA to about $904 million in 2008. Between 

2002 and 2008, an average of 87 percent of U.S. imports from Jordan were 

textiles and apparel, with much of these imports originating from the 

preexisting U.S. Qualifying Industrial Zone (QIZ) program, although 

exports under the FTA are increasing.23 The EU remains the dominant 

 

22For example, since the Singapore FTA was implemented in 2004, we calculated an 

average growth rate of bilateral trade for a pre-FTA period of 5 years before and 5 years 

after implementation. For comparison, we also calculated the average annual growth rate 

of U.S. trade with the world for the same periods—5 years before 2004 and 5 years after. 

We calculated the same periods for the Chile FTA; for the Morocco FTA, 3 years before and 

3 years after; and 7 years before and 7 after for the Jordan FTA. 

2319 U.S.C. § 2112 note. Under the United States-Israel Free Trade Area Implementation Act 

of 1985, a qualifying industrial zone is an area that “(1) encompasses portions of the 

territory of Israel and Jordan or Israel and Egypt; (2) has been designated by local 

authorities as an enclave where merchandise may enter without payment of duty or excise 

taxes; and (3) has been specified by the President as a qualifying industrial zone.” In 

relation to the QIZs, for an article to receive an elimination or modification of duties it must 

be: (1) wholly the growth, product, or manufacture of the West Bank, the Gaza Strip, or a 

qualifying industrial zone or is a new or different article of commerce that has been grown, 

produced, or manufactured in the West Bank, the Gaza Strip, or a qualifying industrial 

zone; (2) imported directly from the West Bank, the Gaza Strip, Israel, or a qualifying 

industrial zone; and (3) the sum of the cost or value of the materials produced in the West 

Bank, the Gaza Strip, Israel, or a qualifying industrial zone, plus the direct costs of 

processing operations performed in the West Bank, the Gaza Strip, Israel, or a qualifying 

industrial zone is not less than 35 percent of the appraised value of the product at the time 

it is entered into the United States. 

Page 18 GAO-09-439 Free Trade Agreements
 

overall foreign supplier in Jordan’s market, and the U.S. market share has 

decreased somewhat since the FTA. 

Figure 1: U.S. Bilateral Trade with Jordan, 1998–2008 

Sources: GAO analysis using data from Commerce and ITC.

Year

U.S.-Jordan FTA

Dollars in millions

0

200

400

600

800

1,000

1,200

1,400

1,600

U.S. imports

U.S. exports

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

As figure 2 shows, from 2005 through 2008, U.S. exports to Morocco grew 

190 percent, from $519 million to over $1.5 billion, while imports from 

Morocco grew by 87 percent, from $470 million to about $880 million. The 

EU still has the largest overall share in this market, at 63 percent in 2008. 

The U.S. market share increased marginally since before the FTA went 

into force, from 3 percent in 2005 to 5 percent in 2008. However, in several 

important agricultural products/sectors, such as cereals and soybean oil 

cake, the U.S. increased market share grew substantially during this 

period. In addition to the effects of the FTA, several factors led to higher 

U.S. gains in the value of exports to Morocco during this period compared 

with Moroccan exports to the United States. These factors included the 

drought in Morocco in 2007, which caused its government to lift tariff-rate 

quotas on its own, higher worldwide commodity prices, and an exchange 

rate favorable to the United States. 

Page 19 GAO-09-439 Free Trade Agreements
 

Figure 2: U.S. Bilateral Trade with Morocco, 1998–2008 

Sources: GAO analysis using data from the Commerce and ITC.

Year

U.S.-Morocco FTA

Dollars in millions

0

200

400

600

800

1,000

1,200

1,400

1,600

U.S. imports

U.S. exports

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Figure 3 shows that both U.S. exports and imports from Chile increased 

following the Chile FTA. Specifically, total U.S. exports to Chile increased 

by 365 percent, from $2.4 billion to $11.4 billion from 2003 to 2008, and 

Chile’s exports to the United States rose from $4 billion to $8.2 billion, or 

by 106 percent. U.S. agricultural exports increased tenfold and U.S. 

exports to Chile of intermediate or capital goods exports rose markedly. 

After the agreement came into force, the United States steadily regained 

its overall market share in the Chilean market that it had lost prior to the 

FTA. Other trading partners had secured FTAs there first, notably 

countries in the Mercosur regional trade agreement, as well as Canada and 

the EU.24 In 2008, the U.S. share of Chile’s market finally reached the preFTA levels that it had in 2001. U.S. imports from Chile dropped somewhat 

in 2007 and 2008, due to increased exports of copper to China, with which 

Chile signed an FTA that entered into force in 2006, as well as the global 

 

24The countries that make up the Mercosur regional trade agreement include Brazil, 

Argentina, Uruguay, Paraguay, and Venezuela; Chile, Bolivia, Columbia, Ecuador, and Peru 

are associate members. 

Page 20 GAO-09-439 Free Trade Agreements
 

economic downturn in 2008. While Chilean officials noted that they were 

looking to see increases in manufacturing goods exports following the 

FTA, most Chilean exports to the United States have consisted of natural 

resource exports such as those from mining, fisheries, and agriculture. 

Figure 3: U.S. Bilateral Trade with Chile, 1998–2008 

Sources: GAO analysis using data from the ITC’s Interactive Tariff and Trade DataWeb.

Year

U.S.-Chile FTA

Dollars in millions

0

2

4

6

8

10

12

U.S. imports

U.S. exports

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Figure 4 displays bilateral trade with Singapore before and after the FTA. 

Since the FTA, U.S. exports to Singapore have grown by 72 percent, from 

$14.9 billion in 2003 to $25.7 billion in 2008, while imports from Singapore 

have grown by 10 percent, from $14.3 billion to $15.7 billion. Although 

total U.S. market share in Singapore has declined slightly, from 13 to 12 

percent from 2003 to 2008, the United States has remained a major 

competitor despite several other trade agreements by Singapore with key 

trading partners, such as China, Malaysia, and Japan. The top valued, 

higher growth U.S. exports to Singapore in 2008 included electrical 

machinery such as semiconductors and related devices, as well as other 

industrial machinery, such as excavating, paving, and construction 

machinery. While total U.S. imports from Singapore have grown overall 

since 2003, they have faced intensified competition from Asian suppliers 

such as China and India. Moreover, in 2008, the global financial downturn 

Page 21 GAO-09-439 Free Trade Agreements
 

especially impacted U.S. imports from Singapore, which is highly 

dependent on exports of finished goods. 

Figure 4: U.S. Bilateral Trade with Singapore, 1998–2008 

Sources: GAO analysis using data from Commerce and ITC.

Year

U.S.-Singapore FTA

Dollars in millions

0

5

10

15

20

25

30

U.S. imports

U.S. exports

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

To examine how the United States and partner countries benefited from 

the FTAs at the product category/sector level, we analyzed (1) the pre- and 

post-FTA growth rates at the product category level for trade with each 

partner, (2) market share data for trade among countries in the FTA 

markets, and (3) product/sector data obtained from our partner-country 

visits where available. We found that for trade with the four selected FTA 

partner countries, from 60 to 100 percent of the top 25 U.S. export product 

categories by value experienced increased rates of annual average growth 

after the FTAs were in force.25 Specifically, average annual growth rates 

increased in the post-FTA time period for 100 percent of the top 25 export 

Majority of Leading Product 

Categories Experienced 

Increased Growth Rates 

 

25Using ITC data for the top 25 export and import product categories by value of the United 

States and the partner countries, we subtracted annual average pre-FTA growth rates from 

post-FTA growth rates for the same number of years before and after the agreements. We 

then ranked the differences in growth between the pre and post-FTA periods in descending 

order to determine which categories grew the most since the FTAs came into force. 

Page 22 GAO-09-439 Free Trade Agreements
 

categories to Chile, 92 percent of the top export categories to Singapore, 

64 percent of these categories to Jordan, and 60 percent to Morocco. For 

U.S. import categories, two out of the four selected FTA partner countries, 

Chile and Singapore, experienced increased rates of growth for a majority 

of their product categories after the agreements came into force.26 (For a 

more detailed examination of these product categories, see apps. II 

through V.) Moreover, several broader sectors of the U.S. economy, 

including agriculture and manufacturing, made substantial gains in market 

share versus other suppliers following implementation of the FTAs. 

Among sectors, we found that U.S. agricultural exports, such as wheat, 

corn, rice, edible fruits and nuts, and dairy products, grew substantially 

post-FTA in several partner countries, with U.S. market share gaining 

against major trading partners. For example, U.S. exports to Chile of 

agricultural, horticultural products, and livestock, grew tenfold, from 

$25 million in 2004 to $256 million in 2007. The United States’ share of 

Chile’s total agricultural imports rose significantly, from 6 percent in 2004 

to 26 percent in 2007. In the dairy sector for instance, the U.S. Dairy 

Export Council explained that, because of reductions in tariffs and 

adjustments to their inspection system for dairy products under the 

Chilean FTA, U.S. exports had increased by tenfold. In the Jordanian corn 

market, U.S. market share grew from just 3 percent in 2001 to 77 percent 

in 2007 after the 5 percent tariff on grains being removed by the FTA. 

There were also increases in U.S sales of almonds to Jordan, from 

$3 million to almost $12 million in 2007, after duties were lowered. 

Numerous U.S. manufacturing sectors—such as construction equipment to 

Morocco, automobiles to Jordan and Chile, and machinery, gas turbines, 

and optical/medical equipment to Singapore—also showed significant 

gains in U.S. exports to FTA partners and increases in U.S. market share. 

For example, U.S. exports of machinery increased from about $4.8 billion 

in 2003 to over $9 billion in 2007 following the FTA with Singapore in 2004. 

Sales of gas turbines to Singapore increased threefold, from about 

$650 million before the FTA came into force, to almost $1.8 billion in 2007. 

The elimination of Chile’s luxury tax on imported cars, along with tariff 

reductions, also spurred greater U.S. automobile exports. 

 

26In this analysis, U.S. import product categories from both Jordan and Morocco had 

greater post-FTA growth rates in 40 percent of their top 25 product categories. For 

Singapore and Chile, 64 and 52 percent of product categories, respectively, had higher 

annual average rates of growth after the FTAs came into force. 

Page 23 GAO-09-439 Free Trade Agreements
 

In some instances, reduced trade barriers led to circular flows of trade 

that benefited both parties of an agreement. We were told by the American 

Forest and Paper Association that increased amounts of kraft liner that go 

into the production of corrugated boxes were exported to Chile to 

accommodate increases in Chilean agricultural exports to the United 

States, both of which received reductions in duties after the Chile FTA. 

According to U.S. and Singapore officials we spoke with, the greater IPR 

protection and enforcement resulting from the FTA were factors 

encouraging more investment by U.S. pharmaceutical firms in Singapore. 

These firms import pharmaceutical manufacturing equipment and drug 

components for the manufacture of pharmaceuticals that are exported in 

bulk back to the United States, where they are then marketed to the 

United States and the world. 

Trade in Services Increases 

For the FTAs we studied, Singapore has the highest level of bilateral 

services trade, with the United States exporting over $7 billion, and 

importing almost $4 billion, for a services trade surplus of over $3 billion 

in 2007. U.S. service exports to Singapore grew 24 percent from the 

average level of the pre-FTA 3-year period 2001–2003 to 2007, while, U.S. 

service imports from Singapore grew by 90 percent. For both exports and 

imports, substantial gains have taken place in the broad category “other 

private services,” within which the subcategory “business, professional 

and technical services” has shown very high growth. These exports to 

Singapore grew over 800 percent, and imports to the United States grew 

over 1,200 percent. The “royalties and license fees” category also had a 

sizable increase. Some of the export growth of these categories is likely 

associated with the improved market access and IPR environment 

resulting from the FTA. 

Singapore 

Services trade with Chile during the period since FTA implementation has 

also shown substantial growth. In 2007, U.S. services exports to Chile were 

$1.76 billion, and U.S. imports were $868 million, for a trade surplus of 

$888 million. U.S. exports to Chile grew 47 percent compared with the preFTA period, while imports grew just 19 percent. Exports in the “other 

private services” category grew 100 percent, and “business, professional 

and technical services” grew by 168 percent. Also, royalties and licensure 

fees” grew 140 percent. 

Chile 

For Jordan and Morocco, the Bureau of Economic Analysis (BEA) does 

not provide separate data on services trade, and this hampers our ability to 

Jordan and Morocco 

Page 24 GAO-09-439 Free Trade Agreements
 

assess the U.S. role in these countries. United Nations’ data do show, 

however, that both of these countries have experienced substantial growth 

in their worldwide services trade. Since 2001, Jordan has experienced 

growth of 96 percent in its service exports, to a level of $2.9 billion in 2007. 

For the same period, Jordan’s imports of services grew 78 percent, to a 

level of $3.1 billion. As for Morocco, since 2001, service exports grew over 

230 percent, to a level of $13.4 billion. Morocco’s service imports grew 

181 percent, to a level of almost $6 billion. While the United States no 

doubt shared in some of this overall services trade growth by Jordan and 

Morocco, we cannot assess U.S. performance. 

As the data on services trade show, worldwide growth during the 2000s 

and the periods of FTA implementation mean that the overall U.S. share of 

worldwide services trade has experienced a declining trend. Yet, the 

United States experienced substantial services trade growth in both 

Singapore and Chile. Moreover, strong growth was apparent in service 

sector categories that are associated with provisions of the FTAs. 

Foreign Direct Investment 

and Affiliate Sales Increase 

The data on foreign direct investment (FDI) suggest that the post-FTA 

period has seen bilateral growth with Singapore and greater economic 

integration between the partners. In 2007, the U.S. stock of FDI in 

Singapore (outward FDI) reached over $82 billion. This is 73 percent 

higher than that during 2001–2003, prior to the FTA. Singapore’s share of 

overall U.S. FDI has remained stable at about 3 percent.27

Singapore 

The level of FDI in the United States by Singapore firms (inward FDI) has 

also grown. In 2007, inward FDI from Singapore had grown over 

370 percent compared with 2003, the year prior to FTA implementation. 

Singapore government data suggest that its FDI in the United States is 

concentrated in financial services and manufacturing. 

An indicator of greater economic integration is the growth in sales by 

majority-owned foreign affiliates (MOFA) of U.S. multinational 

 

27Recently revised BEA data show that 62 percent of the total U.S. stock of FDI in 

Singapore is in holding companies, and total financial-related FDI (including banking and 

finance) is about 70 percent. About 17 percent of U.S. FDI is in manufacturing, and 

computers and electronics constitute 60 percent of manufacturing. 

Page 25 GAO-09-439 Free Trade Agreements
 

corporations (MNC). These sales can be viewed as a complement to FDI in 

so far as the investment in foreign affiliates leads to greater access to the 

domestic market. In fact, sales by foreign affiliates can exceed the amount 

of cross-border trade in goods and services. BEA data show that, in 2006, 

U.S. MOFAs in Singapore had sales of $193 billion. Compared with the 3-

year period prior to the FTA (2001–2003), total U.S. affiliate sales grew 

over 117 percent.28

The Chile FTA sought to consolidate Chile as a secure location for foreign 

investment and improve the IPR environment, according to Commerce. 

The United States was already one of the major foreign investors in Chile 

prior to the FTA, even though FDI in Chile has generally been less than 1 

percent of total U.S. FDI. BEA data show that in 2007 the U.S. stock of FDI 

in Chile totaled $12.6 billion. This level represents growth of 33 percent 

compared with the average level of the 3-year period prior to the FTA, 

2001-03. While no one sector strongly dominates as a target for U.S. FDI in 

Chile, the financial sectors and manufacturing garner substantial shares, 

with chemicals playing a strong role within the manufacturing sector. The 

stock of FDI by Chilean entities in the United States is small and has not 

shown much growth in the post-FTA period. 

Chile 

Sales by MOFAs of U.S. multinationals in Chile totaled about $14.8 billion 

in 2006, based on preliminary BEA data. Compared with the 3-year average 

prior to the FTA, total U.S. affiliate sales in Chile grew 72 percent, with 

sales of goods growing faster than sales of services. 

U.S. FDI in Jordan and Morocco also grew following FTA implementation, 

but by less than FDI from other nations. Recent BEA data show that U.S. 

FDI in Jordan was $119 million in 2007, up from $39 million in 2006. U.S. 

FDI in Morocco was $238 million in 2007, a substantial increase over the 

$130 million level attained in 2006, the first year of the Morocco FTA. 

However, this 2007 level is still lower than the stock of U.S. FDI in the 

period 2001-2003. 

Jordan and Morocco29

 

28Of the $193 billion in U.S. affiliate sales, $182 billion was in goods, and over $9.3 billion 

was in services. Compared with the pre-FTA period, sales of goods grew 123 percent, and 

services grew almost 48 percent. 

29BEA data on sales by MOFAs of U.S. multinational corporations is not available for 

Jordan and Morocco. 

Page 26 GAO-09-439 Free Trade Agreements
 

Both Jordan and Morocco experienced even stronger growth in total 

inward FDI from the world during the 2000s, according to data from the 

United Nations Conference on Trade and Development (UNCTAD). In 

Jordan, inward FDI holdings more than tripled from $4 billion in 2002 to 

over $14.5 billion in 2007.30 In Morocco, between 2000 and 2007, worldwide 

inward FDI grew at an annual rate of over 50 percent, attaining a level of 

$32.5 billion in 2007. Comparing these figures with the U.S. totals from 

BEA gives some indication that the United States has yet to play a 

significant role in FDI in these countries. 

U.S. Industry and InCountry Officials 

Expressed General 

Satisfaction with FTA 

Results, While Indicating 

Several Outstanding 

Concerns 

Information we obtained from a cross section of agriculture, 

manufacturing, services, and IP-related industry representatives on 

committees that advise the U.S. government generally suggest that, to 

date, FTAs have provided direct and indirect commercial benefits to U.S. 

businesses across a range of sectors. While acknowledging that other 

industry and macroeconomic factors are also at work, most business 

groups that we contacted reported FTAs had played a role in these 

favorable trade and investment trends. Among the more significant 

beneficial provisions of the FTAs identified by the private sector were 

tariff cuts, strengthened IPR, and improved regulatory frameworks as 

follows: 

• Agricultural interests that advise the U.S. government were generally 

enthusiastic about their experience with FTAs, reporting improved market 

access in a variety of product areas, such as processed food, dairy, grains, 

almonds, tree fruits, and, to a certain extent, meat. Sectors that are highly 

protected, such as sugar, reported that these FTAs would not affect them 

since all of these countries are net sugar importers. Other product areas, 

such as certain U.S. beef and chicken meat products, still face certain 

nontariff barriers to trade and do not have full access to these FTA 

markets. 

• Manufacturing FTA-related gains were reported by industries such as U.S. 

construction equipment, industrial equipment, and electrical machinery, 

while some others, such as textiles and apparel, and the chemicals 

industry, reported mixed to no impact. For instance, the Industrial 

 

30While Jordan does not maintain official detailed statistics of FDI, aggregate inflows of 

registered capital tracked by the Central Bank indicate that the main source countries for 

foreign investment are Middle Eastern (Iraq, Kuwait, United Arab Emirates, Saudi Arabia, 

Egypt, and Bahrain) or European (Denmark, Belgium, and the United Kingdom). 

Page 27 GAO-09-439 Free Trade Agreements
 

Equipment Manufacturers, an association representing 800 manufacturers 

of industrial equipment used in the construction, agriculture, mining, 

forestry, and utility sectors, report that their members have seen sharp 

increases in exports to Chile, Singapore, and Morocco after the FTAs went 

into effect. Officials of the chemicals industry, on the other hand, reported 

that while FTAs had some impact on increases in exports, they believed 

that this was more due to overall growth in demand and other factors. 

• Many services trade and intellectual property-related industries reported 

gains due to FTA market-opening provisions in services, improved 

investor protections, strengthened IPR, procurement liberalization, and 

regulatory transparency. These industries included express delivery, 

financial services, pharmaceuticals, business software, and information 

services. 

In addition, evidence we gathered on fieldwork in partner countries, 

including the views of the United States and partner country officials and a 

range of market participants, reveals a generally positive view of the 

impact and results of the FTAs. 

Despite the overall positive tenor of views about the FTAs’ commercial 

results, some outstanding concerns remain among U.S. private sector 

groups, as well as among U.S. and partner governments. As a result, 

continued efforts to resolve outstanding issues were urged, specifically the 

following: 

Continued Focus on 

Outstanding Trade Concerns 

Urged by Private Sector, United 

States, and Partner Country 

Officials 

• In a few U.S. industries, concerns were expressed about actual or 

potential displacement (cotton, fruit, and vegetable producers). Others 

said that the FTAs haven’t achieved their full potential and may involve 

some costs due to varying rules of origin and cumbersome paperwork (for 

example, businesses in the express delivery sector said they benefit from 

innovative market access and treatment provisions, but they find FTArelated paperwork and packing requirements can counter their strengths 

in global supply chain support and “hub and spoke” redistribution 

systems). 

• From a U.S. government perspective, IPR-related issues in Chile have not 

been adequately addressed and have since been elevated by USTR to the 

Page 28 GAO-09-439 Free Trade Agreements
 

Special 301 Priority Watch list in 2006 and 2007.31 U.S. officials and the 

private sector remain frustrated by Chile’s slow and incomplete 

implementation of its FTA IPR obligations, particularly since this was 

billed as being a major benefit of the FTA for the United States. The United 

States and Chile have previously conducted a review of Chile’s 

implementation of several of its IPR obligations under the FTA and plan 

continued engagement on these issues in 2009. 

• In Chile, some concern and disappointment was expressed by officials 

with the level of trade in services and U.S. investment since the FTA was 

implemented. In addition, Chilean officials said that Chile’s FTAs with 

other partners (such as Mexico) were more flexible and contain 

cumulation provisions that allow inputs from other countries.32

• Regarding Jordan, a representative of U.S. fabric producers suggested 

FTAs as a whole have been quite helpful and important to the industry’s 

survival by creating export markets for U.S. fabric. However, he also 

expressed concern that imports from Jordan and other suppliers with 

preferential access to the United States without requirements to use U.S. 

fabric were undermining apparel producers under NAFTA and the Central 

America–Dominican Republic Free Trade Agreement (CAFTA-DR) that do 

use U.S. inputs and, in turn, their producers. While in Jordan, complaints 

from officials included that, especially in agriculture, Jordanian products 

could not meet U.S. regulatory standards and that U.S. customs paperwork 

and regulations were complex. Broader concerns were also expressed by 

Jordanian officials about the level of trade in services and investment from 

the United States after the FTA. 

 

31“Special 301” (as added by Section 1303 of Omnibus Trade and Competitiveness Act of 

1988, Pub. L. No. 100-418, to the Trade Act of 1974 (19 U.S.C. §2242) is designed to enhance 

the United States’ ability to negotiate improvements in foreign intellectual property 

regimes. USTR is required to conduct an annual review to identify foreign countries that 

deny “adequate and effective” protection of IPR or “fair and equitable market access” to 

U.S. persons relying upon IPR protection. Countries may be placed on “priority watch” or 

“watch” lists if their intellectual property laws or enforcement practices are of major 

concern to the United States. 

32Cumulation provisions are provisions within a trade agreement that allow for the import 

of inputs from “third countries” in other regions or trade agreements to count toward a 

country’s content rule of its rules of origin. Trade agreements with cumulation provisions 

are considered to be more flexible than those without them because a country can 

potentially source inputs from multiple countries. See, Paul Brenton, “Rules of Origin in 

Free Trade Agreements” (Washington, D.C.: The World Bank Group, International Trade 

Department, Trade Note 4, May 29, 2003). 

Page 29 GAO-09-439 Free Trade Agreements
 

• U.S. officials we met with in Morocco and Moroccan officials shared a 

concern that Morocco had undertaken liberalization and seen sharp 

increases in imports from the United States but had yet to see much in 

terms of gains in sales to the United States. Meetings with Moroccan 

government representatives revealed their general dissatisfaction with 

their trade results so far, which they believed did not reflect “the 

objectives and potential of the FTA.” They listed several factors that they 

felt contributed to this situation including: (1) discrepancies between 

Moroccan and U.S. trade statistics; (2) problems relating to the inability to 

meet U.S. regulatory standards, in particular sanitary and phytosanitary 

standards; (3) specific difficulties of Moroccan exporters pertaining to U.S. 

Customs; and (4) long phaseout periods of U.S. tariffs on some Moroccan 

products.33

• Ongoing U.S. concerns in Singapore pertain to frustration with some 

opaque or cumbersome regulatory practices that are undermining U.S. 

firms’ access to Singapore’s telecommunications and domestic 

pharmaceutical procurement markets. In addition, some animal, plant, or 

human-health related bans or restrictions remain, posing hurdles for U.S. 

exporters of some meat and other agricultural products. Despite a very 

positive view of the FTA by Singaporean officials, there were calls from 

some exporters for more flexible rules of origin, such as in the case of 

optical disc producers who cannot meet the value-added requirement. 

Some disappointment was expressed with the results of the 

 

33Concerning the issue with the Moroccan trade statistical discrepancies, the two countries 

are having ongoing consultations among participants from the U.S. Census and USTR, and 

the Moroccan Office des Changes (Foreign Exchange Office) to resolve these issues. U.S. 

officials explained that, after an examination of this issue by both countries, it was found 

that Moroccan statistics had failed to fully account for exports sent to the United States via 

third countries which resulted in U.S. import statistics showing a higher volume of imports 

from Morocco than Moroccan statistics show as being exported to the United States. 

Concerning partner countries meeting U.S. standards, including sanitary and phytosanitary 

standards, U.S. officials commented that it often takes many years for the Animal and Plant 

Health Inspection Service (APHIS) of the U.S. Department of Agriculture, to certify 

products. For Moroccan tomatoes, we were told that APHIS has published a draft 

regulation, which is the first step in the process. 

Page 30 GAO-09-439 Free Trade Agreements
 

congressionally modified “integrated sourcing initiative”34 compared with 

the expectations during FTA negotiations. Also, concern was expressed 

about the ease of obtaining visas for Singaporean business persons in 

some countries, including the United States. 

While GAO did not do a comprehensive examination of agency efforts in 

this area, it appeared that active monitoring and ongoing engagement were 

already under way in most of these areas. For example, U.S. officials were 

able to give a detailed scorecard of Chile’s IPR implementation efforts, as 

well as provide a timeline documenting extensive bilateral contacts. 

Similarly, in Singapore, U.S. officials were able to provide extensive 

information regarding IPR developments and services market access 

concerns. Nevertheless, USTR, Commerce, and Department of Agriculture 

(USDA) officials told us that evaluation of FTAs in terms of trade results is 

infrequent and done on an ad hoc basis. For example, agencies produced a 

one-time report required for TPA in 2005 and Commerce produced charts 

on particular FTAs in 2008. 

 

34During the negotiations for the U.S.–Singapore FTA, USTR announced an “integrated 

sourcing initiative” in which information technology products, manufactured on two 

Indonesian islands off the Singapore coast and by a number of other Association of 

Southeast Asian Nations countries in the region and shipped from Singapore, would be 

considered to be of Singapore origin. The initiative was limited to information technology 

products (100 or more types), which do not involve a sensitive sector in the U.S, and would 

receive tariff-free treatment. This initiative was expected to be a boon to the economy, as 

electronics is a major industrial output sector for Singapore. Subsequently, during 

congressional deliberations over the FTA, provisions of the integrated sourcing initiative 

were modified. 

Page 31 GAO-09-439 Free Trade Agreements
 

FTAs Contribute to 

Labor Improvements 

in Partners, but U.S. 

Follow-up on FTA 

Labor Commitments 

Has Been Minimal 

FTAs Spurred Some Labor 

Law Reforms, but Most 

Partners Face 

Enforcement Challenges 

Jordan, Chile, Singapore, and Morocco have all made efforts to meet their 

commitment in the FTAs to strive to ensure that their domestic labor laws 

provide for agreed labor standards consistent with the internationally 

recognized labor rights and strive to make improvements. (See boxed text, 

which describes some of the most important labor commitments in the 

FTAs.) U.S. and partner officials said the FTA negotiations stimulated 

labor law reforms and improvements in enforcement of the laws in all four 

partner countries, either during the FTA negotiations or later. However, 

Jordan, Chile, and Morocco all have documented difficulties ensuring 

respect for core labor rights and face enforcement challenges. U.S. 

agencies missed opportunities to promote partner capacity because they 

have provided little sustained engagement or assistance. 

TPA and FTA Provisions Related to Labor 

TPA Goals 

TPA’s overall negotiating objectives on labor include promoting respect for workers’

rights and the rights of children consistent with core labor standards of the ILO, as 

defined in TPA. Principal negotiating objectives include strengthening the capacity of 

U.S. trading partners to promote respect for core labor standards. The President is 

directed to seek to establish consultative mechanisms among parties to trade 

agreements to strengthen the capacity of U.S. trading partners to promote respect for 

core labor standards as enumerated in TPA. 

FTA Commitments 

All of the primary provisions of the pre-TPA Jordan FTA labor article are echoed in the 

Chile, Singapore, and Morocco FTAs. In each of the agreements, the parties commit to:

• not fail to effectively enforce their own labor laws, through a sustained or recurring 

course of action or inaction, in a manner affecting trade between the parties; 

• strive to ensure that their domestic labor laws provide for labor standards 

consistent with the internationally recognized labor rights set forth in the labor 

article, while recognizing the right of each party to establish its own domestic labor 

standards, and strive to improve those standards; 

Page 32 GAO-09-439 Free Trade Agreements
 

• strive to ensure that they do not waive or derogate from, or offer to waive or 

derogate from, domestic labor laws as encouragement for trade with the other 

party; and 

• strive to ensure that the labor principles and internationally recognized labor rights 

set forth in the labor article are recognized and protected by domestic law. 

The Singapore, Chile, and Morocco FTAs also contain provisions on labor 

consultations, commitments to labor cooperation in order to advance common labor 

commitments, public awareness, and domestic procedural guarantees. For example, 

parties are required to ensure that their proceedings for the enforcement of their labor 

laws are fair, equitable, and transparent. 

Internationally Recognized Labor Rights 

The internationally recognized labor rights defined in TPA and the FTAs are: 

• the right of association, 

• the right to organize and bargain collectively, 

• a prohibition on the use of any form of forced or compulsory labor, 

• a minimum age for employment of children, and 

• acceptable conditions of work with respect to minimum wages, hours of work, and 

occupational safety and health. 

a Consistent with TPA guidance, prohibition and elimination of the worst forms of child 

labor is also included in the Singapore, Chile, and Morocco FTAs but not the Jordan 

FTA. The Singapore and Chile FTAs also refer to “labor protections for children and 

young people,” including the elements specified here. 

The following sections describe progress and challenges in labor law 

reforms and enforcement in each partner country. 

Jordan has made some improvements to its labor laws and enforcement in 

recent years, according to USTR and Labor officials, but ongoing 

weaknesses in its labor protections contributed to abuses of workers that 

occurred in factories in the U.S.-designated QIZs. Despite U.S. awareness 

of such weaknesses going into the agreement, little was done by the 

United States or Jordan to address them between 2002 and mid-2006, the 

first 5 years of the FTA. Jordan’s actions since then are generally seen as 

serious responses intended to correct labor abuses and have resulted in 

recognized improvements. Although some labor problems persist in the 

QIZs, the U.S. government recently decided to widen Jordan’s duty-free 

access to the U.S. apparel market. 

Jordan 

A former U.S. official involved in the labor negotiations for the Jordan FTA 

told us that, during the negotiations, Jordan’s labor laws had been found 

wanting in some respects, but the United States did not require changes as 

part of the FTA. State’s human rights reports have for years noted 

limitations in Jordan’s labor protections, which were particularly weak for 

foreign workers and workers in the informal sector. According to USTR, 

Page 33 GAO-09-439 Free Trade Agreements
 

Jordan’s labor laws were amended by Jordan in 2008 to cover some 

previously excluded workers, including agricultural workers. 

Until 2006, the International Trade Union Confederation’s Annual Survey 

of Violations of Trade Union Rights routinely noted that Jordan’s labor 

inspection service was ineffective and labor laws were not always 

enforced. In addition, State’s human rights reports have noted a lack of 

government training for labor inspectors on the country’s child labor laws 

and the inspectors’ failure to enforce these laws over the past decade. 

However, they also described the government’s efforts during this period 

to establish a new child labor unit in the Ministry of Labor and to oversee 

recruitment and employment of certain foreign workers. 

A serious failure in both Jordan’s laws and its enforcement—which 

Jordan, with the help of U.S. agencies, independently verified and has now 

taken some steps to address—was publicized in a May 2006 report by the 

National Labor Committee, a U.S. labor advocacy organization. It 

described widespread abuses of foreign workers in garment factories 

operating in Jordan’s QIZs, whose duty-free exports to the United States 

have grown dramatically under the FTA. The majority of workers in 

Jordan’s QIZs are not Jordanian; they are brought to Jordan under 

contract from several east and southeast Asian nations. While many of the 

investors are from China, Taiwan, India, and Pakistan, some U.S. brands 

and stores source goods for export from Jordan. The National Labor 

Committee report detailed problems such as workers’ passports being 

confiscated by factory managers, regular work shifts of 12 to 20 hours and 

occasional shifts of 48 or more hours, withholding of wages for up to 6 

months, nonpayment of full wages with overtime, threats and incidents of 

deportation, overcrowded and unsanitary living quarters provided by 

employers, and incidents of physical and sexual abuse. 

According to U.S. officials, the government of Jordan reacted immediately 

to the 2006 public report. Jordan initiated its own investigation and 

requested U.S. funding for an independent assessment of working 

conditions in the QIZs, conducted by a contractor specializing in labor 

compliance monitoring, which confirmed numerous violations of Jordan’s 

labor laws and international labor standards.35 The assessment found some 

problems were pervasive in the QIZ factories, while others were limited to 

 

35The assessment involved visits to 70 of 111 garment factories operating in the QIZs at that 

time; of these, 63 employed migrant workers. 

Page 34 GAO-09-439 Free Trade Agreements
 

a few cases or a few factories. According to the assessment, the 

widespread violations of Jordanian laws included non-voluntary and 

routine overtime of 2 or more hours daily and incorrect wage payments 

including pay below the minimum wage. 

Jordan’s Ministry of Labor took steps to improve workers’ conditions and 

compliance with labor laws, with assistance from USAID and other 

donors, including closing some factories, transferring workers to factories 

with better working conditions, developing a voluntary code of conduct 

for factories, creating a hotline for complaints from migrant workers, 

hiring new inspectors, and instituting new training programs for labor 

inspectors. Jordan agreed with the ILO to start a “Decent Work” program 

to create quality jobs and reduce unemployment nationally, as well as a 

“Better Work” program to implement a monitoring system in the garment 

sector, combined with needs assessment, remediation, and training at the 

enterprise level. However, the National Labor Committee has reported 

recurrences of some problems in the QIZs over the past 2 years, and a 

Ministry of Labor report indicates that at least one case was so egregious 

that it closed the factory. The ministry said it also accelerated an ongoing 

effort to revise the national labor law through a process involving the 

government, employers, and workers. U.S. officials, trade union officials, 

and others told us that a comprehensive reform package was developed in 

late 2006, but the ministry delayed in submitting it to parliament until June 

2008. According to U.S. officials, Parliament enacted a set of labor reforms 

but did not enact some elements of the proposed revisions, including 

providing legal rights to foreign workers to organize and join unions, 

despite the government’s repeated assurances to U.S. officials over a 

period of years that this particular reform would be made “soon.” 

According to Chilean officials, Chile has continued to strengthen its labor 

laws since its FTA went into effect in 2004, but they also told us about 

ongoing difficulties with ensuring respect for labor rights by employers 

and with its enforcement regime. Chile began a process of labor reform in 

the 1990s that has continued up to and since passage of the 2004 FTA. As a 

result, its labor enforcement regime is considered among the best in Latin 

America, according to ILO officials. According to the FTA labor rights 

report for Chile submitted to Congress, reform legislation that was 

enacted in 2001 significantly improved workers’ rights to organize. It also 

reduced the official work week from 48 to 45 hours, tightened overtime 

pay regulations, and improved safety standards, among other changes. In 

addition, according to Ministry of Labor officials, a 2007 law established a 

legal responsibility for employers to protect the health and safety of 

subcontracted workers, guarantee their pay, and clarify their contracting 

Chile 

Page 35 GAO-09-439 Free Trade Agreements
 

status.36 However, comments from individuals in the Chilean government 

and nongovernmental organizations during GAO’s fieldwork indicated this 

reform was seen as fixing some problems but creating others. Both 

ministry and trade union officials noted some continuing problems with 

workers’ rights, including inequality in pay for subcontractors and legal 

limitations on workers’ ability to organize and bargain collectively across 

enterprises. 

The State Department’s 2007 Report on Human Rights Practices indicates 

that Chile’s Ministry of Labor effectively enforced its laws and regulations 

on minimum wages, work hours, and safety and health standards and 

devoted considerable resources to oversight of child labor policies. 

Chilean labor ministry officials we met said enforcement has improved 

since the FTA went into effect, but Chile still faces some of the same 

challenges in enforcement that existed at the time the FTA entered into 

effect. They said the ministry has increased the number of labor 

inspectors, raised inspectors’ salaries, and introduced unannounced 

inspection visits. In addition, they said labor court procedures have been 

modified to address labor disputes in a more timely way. Spurred by its 

FTA commitments to the United States, Chile’s Ministry of Labor 

proactively undertook a self-study, with initial cooperation from the 

private sector, of two of Chile’s leading export sectors, salmon and 

forestry products. It identified some labor rights problems with the aim of 

convincing companies that improving labor practices would be good for 

business. Chilean labor ministry officials also acknowledged that 

enforcement is weaker than they would like. Fines for violations remain 

low, and labor inspectors’ pay is still among the lowest for government 

inspectors in Chile. 

When asked about post-FTA developments and effects, labor groups we 

met in Chile generally agreed with the government’s assessment that there 

had been some progress but continued to be problems with Chile’s labor 

laws and enforcement. They added that workers’ jobs, pay, benefits, and 

protections in Chile, particularly in manufacturing, had been under 

pressure as a result of near-continual import liberalization by Chile most 

recently through conclusion of an FTA with China. While the U.S-Chile 

FTA was not seen as the sole or even primary cause of these downward 

 

36Ministry officials said subcontracting is a widespread practice in Chile that enables firms 

to employ workers through temporary contracts, often for substantially lower wages and 

with less safety protection than direct employees who work alongside them. 

Page 36 GAO-09-439 Free Trade Agreements
 

pressures on Chilean working conditions, the FTA also was not seen as a 

powerful or well-used used tool for betterment. 

Singapore generally had strong protections for workers going into the FTA 

and has since improved them. As a high-income economy, Singapore 

provides good working conditions and a broad range of social benefits for 

most of its workers, and U.S. officials involved in the negotiations said 

changes in Singapore’s labor laws were not needed to conclude the FTA. 

The International Trade Union Confederation (ITUC) reports that there 

are some restrictions on unions in Singapore’s labor laws, but many of the 

restrictions are not applied in practice. U.S. FTA negotiators were initially 

concerned by Singapore’s lack of a minimum wage law, but these 

concerns were allayed by an understanding of Singapore’s unique system 

for determining wage increases through the annual recommendations of a 

National Wages Council that is composed of government, trade union, and 

employer representatives. U.S. embassy officials said Singapore has made 

changes in its laws to improve worker protections since the FTA took 

force. The embassy officials stated that, for example, a workplace safety 

and health act was enacted to provide safety protections to a broader 

range of workers. 

Singapore 

State’s 2008 human rights report indicates that Singapore’s Ministry of 

Manpower effectively enforced its laws and regulations on working 

conditions, safety and health standards, and child labor. 

Morocco has strengthened its labor laws in connection with the FTA, but 

its enforcement is often poor, and child labor and suppression of strikes 

remain problems, according to U.S. government reports and officials. 

USTR and Labor officials indicated that Morocco achieved significant 

labor reforms and progress in employer-worker relations with reform 

legislation that took effect in 2004. Although these reforms had been under 

discussion for over 20 years, U.S. officials said the FTA negotiations 

provided an external push that was helpful in gaining agreement among 

workers, employers, and the government on outstanding issues. Moroccan 

government officials told us that the number of labor disputes has 

decreased 50 percent since 2004, and trade union officials agreed that the 

environment for labor dialogue has improved as a result of the new labor 

code. In 2004, Morocco’s legislature also passed reforms to the family code 

and the penal code, which strengthened labor protections and other rights 

for women and children, according to State’s human rights reports. 

Despite the progress, trade union officials and labor experts told us that 

labor protections should be further expanded to cover workers in 

Morocco’s large informal economy. 

Morocco 

Page 37 GAO-09-439 Free Trade Agreements
 

State’s human rights reports note that enforcement of all of these laws has 

often been poor, particularly within Morocco’s informal work sector, due 

partly to limited government resources. For example, in April 2008, 

approximately 55 deaths caused by a mattress factory fire in Casablanca 

reportedly occurred after inspections had identified safety violations that 

were not corrected. During our fieldwork, an ILO official also told us that 

Moroccan labor inspectors are reluctant to cite employers for labor 

violations because an inspector was sentenced to prison for issuing a 

citation several years ago. The Morocco FTA labor rights report states that 

Morocco has experienced repeated incidents of violent repression of 

worker strikes, and a 2007 confederation report indicated at least one of 

these involved a U.S.-affiliated export manufacturer. Furthermore, 

according to State’s human rights, Labor’s child labor, and Human Rights 

Watch reports, Morocco has a relatively high rate of child labor, especially 

in rural areas. Moroccan labor experts have attributed this to poverty, 

poor quality education and poor access to education (particularly for 

girls), broken families, and wide social acceptance of child labor. The 

Moroccan government has ongoing programs aimed at eliminating child 

labor through education for child workers and other efforts, which have 

been developed with support from the ILO and Labor. 

U.S. Agencies Did Not 

Develop Labor 

Cooperation Plans and 

Had Limited Resources to 

Strengthen Partner 

Capacity 

In addition to their responsibilities described in the boxed text, pursuant 

to TPA reporting requirements, U.S. agencies created fairly comprehensive 

baseline assessments of these FTA partners’ labor rights regimes. TPA 

does not require that U.S. agencies use the assessments to systematically 

plan or set priorities with partners, and U.S. agencies did not do so. 

However, because U.S. agencies were disengaged and provided little 

assistance to partners, agencies may have missed opportunities to 

cooperate with partners in promoting capacity. 

Page 38 GAO-09-439 Free Trade Agreements
 

U.S. Agency Responsibilities for FTA Labor Matters 

Labor is responsible for overseeing FTA labor commitments and cooperation and is the 

lead on all but the Jordan FTA, in coordination with State and USTR. In Federal Register 

notices for the Singapore, Chile, and Morocco FTAs, Labor’s ILAB was designated as the 

point of contact for implementation of the labor provisions for the FTAs, as well as for the 

labor cooperation mechanisms established by the annexes to these FTAs. Under the 

labor cooperation mechanisms, the parties have broad authority to undertake cooperative 

activities on any labor matter, and the responsible agencies shall cooperate to establish 

priorities for cooperative activities. The Federal Register notices also outline ILAB’s 

responsibilities in relation to the FTAs, which include implementing trade-related labor 

policy, coordinating international technical cooperation in support of the labor provisions in 

FTAs, and receiving, determining whether to accept for review, and reviewing 

submissions on another party’s compliance with commitments and obligations arising 

under a labor chapter. ILAB is required to consult with State and USTR on these activities.

Before congressional review of a final trade agreement, TPA required U.S. 

agencies to prepare and submit to Congress a “meaningful labor rights 

report” for each partner country and a report describing the country’s laws 

governing exploitative child labor.37 USTR and Labor officials told us that, 

in general, at the start of discussions about each possible FTA, they 

consult with partner government officials, clarify U.S. FTA labor 

requirements for them, and seek information about the labor situation in 

the country. As the negotiations continue, they conduct an analysis of the 

country’s labor laws and practices and visit the country to meet with 

government, union, and private sector officials. If labor concerns are 

serious, U.S. negotiators may request legislative changes to remedy them. 

Labor officials said they also work with partner government officials at 

this stage to identify weaknesses and needs for technical assistance 

concerning labor rights and enforcement, as required by TPA.38 The 

information gathered contributes to the labor rights report prepared for 

Congress and also informs the negotiations and decisions about 

cooperation and assistance. 

Reports Required by TPA 

Provided a Comprehensive 

Baseline on Labor Rights 

The TPA labor rights reports we reviewed for these FTA partners provided 

detailed descriptive information on and insight into the labor rights 

situation in these countries. They described each country’s legal 

framework, the administration of labor law, labor institutions, and the 

labor justice system, as they pertained to the core labor standards defined 

in U.S trade legislation. Although the reports did not attempt to evaluate 

 

3719 U.S.C. § 3802(c)(8). 

3819 U.S.C. § 3802(c)(7). 

Page 39 GAO-09-439 Free Trade Agreements
 

the severity of labor problems, our comparison of them indicated that they 

portrayed more significant labor problems in Morocco, limited problems 

in Chile, and very few in Singapore. The reports did not include any 

analysis of the potential effects of expanded trade on the situation for 

workers in export sectors. 

Because the Jordan FTA negotiations occurred before TPA was enacted, 

neither a meaningful labor rights report nor a report on laws governing 

exploitative child labor was required or prepared for Congress. Our 

document review indicated, however, that in response to a USTR request, 

in 2004, Labor identified various labor rights weaknesses, including the 

facts that the estimated 125,000 registered foreign workers in Jordan 

lacked the right to organize, bargain collectively, or join unions and that 

the recently increased minimum wage was set at poverty levels. 

The post-TPA FTAs establish labor cooperation mechanisms and explicitly 

recognize that bilateral cooperation provides enhanced opportunities to 

improve labor standards and advance common commitments. USTR and 

ILAB officials told us that when the four FTAs GAO focused on were 

negotiated, they foresaw greater cooperation between experts at Labor 

and partner countries’ labor ministries than has occurred. U.S. agencies 

have not utilized the bilateral cooperation process laid out in the FTA 

annexes to set joint priorities and plans for cooperative activities with 

these FTA partners. Information from the labor rights reports identified 

partners’ weaknesses, and Labor did use this information to develop its 

initial interactions with these partners. Labor and the agencies it must 

consult with concerning cooperation activities did not use the information 

as a basis for assessing and prioritizing needs and planning cooperative 

efforts with partner countries beyond these initial projects. However, as 

discussed below, Labor’s direct funding for technical cooperation projects 

was essentially eliminated at the time the FTAs we examined began 

entering into force. 

U.S. Agencies Did Not 

Establish a Process to 

Prioritize and Plan Cooperative 

Activities 

In contrast to the arrangements for environmental cooperation described 

later in this report, there is no process between the United States and its 

trade partners for developing work plans for labor cooperation that 

establish objectives and activities over a period of time. In the FTA labor 

cooperation annexes, the parties committed to establish priorities for 

cooperation and develop specific activities in line with the priorities. 

However, the annexes do not set a time frame in which these actions are 

to be completed. In practice, no cooperation priorities or multiproject 

work plans have been developed with any of these FTA partners, apart 

from plans for individual projects described below. 

Page 40 GAO-09-439 Free Trade Agreements
 

The text of each of the three FTAs negotiated under TPA anticipates 

cooperation between the United States and its trade partner on labor 

matters. Each of these FTAs creates a labor cooperation mechanism and 

the respective associated annexes state that parties shall cooperate and 

the parties recognize that cooperation provides enhanced opportunities to 

improve labor standards and advance common commitments including the 

ILO Declaration. To promote these goals, in the Chile, Singapore, and 

Morocco FTAs, the “Cooperative Activities” and “Implementation of 

Cooperative Activities” provisions of the labor cooperation mechanism 

annexes identify areas of cooperation and types of cooperative activities 

that could be undertaken by the United States and the partner country, but 

does not require that these enumerated activities be undertaken.39 The 

annexes identify activities such as exchanging information, organizing 

joint conferences, and undertaking joint research projects, on topics such 

as fundamental labor rights and their effective application, labor relations, 

and working conditions. None of these FTAs’ labor provisions and 

associated annexes specifies a time frame for completion of the activities. 

The Jordan FTA does not have a labor cooperation mechanism annex, but 

it provides an opportunity for labor cooperation by requiring that the Joint 

Committee established to implement the FTA consider any opportunity for 

cooperation identified by any of the parties to the agreement. In addition, 

the “Economic Cooperation and Technical Assistance” article in the 

Jordan FTA (which is not focused on labor) states that “in view of Jordan’s 

developing status, and the size of its economy and resources, the United 

States shall strive to furnish Jordan with economic technical assistance, as 

appropriate.” 

Labor Cooperation Efforts 

Have Been Limited and Driven 

by Type of Funding Available 

However, none of the FTAs contains a specific commitment of financial 

assistance. Instead, Labor’s ILAB programs for non-FTA-related technical 

assistance have been the initial or primary source of funding for technical 

assistance projects on labor issues for these FTAs. ILAB technical 

assistance has typically supported improvements in labor law enforcement 

and labor relations, as well as programs to prevent and withdraw children 

from exploitative child labor. In addition, USAID has been a primary 

source for funding in Jordan recently, and State’s Middle East Partnership 

Initiative provided funds for Morocco. 

 

39See Chile FTA Annex 18.5, para. 4, Singapore FTA Annex 17A, para. 3, and Morocco FTA 

Annex 16-A, para. 4. 

Page 41 GAO-09-439 Free Trade Agreements
 

U.S. assistance to help partners build labor capacity was limited to 

partners or issues with preexisting program resources and was less than 

initially foreseen due to funding cuts. ILAB officials told us their budget 

for general bilateral and multilateral technical assistance that could be 

used for FTA partner countries was greatly reduced in 2004 (from $37 

million to $2.5 million) and has been eliminated in every year since 2005. 

As a result, ILAB has not had a direct source of funding available to 

dedicate to new technical assistance for FTA partners, except for child 

labor projects. For some FTAs, ILAB has identified funding from other 

U.S. agencies to support labor assistance, including a large amount from 

USAID in Jordan and a very small amount from State in Morocco. 

Although cooperation could involve less costly technical or information 

exchanges, as well as assistance projects, ILAB officials said they do not 

have much funding for travel to meet with or provide in-house technical 

assistance to labor ministry officials. In addition, they said other Labor 

agencies that have technical expertise they would like to draw on, such as 

the Occupational Health and Safety Administration, are limited by their 

domestic missions in their ability to pay for sending staff overseas. ILAB 

officials said they are trying to explore less costly ways of participating in 

international meetings, such as through videoconferences. However, in 

response to an invitation by Chile to participate in a labor forum it 

organized in 2008, the officials told us ILAB did not have funds for travel. 

While not able to make alternative arrangements to participate, they 

provided materials and preparation so that a U.S. embassy employee could 

attend instead. 

Following are descriptions of U.S. labor assistance that has been provided 

to each partner country and how it relates to labor enforcement capacity 

weaknesses cited in the FTA labor rights (or other U.S. government) 

reports and expectations for cooperation stemming from the existence of 

the labor cooperation annexes. 

Jordan 

U.S. support for capacity building to counter Jordan’s weaknesses in labor 

law enforcement, including those noted in State’s human rights reports, 

was originally provided through two ILAB-funded projects implemented 

by the ILO. Total funding for these projects, both initiated in 2002, was 

about $2.4 million. One project was designed to form a committee of 

workers, employers, and government officials for ongoing “social 

dialogue” on national labor issues; develop a proposal for labor law 

reforms; support collective bargaining; and strengthen the labor 

inspectorate. The other project supported development of a national 

Page 42 GAO-09-439 Free Trade Agreements
 

program to eliminate child labor. In 2008, ILAB committed an additional $4 

million to a 4-year child labor/education project. After labor rights and 

enforcement problems in the QIZs became publicly known in 2006, USAID, 

which has a large assistance program in Jordan, committed $4.186 million 

to address these problems. This has included $442,000 for an assessment 

of labor problems in the QIZs in 2006, $1.044 million for advisory services 

for the Ministry of Labor and its labor inspectorate since 2007, and $2.7 

million in 2008 to support the launch of a 5-year “Better Work Jordan” 

program, designed by the ILO and the International Finance Corporation 

and co-funded by Jordan’s Ministry of Labor, to improve labor standards 

and overall competitiveness in the export garment industry. According to 

documents we reviewed, the U.S. embassy and USAID did not commit the 

bulk of this assistance until they were asked to do so by USTR in mid-2007, 

more than a year after the problems were publicly reported and at least 3 

years after the U.S. government itself was apparently aware of them. State 

explained that the ILO first proposed the Better Work Jordan program to 

donors in November 2006 and then made two project scoping visits, but 

was reluctant to move forward until certain labor law reforms had been 

made by Jordan. The ILO formally requested USAID funding for the 

program in March/April 2007, and the grant for the program was signed in 

February 2008. 

Chile 

One largely unsuccessful U.S. assistance project with Chile was started 

near the time of the FTA’s entry into force. The FTA labor rights report for 

Chile described a functioning labor enforcement system that, nevertheless, 

had overburdened labor courts and some enforcement weaknesses. Chile 

had graduated from USAID assistance by this time and did not have a 

significant child labor problem, which limited the available sources of U.S. 

funding for capacity building. In response to the interests of Chilean labor 

officials, ILAB provided $1.4 million for a project to improve labor law 

compliance. The project was initiated in 2003 and focused on training 

labor inspectors and improving the efficiency of labor courts. However, 

according to the midterm project evaluation, the project was overly 

ambitious, given its resources, and faced a number of obstacles. A final 

evaluation was not available, but ILAB officials told us project funding and 

activities were subsequently reduced in 2005 due to budget cuts in their 

international technical assistance. 

According to State and ILAB officials, lack of funding has consistently 

stymied efforts to provide Chile FTA-related technical assistance and 

cooperation. Chilean labor officials told us they were eager to have 

Page 43 GAO-09-439 Free Trade Agreements
 

technical exchanges with the United States on labor issues—similar to 

exchanges Chile has had with other FTA partners, such as Canada and the 

EU—but have had few opportunities to do so. In addition, little technical 

cooperation or assistance has been directed toward some of the 

nonmandatory elements listed in the labor cooperation annex that are 

unique to this FTA, such as promoting the collection of comparable labor 

data and addressing labor issues related to small and medium enterprises. 

The annex also provides for periodic labor cooperation reviews at the 

request of either party, but neither party has requested such reviews. 

ILAB officials described a few recent cooperative efforts with Chile, 

including an information request from Chile concerning innovative job 

training programs and meetings between U.S. and Chilean labor officials at 

multilateral labor meetings. A joint U.S.-Chilean proposal to send Chilean 

labor inspectors to the United States to learn about labor hotlines was 

recently selected for funding from the Organization of American States. 

The embassy is also organizing a series of digital video conferences; the 

first one took place in May 2009. 

Singapore 

No U.S. activity or assistance on labor has been provided since the FTA 

went into effect, according to ILAB officials. Singapore has high labor 

standards and relatively few labor problems, as indicated in the FTA labor 

rights report. U.S. officials told us that because Singapore’s labor laws and 

enforcement systems were good, they did not see a need for extensive 

cooperation and, furthermore, Singapore had not requested it. No U.S. 

financial assistance for labor activities has been provided. Despite the 

provisions in the labor cooperation annex and the expectations of 

negotiators in both countries, neither U.S. nor Singapore government 

officials were aware of any technical cooperation activities concerning 

labor since the FTA was implemented. However, Singaporean officials told 

us they were cooperating on labor issues with other trade partners, such 

as the Trans-Pacific Strategic Economic Partnership that also includes 

Chile, New Zealand, and Brunei Darussalam. 

Morocco 

About $11 million in U.S. assistance has been provided to help Morocco 

bolster enforcement and stem child labor abuses. The FTA labor rights 

report noted that Morocco had numerous labor enforcement weaknesses, 

including a lack of resources and training for labor inspectors and 

pervasive child labor violations. Although the labor cooperation annex for 

Page 44 GAO-09-439 Free Trade Agreements
 

the Morocco FTA is largely similar to the others we examined, one of its 

unique elements is a focus on promoting compliance with the ILO 

convention concerning the worst forms of child labor. In response to these 

concerns, the United States has provided a relatively large amount of labor 

assistance to Morocco, with most of the funding focused on child labor 

prevention and elimination. ILAB provided $8.351 million for three child 

labor projects and $3.072 million for one project to strengthen labor 

relations and capacity to implement and enforce its new labor laws,40 in 

response to a request from the Ministry of Labor. Three of the projects 

started in 2003, during the FTA negotiations, while the fourth, a child labor 

project, started in 2007. 

Minimal U.S. Oversight and 

Dialogue on Labor Issues 

May Have Resulted in 

Missed Problems and 

Opportunities 

A reliable, well-functioning monitoring and enforcement effort helps 

sustain congressional and public confidence in the President’s trade 

strategy and fosters support for continued trade liberalization. The key 

steps we have identified in monitoring and enforcing trade agreements 

include identifying problems, setting priorities, gathering and analyzing 

information, developing responses, and taking enforcement action. 

However, according to officials at ILAB, State, and USTR, U.S. agencies 

are not required to proactively monitor and report on FTA partners’ labor 

commitments after the agreements enter into force. FTAs rely on passive 

monitoring structures, through which outside parties can raise concerns 

that the U.S. government can or must react to. U.S. agencies may have 

missed labor problems and overlooked opportunities in these partners 

because they did not use the structures established by the FTAs as a 

vehicle for ongoing engagement on labor matters. Agencies cited a lack of 

funding and the staff levels necessary for increased labor cooperation. The 

FTAs provide a framework for bilateral oversight and dialogue on FTA 

commitments, including labor. However, bilateral mechanisms for 

dialogue on labor issues between the FTA trade partners have largely been 

inactive, and labor-related discussions have been minimal. In addition, 

U.S. agencies have not actively monitored FTA partners’ compliance with 

labor commitments, and U.S. interaction with partners on labor issues 

after the FTAs entered force has been very limited in most cases—except 

in Jordan, where external parties pushed labor problems into the spotlight. 

U.S. and Jordanian officials did not seriously address Jordan’s migrant 

labor rights violations until those problems were taken up in the 

 

40Of the $3.072 million, State’s Middle East Partnership Initiative provided nearly $100,000 

to add a gender equity component to ILAB’s labor relations project. 

Page 45 GAO-09-439 Free Trade Agreements
 

international news media, and U.S. officials have missed other 

opportunities to work constructively with FTA partner countries on labor 

issues of common interest. 

For some of these FTAs, labor issues have rarely or never been discussed 

in the FTA’s Joint Committee, which is the main forum for bilateral 

dialogue on FTA implementation for each FTA, or in one of its 

subcommittees.41 However, the provisions of the FTAs reviewed do not 

prescribe the agenda or discussion points for meetings of the Joint 

Committee. The Joint Committee, which is required to meet annually,42 is 

chaired by cabinet-level trade officials from both countries. Its duties 

include supervising implementation of the agreement and reviewing the 

trade relationship between the parties; therefore, it may address a broad 

range of issues. USTR has the U.S. lead in organizing such meetings. Under 

three of the FTAs we reviewed, the committee is required or allowed to 

establish a labor affairs subcommittee or similar entity.43 Under the Chile 

FTA, the Labor Affairs Council was required to meet within the first year 

after the FTA’s entry into force and thereafter as it considered necessary. 

The council met once in December 2004 and has not met again. Under the 

Singapore and Morocco FTAs, the Joint Committees have not exercised 

their prerogative to convene labor affairs subcommittees, and our review 

of available Joint Committee meeting agendas and summaries indicated 

that labor issues have not been discussed in Joint Committee meetings for 

these FTAs.44 The Jordan FTA did not call for a labor affairs 

subcommittee, but the two partners established a labor affairs working 

group in 2006. Labor issues were discussed by the Joint Committee in 

2004, 2006, and 2008, according to a USTR official, and our file review 

showed gaps in U.S. engagement before 2006, despite Jordan’s labor 

abuses. 

 

ILAB has not used its role as the lead agency and designated point of 

contact on labor issues and cooperation for the Singapore, Morocco, and 

41Under the Chile FTA, this body is called the Free Trade Commission. 

42Under the Singapore and Morocco FTAs, the Joint Committee is required to meet 

annually unless the parties agree otherwise. 

43The Chile FTA required the establishment of a similar entity, the Labor Affairs Council. 

Under the Singapore and Morocco FTAs, the Joint Committees could choose to establish 

labor affairs subcommittees. The Jordan FTA did not mention such an entity. 

44However, as the most recently implemented FTA among these four, Morocco has only had 

one Joint Committee meeting, in March 2008. 

Page 46 GAO-09-439 Free Trade Agreements
 

Chile FTAs to proactively monitor partners’ progress or problems or to 

promote cooperative efforts. Labor and State have not updated ongoing 

reports to ensure substantive coverage of partners’ conformity with FTA 

labor commitments, and the number and expertise of in-country U.S. labor 

officers has fallen. (However, as stated previously, according to offici

ILAB, State, and USTR, U.S. agencies are not required to proactivel

monitor and report on FTA pa

als at 

y 

rtners’ labor commitments after the 

agreements enter into force.) 

B revised 

 for ILAB 

t a 

rity to 

or 

d to review the matter, or pursue other dispute 

resolution measures. 

f 

STR 

ge 

 

Labor made progress in developing its mechanism for reviewing FTArelated labor concerns, but this mechanism is not available for Jordan

because USTR handles labor concerns under that FTA. A process for 

public submissions concerning FTA labor provisions is built into the 

functioning of the FTAs that were enacted under TPA, and this provides a

venue for nongovernmental organizations and others to raise complaints 

about labor violations in FTA countries. In December 2006, ILA

and clarified its procedures for receiving and reviewing public 

submissions, including those related to an FTA partner’s labor 

commitments. It also established that Labor could self-initiate a review of 

any matter related to the labor provisions. The new procedures identified 

the type of information a submission should include, the timeline

review, and the criteria ILAB uses in deciding how to handle the 

submission; however, ILAB retains discretion about whether to accep

submission for further review. Ultimately, Labor has the autho

recommend whether the U.S. government should seek formal 

consultations with the FTA partner government, request a bilateral lab

committee be convene

To date, ILAB officials have received only one public submission for any o

the FTAs negotiated under TPA—a 2008 complaint about labor problems 

under CAFTA-DR.45 A 2006 complaint about Jordan was filed with U

because Labor is not the lead for that agreement. While it was not 

formally considered for investigation, USTR pledged to continue to enga

45The revised public submission process faced its first test through this submission—a 

complaint filed by the AFL-CIO and six Guatemalan labor unions in April 2008 concerning 

alleged FTA labor violations in Guatemala, including the murders of two union leaders. 

ILAB reviewed the submission and issued its findings and recommendations in January 

2009, in which it confirmed a number of violations but declined to recommend 

consultations, stating that the Guatemalan government had cooperated with ILAB’s review 

and made efforts to address some of the issues raised. ILAB recommended a series of 

corrective actions by Guatemala and committed to reassess the situation within 6 months. 

Page 47 GAO-09-439 Free Trade Agreements
 

senior Jordanian officials, the private sector, the ILO, labor unions, and 

other interested groups in order to help improve working conditions in 

Jordan and stated, “We will keep open all options available under the FTA

should the issues not be adequately addressed." According to USTR, the 

United States has not pursued formal consultations or dispute resolution 

on a labor matter—or any other matter—under the FTAs we reviewed. 

thering 

ce 

r 

nd 

rs’ 

r all 

s, 

but 

y 

e in the 

Labor periodically updates its comprehensive Foreign Labor Trends report 

Assessing partner progress enables agencies to take key steps in 

monitoring, such as identifying problems, setting priorities, and ga

and analyzing information. Regarding the FTAs we examined, the 

provisions of TPA and/or the FTAs do not require that U.S. agencies 

actively use existing reports on labor issues to assess partners’ complian

with FTA labor commitments or update the content or approach of the 

reports to enable them to be used to assess progress over time, and U.S. 

agencies have not done so. Although proactive monitoring of FTA labo

commitments does not routinely occur, State and Labor do regularly 

monitor and report on certain labor issues overseas, as part of other 

duties. However, agency officials told us no effort has been made to 

modify the pertinent reports to include information or assessments 

concerning FTA compliance or progress on FTA commitments. State a

Labor compile country-specific information that is published in three 

annual reports—State’s country reports on human rights, State’s report on

trafficking in persons, and Labor’s Findings on the Worst Forms of Child 

Labor. State’s human rights reports contain a section on workers’ rights, 

organized with reference to the list of internationally recognized worke

rights contained in U.S. trade legislation. State’s trafficking in persons 

report sometimes reports on FTA-related labor issues, such as concerns 

that QIZ violations in Jordan involved human trafficking. Labor’s report 

provides information on the child labor aspect of workers’ rights fo

countries that are beneficiaries of U.S. trade preference program

including FTA partners that were formerly preference program 

beneficiaries. These annual reports—particularly the human rights 

reports—include some detailed information related to the internationally 

recognized labor rights referred to in U.S. trade legislation and FTAs, 

none of them contains information or analysis focused on whether a

country is meeting its FTA commitments. For example, they do not 

indicate whether a country has weakened or reduced the protections in its 

labor laws in order to encourage trade or investment, or whether a countr

promotes public awareness of its labor laws—commitments mad

FTA labor chapters. Moreover, we were told the reports are not 

necessarily comparable from year-to-year, making them unreliable for use

in gauging whether partners are making forward progress. Finally, while 

Page 48 GAO-09-439 Free Trade Agreements
 

series, no reports on these FTA partners have been issued since the FTAs 

went into effect. 

State and, to a lesser extent, Labor have staff assigned to monitor labor 

issues overseas. (This staffing is not addressed by TPA or FTA provisions.) 

State and Labor officials and advocacy group representatives told us that 

the number and expertise of State labor officers charged with such 

monitoring has declined since the mid-1990s. Some officials pointed out 

that this decline in personnel responsible for labor reporting occurred 

despite the fact that the United States has now entered into FTAs 

containing labor obligations with more than a dozen nations. Although 

State told us that efforts are made to ensure labor issues are adequately 

covered when a country has an FTA, most embassy labor officers are 

economic or political officers who take on the added duty of reporting on 

labor issues. Only 45 are currently “designated” labor officers who were 

selected for the post and received specialized training, according to State 

officials. They said that in the mid-1990s the number of designated labor 

officers was higher—reaching a peak of 60—when there was an exchange 

program that allowed Labor employees to serve in these positions. Labor 

advocacy group representatives also told us that the quality of training for 

labor officers has generally declined in recent years, and only basic 

information about labor rights is presented. Among the four FTA countries 

we reviewed, only Morocco has a designated labor officer. 

Following are our observations on how U.S. officials have engaged with 

these four countries concerning FTA labor issues. 

U.S. engagement with Jordan on labor has episodically intensified and 

waned. According to a former State official involved in the FTA 

negotiations, the labor rights abuses faced by migrant workers in Jordan’s 

QIZs were not anticipated by U.S. officials during the negotiations, 

although the deficiencies in Jordan’s labor laws with respect to foreign 

workers’ rights were known. In our review of USTR and State files 

concerning labor issues in Jordan, certain U.S. officials were aware of 

potential labor problems in the QIZs as early as 2001 and, in 2004, 

interagency discussions reflected serious concerns. However, these 

records indicated there were no further discussions of the problems for 

almost 2 years, until shortly before the National Labor Committee’s report 

was issued in mid-2006. 

Jordan 

Throughout the rest of 2006, intensive interagency and bilateral activity 

occurred as U.S. and Jordanian officials sought to document and address 

the problems. According to an ILAB official, an ad hoc interagency team 

Page 49 GAO-09-439 Free Trade Agreements
 

met regularly during this period to focus on Jordan’s labor issues. USTR 

and State officials told us high-level exchanges occurred, and USTR 

eventually recommended that USAID provide funding to support the ILO’s 

Better Work project in Jordan. After public reports about QIZ abuses again 

surfaced in September 2008, USTR told us more focused interagency and 

bilateral discussions about Jordan’s labor progress would be resumed in 

2009. 

U.S. agency responsibilities under the Jordan FTA are less clear than 

under the later FTAs. No agency is designated responsible, leaving USTR 

as lead. In subsequent FTAs, Labor is designated as having lead 

responsibility for labor matters. ILAB’s procedures for public submissions 

on labor issues concerning the FTAs negotiated under TPA, which are 

public (described above), also do not pertain to the Jordan FTA. 

While the labor chapter of the FTA only requires that members of the 

Labor Affairs Council46 (representatives of the parties) meet within the 

first year after the date of entry into force of the FTA, Chilean government 

officials were disappointed at the minimal level of cooperation and 

dialogue with the United States on labor issues after the FTA took effect. 

The officials said they had expected more cooperation and dialogue. Labor 

Ministry officials told us their government had taken the FTA labor 

provisions seriously and had funded a study of labor compliance issues 

under the FTA in two key export industries—forestry and salmon 

fisheries. The ministry had hoped to use the FTA as leverage to promote 

better labor standards and practices in those industries.47 The study found 

that the growing use of subcontractors in these multinational industries 

created labor rights problems, including high accident rates and antiunion 

practices. They said that, when the study was initiated in 2005, firms were 

concerned about complying with commitments in the FTA labor chapter; 

however, by the time the study ended, their interest had dissipated 

because they discerned U.S. agencies were not monitoring or enforcing 

Chile 

 

46The labor chapter of the U.S.-Chile FTA details the establishment of a Labor Affairs 

Council to oversee implementation of and review progress under the labor chapter. The 

council is required to meet within the first year after the date of entry into force of the FTA 

and thereafter as the Council considers necessary. Chile FTA, Art. 18.4. 

47Government of Chile, Direccion del Trabajo, Division de Estudios, “Los Derechos 

Laborales del Tratado de Libre Comercio Chile-Estados Unidos en la Industria Forestal y 

en la Industria del Salmón,” Cuadernos de Investigacion 32, December 2007. 

http://www.dt.gob.cl/documentacion/1612/article-95495.html, accessed on Jan. 27, 2009. 

GAO had informal translations of key sections of the report done for this engagement. 

Page 50 GAO-09-439 Free Trade Agreements
 

the FTA labor provisions. U.S. agencies told GAO that Chile did not 

approach embassy or other U.S. officials with the results of the study, nor 

did they ask for assistance in these areas. Labor and USTR officials we 

spoke with were not aware of this study and had not discussed these 

issues with Chilean officials. 

Chilean officials also told us they were frustrated at not being able to 

schedule high-level meetings with U.S. labor officials. Under the labor 

chapter of the FTA, after the first meeting, it is up to the Labor Affairs 

Council to determine, by mutual consent, if and when it will meet. 

Relatively few high-level meetings have taken place between U.S. and 

Chilean labor officials, and ILAB officials acknowledged problems on both 

sides in scheduling meetings between Chilean officials and the U.S. 

Secretary of Labor. ILAB and USTR officials acknowledged the low level 

of cooperation and dialogue relative to the original expectations. 

In Singapore, government officials said they had had no discussions with 

U.S. officials about labor issues since the FTA negotiations took place. 

Joint Committee48 meeting agendas that we reviewed did not cover labor 

topics, and U.S. and Singaporean officials told us the subcommittee on 

labor affairs had never been convened, as meetings are not required. 

Singapore 

Although the Moroccan government has had fairly extensive cooperation 

and interaction with Labor through several technical assistance projects, 

U.S. and Moroccan officials told us the subcommittee on labor affairs had 

never been convened. Meetings are not required, and Labor has not sought 

to convene one. Moroccan Ministry of Labor officials with whom we met 

were not aware that such a body could be formed. 

Morocco 

U.S. Efforts to Monitor 

FTA Labor Compliance 

Have Been Limited 

How a country implements and enforces its labor laws is as critical to 

improving labor conditions as having labor laws that incorporate 

international labor standards, according to U.S. officials, labor experts, 

advocates with whom we spoke. They said many countries have passed 

good labor laws and ratified numerous ILO conventions, but fewer 

countries are willing or able to enforce their laws adequately. 

Nevertheless, most of these experts believed that including labor 

provisions in the FTAs is valuable because it can result in improvements in 

 

48Under the U.S.-Singapore FTA, the Joint Committee is required to meet annually unless 

the parties agree otherwise. 

Page 51 GAO-09-439 Free Trade Agreements
 

a partner country’s labor laws. During the period of FTA negotiations, 

several of the experts and U.S. officials said, is when the United States has 

the greatest leverage to influence reforms in the partner country—as we 

observed in Morocco. 

As mentioned earlier, key steps in monitoring and enforcing trade 

agreements include identifying problems, setting priorities, developing 

responses, and taking enforcement action. With respect to the labor 

obligations in these FTAs, the responsible U.S. agencies have made little or 

no effort, or a belated effort, to identify labor compliance concerns after 

FTA enactment, and engagement with these partners on labor issues has 

been a low priority most of the time. In Jordan, the U.S. agencies 

responded quickly to problems, once they were revealed publicly, but the 

overall U.S. response has been reactive rather than proactive. Agencies 

have had some success, through diplomatic efforts and assistance, in 

encouraging Jordan to improve its labor conditions and standards, but at a 

cost of diminished public confidence in agencies’ decisions, to date, not to 

take formal enforcement action with any FTA partners. While admittedly 

lacking in funding to assist partners, agencies also have not taken full 

advantage of the information and expertise available to set priorities and 

pursue partner improvements. 

FTA Partners Have 

Improved 

Environmental Laws, 

but the Lack of 

Systematic U.S. 

Monitoring and Other 

Factors Impede 

Assessment of Their 

Impact 

Page 52 GAO-09-439 Free Trade Agreements
 

FTA Partners Have Made 

Several Changes to 

Environmental Laws, but 

Despite Some Progress, 

Enforcement Remains a 

Challenge for Most 

As described in the boxed text, the FTAs include provisions in which 

partner countries commit to strive to improve the level of environmental 

protection under their laws, and our work revealed that Jordan, Chile, 

Singapore, and Morocco have taken steps consistent with their 

commitments in the respective FTAs to strive to improve the level of 

environmental protection under their laws. While we did not conduct a 

comprehensive review of all the changes made in environmental laws in 

the four countries, we were told that, in all of them, laws to provide 

additional protections to the environment have been passed since the 

FTAs were negotiated. While government officials in all four countries said 

the changes made to their laws were not in direct response to the 

commitments made under the FTAs, but rather in response to internally 

recognized environmental issues, they said the fact that international 

commitments were made to provide improved environmental protection 

was taken into consideration in passing the laws. 

TPA and FTA Provisions Related to the Environment 

TPA Goals 

TPA’s overall negotiating objectives on environment include: to assure that trade and 

environmental policies are mutually supportive and to protect and preserve the 

environment and enhance the international means of doing so, while optimizing the use of 

the world’s resources. Principal trade objectives include strengthening the capacity of U.S. 

trading partners to protect the environment through the promotion of sustainable 

development. The President is directed to seek to establish consultative mechanisms 

among parties to trade agreements to strengthen the capacity of U.S. trading partners to 

develop and implement standards for the protection of the environment and human health 

based on sound science. 

FTA Commitments 

• In each of these agreements, the parties commit to 

• not fail to effectively enforce their environmental laws, through a sustained or recurring 

course of action or inaction, in a manner affecting trade between the parties; 

• ensure (or strive to ensure, in the case of Jordan) that their laws provide for high 

levels of environmental protection, and strive to continue to improve these laws while 

recognizing the right of each party to establish its own levels of domestic 

environmental protection and to adopt or modify accordingly its environmental laws; 

• strive to ensure that they do not waive or otherwise derogate from, or offer to waive or 

otherwise derogate from, domestic environmental laws in a manner that weakens or 

reduces the protections afforded in those laws as an encouragement for trade or 

investment with the other party (except for the Jordan FTA, in which parties strive to 

ensure that they will not waive or otherwise derogate from, or offer to waive or 

derogate from environmental laws to encourage trade with the other party). 

The post-TPA Chile, Singapore, and Morocco FTAs contain provisions on environmental 

Page 53 GAO-09-439 Free Trade Agreements
 

cooperation, opportunities for public participation, and environmental consultations, among 

others, that are absent from the Jordan FTA. 

FTA-Related Environmental Cooperation Commitments 

After all four of these FTAs were concluded, the partners reached separate agreements on 

environmental cooperation. 

Some of the partners have demonstrated significant progress in improving 

the environment since the FTAs were signed. For example, Singapore 

reports that, since 2002, air quality has surpassed the “good” range under 

the pollutant standards indexed, recycling rates improved from 45 percent 

in 2002 to 49 percent in 2005, and penalties for illegal trafficking of 

endangered species increased from $5,000 and/or a 1-year jail term to 

$50,000 and/or a 2-year term. 

Nevertheless, three of the four FTA partners reported ongoing challenges 

to enforcing environmental laws. In each of these four agreements, each 

party commits to not “fail to effectively enforce its environmental laws 

through a sustained or recurring course of action or inaction, in a manner 

affecting trade between the Parties.” As will be discussed later in this 

section, it is difficult to assess the level of partner’s compliance with this 

commitment because of lack of U.S. monitoring and the absence of a 

reliable baseline. However, officials at the Ministry of the Environment in 

Jordan, Chile’s National Commission for Environmental Cooperation 

(CONAMA), and the Ministry of Energy, Mines, Water, and Environment in 

Morocco said the implementation of environmental laws in their 

respective countries continues to be a challenge. Some of the challenges 

described were common across these partners, such as weaknesses in 

their government institutions in implementing environmental laws and 

regulations. Singaporean officials at the Ministry of the Environment, on 

the other hand, said Singapore has historically had a strong environmental 

legal system and enforcement of these laws has been strict, even before 

the FTA was signed; environmental nongovernmental organizations that 

we spoke with agreed that this was the case. 

Examples of laws passed and enforcement challenges are discussed in the 

following sections: 

According to an EPA report, in Jordan, the Environmental Protection Law 

of 2003 created the Ministry of the Environment, which is responsible for 

environmental protection and is the central body for all environmental 

protection matters in Jordan. In addition, Jordan established the Royal 

Rangers (formerly known as the Environmental Rangers) to enforce 

Jordan 

Page 54 GAO-09-439 Free Trade Agreements
 

environmental laws and regulations in the areas of pollution and natural 

resources. 

However, Jordan still faces enforcement challenges, according to the 

partner officials we interviewed. Officials at the Ministry of Environment 

said the ministry has only been established for about 5 years and is still 

working to build its capacity to enforce environmental laws. Among the 

challenges Jordan faces in implementing environmental laws is that it has 

only 25 inspectors in the country, who are responsible for agricultural, 

construction, and industrial sectors throughout the 34,400 square miles of 

national territory. Another challenge that the ministry is working to 

correct is the limited experience and training of judges in adjudicating 

environmental cases. Ministry officials said that judges often adjudicate 

environmental cases under laws that are less strict in guarding the 

environment, such as agricultural laws. In response, the government of 

Jordan has trained some judges in cooperation with U.S. agencies. 

U.S. and Chilean officials told us that Chile also made some improvements 

in its environmental laws. According to CONAMA officials, in March 2007, 

a law was passed to create the position of the Minister of the Environment, 

which initiates the process of elevating CONAMA to a ministry status with 

new enforcement authorities. Additionally, it has made progress 

encouraging public participation in environmental decision-making. 

Chile 

The pre-FTA USTR environmental review reported that environmental 

concerns in Chile relate to major natural resource and extractive 

industries that are central to Chile’s economy, including mining, fishing, 

forestry, and agriculture and environmental law enforcement. The 

environment chapter of the FTA does not prescribe the work plan for the 

Joint Commission on Cooperation49 and the Commission’s biannual work 

plans do not include any of these natural resource sectors as areas of 

priority for cooperation. The areas of cooperation do include, however, 

strengthening effective implementation and enforcement of environmental 

practices and technologies, promoting sustainable development and 

 

49Under the U.S.-Chile FTA, the parties established an Environmental Affairs Council to 

discuss the implementation of, and progress under, the environment chapter. The parties 

also agreed to undertake cooperative environmental activities including by negotiating a 

United States-Chile Environmental Cooperation Agreement (ECA). Under the ECA, the 

parties established a Joint Commission for Environmental Cooperation to establish and 

develop programs of work resulting from the ECA which takes into account the views and 

recommendations of the Environment Affairs Council established by the FTA. 

Page 55 GAO-09-439 Free Trade Agreements
 

management of environmental resources, including wild fauna and flora 

and protected wild areas, and facilitating civil society participation in the 

environmental decision-making process. Of the eight projects outlined in 

the Environmental Cooperation Annex of the environment chapter of the 

FTA, two relate to issues in Chile’s major export industries, reducing 

mining pollution and improving agricultural practices. On mining, the 

United States committed to assist Chile in reducing contamination and 

pollution resulting from past mining practices by working together to 

identify sources of pollution and explore cost-effective remediation 

methods. In agriculture, the parties agreed to adapt and implement a 

training program for Chilean farmers and other workers to promote 

appropriate handling of chemical pesticides and fertilizers, and promote 

sustainable agricultural practices to help reduce pollution from 

agricultural practices. Under the Environmental Cooperation Annex, the 

parties recognized that the funding, scope, and duration of the eight 

projects would be undertaken in accordance with the parties’ personnel 

and financial resources. However, after initial implementation workshops 

and information sessions, little has been done in these areas. 

One of the major problems in implementing environmental laws reported 

to us in Chile is that CONAMA does not have enforcement authority. 

According to a CONAMA official, the committee must coordinate with 13 

ministries to address environmental issues. CONAMA officials expected 

that the creation of a Ministry of Environment will resolve many of these 

challenges. 

Singapore continues to strengthen its environmental laws. According to 

officials at the Ministry of Environment and a nongovernmental 

organization (NGO) following changes to environmental law, in January 

2006, the Singapore Endangered Species (Import and Export) Act was 

amended. This is Singapore’s national legislation that gives effect to the 

Convention on International Trade in Endangered Species of Wild Fauna 

and Flora (CITES) to control import and export of endangered species in 

Singapore. The reform implemented more severe penalties for violations 

and was deemed a positive step by environmental spokespersons of two 

environmental NGOs we met with there. Moreover, the NGO 

spokespersons said U.S. encouragement appears to have played some role 

in its passage. 

Singapore 

The USTR review reported that most environmental issues of concern 

relate to Singapore’s role as a significant transit center for environmentally 

sensitive trade: wildlife and wildlife products, including endangered 

species; ozone depleting substances; timber and wood products; and live 

Page 56 GAO-09-439 Free Trade Agreements
 

fish for consumption and aquarium. Based on the areas of possible 

cooperation listed in the U.S.-Singapore memorandum of intent on 

environmental cooperation, the biannual plan of action set three main 

goals: (1) further improving capacity to implement and enforce 

environmental law, including further enhancing efforts of countries in the 

region to combat illegal trade in environmentally sensitive goods (e.g., 

wildlife, ozone-depleting substances, and forest products) through 

bilateral and regional cooperative activities; (2) encouraging the bilateral 

and regional use of innovative and climate friendly environmental 

technology and pollution management techniques; (3) participating in 

regional initiatives on environmentally sustainable cities and sustainable 

management and trade in sustainable managed resources, such as fisheries 

and forests. The plan of action also states that implementation of project 

ideas described therein is subject to the availability of funds. According to 

U.S. embassy staff in Singapore, with the exception of two workshops and 

other informative activities, most of the projects on the work plan have 

not materialized. Efforts and communication on these and other issues 

continue. 

Morocco passed environmental laws in anticipation of the FTA, and 

additional reforms were passed after the agreement was enacted. 

According to documentation provided by the U.S. embassy in Morocco, in 

January 2003, the Moroccan parliament approved three important 

environmental laws: a general framework law on environmental 

protection, a law requiring environmental impact assessments, and an air 

pollution law. Also, a bill concerning waste management and disposal 

practices was published and implemented in December 2006. According to 

an embassy report, there are also a number of additional laws just passed 

or under development within the Ministry of Environment, including laws 

concerning management of coastal zones. Even though some of these 

changes in Morocco were initiated before the FTA was enacted, they are 

largely perceived by the United States as a reflection of the commitment 

made to improve environmental protection in the FTA. 

Morocco 

Officials from the Ministry of Environment said inconsistency on how 

environmental laws are enforced creates several challenges. They 

explained that enforcement of laws is left to the local and regional 

governments and that, at the national level, jurisdiction for environmental 

laws lies across several agencies or law enforcement entities. The officials 

said that there is no consistency on how local governments or law 

enforcement agencies implement the laws. 

Page 57 GAO-09-439 Free Trade Agreements
 

FTA Environmental 

Provisions and Associated 

U.S. Processes Lack Some 

Elements that Would 

Facilitate U.S. Agency 

Monitoring, Oversight, and 

Measurement of Progress 

Monitoring and oversight of the environmental provisions and cooperation 

mechanisms by U.S. agencies is complicated by the lack of certain 

elements in these four FTAs. U.S. government officials, FTA partner 

government officials, and other experts we interviewed agreed that the 

environmental provisions in the four FTAs are general and broad in 

nature. The general principles of these agreements include the 

commitment that partners must ensure, or strive to ensure, that their laws 

provide high levels of environmental protection and strive to improve 

those levels. The Chile, Singapore, and Morocco agreements contain 

cooperation provisions that reflect the TPA goals of strengthening 

partner’s capacity to protect the environment and partners agree to 

cooperate to do so. NGO representatives and an academic we interviewed 

said the inclusion of the environmental provisions and cooperation 

mechanisms has had little direct impact in providing higher levels of 

environmental protection, strengthening the capacity of trading partners 

to protect the environment, or addressing environmental problems 

targeted in cooperation mechanisms. Some foreign government officials 

agreed, but most FTA partner government officials told us they 

understood the nature and principles of the environmental provisions and 

cooperation agreements and did not expect that the United States would 

resolve their environmental problems. 

U.S. government officials responsible for the implementation of the 

agreements and cooperation mechanisms indicated that the absence of 

several elements in the four selected FTAs or associated U.S. processes 

(some of which are included in more recent trade agreements, such as 

CAFTA-DR or the Peru Trade Promotion Agreement) affects their 

approach to monitoring and overseeing partners’ progress under FTA 

environmental provisions and cooperation agreements. Moreover, in 

GAO’s experience, the lack of these elements in these FTAs impedes 

assessing what impact environmental steps (whether taken by partners 

alone or through cooperation projects) have had in assuring FTA and FTA 

commitments and goals are met and identifying areas for improvement. 

Some of the elements mentioned include the following: 

• An internationally recognized baseline for assessment does not exist. In 

each of these agreements, partners commit to ensure, or strive to ensure, 

that their laws provide for high levels of environmental protection and 

Page 58 GAO-09-439 Free Trade Agreements
 

strive to improve those levels.50 However, unlike with labor provisions in 

which commitments are made to “strive to ensure” that the labor 

principles and internationally recognized labor rights as enumerated in the 

respective FTAs are recognized in domestic legislation, no similar agreed 

international benchmarks were set or identified for FTA partners’ 

environmental laws in these four FTAs.51

• An environmental assessment that serves as a base and road map to 

evaluate the impact of cooperation in trade partner countries does not 

exist. TPA requires an environmental review of future trade and 

investment agreements consistent with Executive Order 13141. Under 

Executive Order 13141, “the focus of environmental reviews will be 

impacts in the United States.” However, Executive Order 13141 also states 

that “as appropriate and prudent, reviews may also examine global and 

transboundary impacts.” USTR environmental reviews provide limited 

information on trade partner environmental conditions and, as a result, 

cannot serve as a base from which to measure or monitor partners’ 

environmental progress. Even though USTR conducted an environmental 

review of these four agreements, as required,52 the reviews focused on the 

environmental impacts that the FTAs would have on the United States and, 

as appropriate, focused on global and transboundary impacts.53 As a result, 

U.S. agencies did not conduct an assessment of the adequacy and 

effectiveness of partners’ environmental laws and enforcement and are not 

required to do so under the TPA. Although not required, some relevant 

information is gathered by USTR and experts within environmental 

agencies. USTR and State officials told us the environmental reviews do 

include information on trade-related environmental concerns that is 

directly relevant to and has helped guide U.S. cooperation with our FTA 

partners. However, the environmental reviews we examined for these 

FTAs do not provide in-depth or comprehensive descriptions of the myriad 

environmental challenges faced by FTA partners. For example, whereas 

 

50Jordan FTA, Article 5.2; Singapore FTA, Article 18.1; Chile FTA, Article 19.1; Morocco 

FTA, Article 17.1. 

51Jordan FTA, Article 5.2; Singapore FTA, Article 18.1; Chile FTA, Article 19.1; Morocco 

FTA, Article 17.1. 

52The environmental review of the Jordan FTA was required under Executive Order 13141, 

and the environmental reviews of the Singapore, Chile, and Morocco FTAs were required 

by TPA section 2102(c)(4). 

53TPA section 2102(c)(4), codified at 19 U.S.C. § 3802(c)(4), specifies that the required 

environmental reviews are to be consistent with Executive Order 13141 and its relevant 

guidelines. 

Page 59 GAO-09-439 Free Trade Agreements
 

the final environmental review for the Chile FTA acknowledges receiving 

public comments of concern related to mining, fishing, forestry, and 

agriculture, there is little discussion of what these were specifically and 

the conditions and extent of environmental issues in these industries. 

• Funding for project implementation and oversight was not allocated by 

Congress for these agreements, as in the case of CAFTA-DR. State’s OES 

officials explained that part of the funding allocated for environmental 

projects in CAFTA-DR has been used to contract with the Organization of 

American States to monitor and evaluate environmental projects. State 

indicated that since a similar source of funding is absent from these four 

agreements, such oversight has not occurred. 

Officials of USTR and State’s OES explained that the FTA provisions and 

cooperation mechanisms are directional and “aspirational” commitments. 

As a result, several of these U.S. officials told us that they seek to do no 

harm and possibly do some good. They explained that the environmental 

challenges facing FTA partners are enormous and that they are often 

systemic, long-term, and evolving in nature. In all four countries, a number 

of the environmental problems identified during the FTA negotiations 

remain a concern and, according to NGOs, in some cases, have intensified 

since the agreement was enacted. For example, in Chile, aquaculture was 

identified as an environmental area of concern during the negotiations, 

and in the summer of 2008, NGOs and the media brought attention to 

increased contamination from increased salmon farming for export. In 

Jordan, one of the main environmental concerns during the negotiations 

was shortage of water, as the country is considered the fourth most dry in 

the world. NGOs expressed concern that an industry that has grown the 

most since the FTA was enacted is the manufacturing of certain garments, 

such as blue jeans, which is very water-intensive and further depletes the 

much-needed resource. Nevertheless, U.S. officials pointed to visible signs 

of improvement in certain FTA partners and said that they perceive FTA 

related environmental cooperation as having a positive impact. They 

stressed it is important to consider that some of the partners are coming 

from situation with nascent environmental regimes and limited experience 

in seeking public input to having more laws, institutions, and outreach 

efforts. While there have been limited resources in most cases, 

cooperation activities have forged relationships, provided expertise and 

underwritten projects that have been helpful. For example, in Chile, the 

U.S. EPA provided technical and financial support to design a proposal to 

create a Pollutant Release and Transfer Register for potentially hazardous 

chemicals. 

Page 60 GAO-09-439 Free Trade Agreements
 

Agencies Did Not Create 

Systematic Mechanisms 

for Monitoring and 

Management 

A reliable, well-functioning monitoring and enforcement effort helps 

sustain congressional and public confidence in the President’s trade 

strategy and fosters support for continued trade liberalization. In addition 

to the absence of certain elements in the FTAs, we found that U.S. 

agencies responsible for the implementation of the environmental 

provisions and cooperation mechanisms lacked key steps in monitoring 

and enforcing trade agreements (1) identifying problems, (2) setting 

priorities, (3) gathering and analyzing information, (4) developing 

responses, and (5) taking enforcement action. USTR is the agency 

responsible for overseeing the overall implementation of FTAs, and State’s 

OES is responsible for negotiating the environmental side agreements 

under the FTAs and implementing cooperative environmental projects. We 

found that USTR does not proactively monitor the implementation of 

environmental provisions and that OES lacks a structure to manage and 

monitor implementation of environmental projects. As summarized in the 

boxed text on FTA commitments above, all four FTAs contain 

commitments by parties to strive to ensure or to ensure that their 

domestic environmental laws provide for high levels of environmental 

protection. Furthermore, the parties committed to not fail to effectively 

enforce its laws through a sustained or recurring course of action or 

inaction, in a manner affecting trade between the parties. Moreover, 

reports by the Trade and Environment Policy Advisory Committee 

(TEPAC, the official advisory committee to USTR on trade and 

environmental policy) for the Chile, Singapore, and Morocco FTAs suggest 

a need for ongoing monitoring. The reports indicate the majority of 

TEPAC members believe that, while trade agreements can create 

opportunities to enhance environmental protection by increasing wealth 

and creating political will in favor of such protection, trade can create and 

amplify adverse environmental externalities that require enhanced 

regulatory oversight. This was one reason the TEPAC Chairman 

emphasized to us the importance of a commitment by U.S. agencies to 

monitor partner’s implementation of the FTA core commitments. 

USTR indicated that they have yearly meetings with FTA partners and that, 

unlike labor, implementation of the FTA’s environment chapter is 

regularly on the agenda of those meetings. In addition, where an FTA 

establishes an Environmental Cooperation Committee or Environmental 

Affairs Council, the council meets annually to review implementation of 

the chapter. These meetings are led by State, but USTR is part of the 

meetings and often reports on implementation matters, as do officials 

from trade partner governments. Finally, USTR told us that they 

sometimes obtain input about environmental concerns in FTA partners 

through official environmental advisors or environmental NGOs. However, 

Page 61 GAO-09-439 Free Trade Agreements
 

we did not see further evidence that proactive monitoring of the 

environmental commitments occurs through this process. For example, 

only a handful of reporting cables on environment were produced in 

response to our document requests. Moreover, in the context of providing 

their perspective on progress, USTR officials told us absent baselines and 

better information and analytic tools, it does not know how it realistically 

could assess if FTA partner countries are complying with general 

commitments to maintain strong protections or are implementing their 

own laws, as agreed upon in the FTAs. 54

U.S. Agency Responsibilities on FTA Environmental Commitments 

USTR has responsibility for the implementation of the FTAs and is the designated 

contact point for FTA environmental provisions. State leads the negotiation and 

implementation of FTA environmental cooperation mechanisms, which usually take the 

form of environmental cooperation agreements or memoranda of understanding or joint 

statements on the environment. State is also responsible for overseeing ongoing 

cooperation with FTA partners, notably developing work plans and conducting periodic 

meetings to discuss progress. Under TPA, the Secretary of State, in consultation with 

USTR and other relevant agencies, is responsible for seeking to establish consultative 

mechanisms among parties to trade agreements to strengthen the capacity of U.S. 

trading partners to develop and implement standards for the protection of the 

environment and human health based on sound science. More generally, by statute, 

State has primary responsibility for coordination and oversight of all major U.S. science 

and technology agreements with foreign nations, including those on the environment. 

Other agencies are encouraged to support State in this function, “where consistent with 

the foreign policy of the United States, [to] lend appropriate support to initiatives, 

resolutions, and programs designed to maximize international cooperation in anticipating 

and preventing a decline in the quality of mankind’s world environment.” 

a

These agreements are: United States-Jordan Joint Statement on Environmental 

Technical Cooperation, The Agreement Between the Government of the United States 

of America and the Government of the Republic of Chile on Environmental Cooperation, 

Memorandum of Intent between the Republic of Singapore and the United States of 

America on Cooperation in Environmental Matters, and United States-Morocco Joint 

Statement on Environmental Cooperation. 

TPA requires that, when the President submits a trade agreement to 

Congress, the President must concurrently submit a plan for implementing 

 

54GAO’s understanding is that in practice, the TPA required environmental review is based, 

in part, on economic models that predict trade-agreement impacts, versus oriented towards 

how non-FTA induced trade growth generally might influence production and potentially 

affect the environment. Yet, in Jordan’s case, it had a very small apparel sector at the time 

the FTA was modeled by the ITC. Situations such as salmon with Chile show that post-FTA 

trade growth has occurred in sectors with relatively low pre-FTA barriers. Ongoing 

monitoring of such trade is not routine. 

Page 62 GAO-09-439 Free Trade Agreements
 

and enforcing the agreement.55 The plan must include agency staffing 

requirements that contain a description of additional personnel required 

by federal agencies responsible for monitoring and implementing the trade 

agreement, including USTR and other agencies as may be necessary.56

Under the plans submitted by the Office of Management and Budget 

(OMB) to implement and enforce the FTAs with Chile, Singapore, and 

Morocco, additional personnel to monitor and implement these trade 

agreements was not requested. 

While State has worked with partners to identify priorities, develop 

detailed work plans, and pursue project funding and implementation by 

U.S. agencies, OES does not have mechanisms in place that allow it to 

assess the effectiveness or efficiency of these projects, provide reliable 

and complete financial reporting, or assure compliance with applicable 

commitments, laws, and regulations. OES staff said that Environmental 

Cooperation Commission meetings and other activities are organized on 

an ad hoc basis, with no formal mechanism. Furthermore, there is no 

formal mechanism to monitor or evaluate the projects or to track funding. 

For example, while OES was able to provide information on several 

environmental projects implemented in Jordan, Chile, Singapore, and 

Morocco, the information was compiled at our request, and a 

comprehensive list was not provided. OES did not have information on 

funding for the projects or a clear understanding of the activities 

implemented by partner agencies. For instance, in many cases, OES was 

not able to provide documentation on description of activities, the agency 

implementing and funding the projects, number of participants in projects, 

outcomes, or other steps taken. Often this information lay with the 

implementing agency or was not collected at all. Evaluations or impact 

assessments are not conducted for many of these projects; therefore, it is 

not possible to know with assurance whether they have improved the 

capacity of FTA partners to protect the environment. Nevertheless, in 

some cooperation mechanisms and subsequent work plans, such as the 

recently concluded one with Jordan, parties agreed to strive to identify 

performance indicators and benchmarks to measure appropriately the 

progress made in accomplishing or otherwise furthering the goals and 

objectives of such programs, projects, and activities and to facilitate public 

reporting of that progress. 

 

5519 U.S.C. § 3808. USTR redelegated this function to OMB. 67 Fed. Reg. 71,606 (Dec. 2, 

2002). 

5619 U.S.C. § 3808. 

Page 63 GAO-09-439 Free Trade Agreements
 

The FTAs that we reviewed do not require and agencies did not seek new 

funding to implement FTA environmental cooperation commitments. 

Moreover, little funding has been made available through existing 

sources.57 OES negotiated environmental cooperation agreements in all 

four of these agreements, which included the implementation of 

cooperation projects and, with the exception of Jordan, contained the 

parties’ agreement that the cooperative activities would be subject to the 

availability of funds; however, OES was not required to and did not make 

systematic requests for funding through the appropriations process for 

their implementation. Furthermore, as the agency responsible for 

preparing the President’s plan for implementation and enforcement of the 

agreements negotiated under TPA, OMB was not required58 and did not 

identify resources needed to implement environmental cooperation 

projects made in the Chile, Singapore, and Morocco environmental 

cooperation agreements. OMB did not take advantage of the opportunity 

to inform Congress of the funding needed to adequately implement 

environmental cooperation agreements associated with these FTAs. The 

U.S.-Chile environmental cooperation agreement, the U.S.-Singapore 

Memorandum of Intent on Environment Cooperation, and the U.S.-

Morocco Statement of Environmental Cooperation state that all 

cooperative activities agreed upon in the respective documents are subject 

to the availability of funds and to the applicable laws and regulations in 

their respective country. 

U.S. Agencies Did Not 

Effectively Translate 

Environmental 

Commitments into 

Priorities for U.S. Funding 

USTR officials said that, while there is no commitment under the 

agreements that the United States should provide funding for 

environmental projects, that is the underlying expectation of several FTA 

partners and of some in the United States. USTR officials said that this can 

create complications, since funding is not always available. For example, 

 

57OES made a request for the first time to obtain funds to implement cooperation activities 

in fiscal year 2009. 

58Under 19 U.S.C. § 3808, an implementation and enforcement plan is required to be 

submitted for each FTA when it is submitted to Congress for approval. The plan shall 

include: (1) border personnel requirements – a description of additional personnel required 

at border entry points, including a list of additional customs and agricultural inspectors, (2) 

agency staffing requirements – a description of additional personnel required by federal 

agencies responsible for monitoring and implementing the trade agreement, (3) customs 

infrastructure requirements – a description of additional equipment and facilities needed by 

the United States Customs Service, (4) impact on state and local governments – a 

description of the impact the trade agreement will have on state and local governments as a 

result of increases in trade, and (5) cost analysis – an analysis of the costs associated with 

each of the items listed in (1)-(4). 

Page 64 GAO-09-439 Free Trade Agreements
 

in Morocco, government officials said it was their understanding that 

funding would be provided by U.S. agencies to implement activities. In 

Chile and Jordan, even though specific funding was not allocated to 

implement any of the projects or activities under the environmental 

cooperation mechanisms, almost all of the funding for these projects has 

been provided by U.S. agencies, out of their regular budgets. 

Instead of asking Congress to appropriate funds for the implementation of 

environmental cooperation projects, State’s OES has attempted to obtain 

funding through an interagency coordination process. OES works with 

other U.S. government agencies such as the EPA, the USAID, and the 

Departments of Interior, Agriculture, Commerce, Justice, and Health and 

Human Services, among others. The agencies discuss cooperation projects 

and attempt to cover some of the projects with funds under their regular 

budgets. In 2004, USTR, in coordination with State undertook a review of 

FTA negotiating experience. During this review the agencies agreed that 

these cooperation mechanisms should serve two primary purposes: 

strengthen existing capacity building efforts on environmental matters and 

identify new priorities while marshalling new resources for these 

expanded efforts. A high priority was to improve interagency coordination 

on funding for these mechanisms, particularly given high expectations that 

their implementation would lead to increased funding for environmental 

capacity building. USTR requested that all other relevant agencies, 

particularly USAID, coordinate closely with State in the implementation of 

these cooperation mechanisms. Despite this joint USTR–State effort to 

encourage agencies to coordinate, in the fall of 2008, OES officials 

described its process for coordinating with agencies on funding as a laborintensive, frustrating one of “shaking the trees.” In practice, they said it 

has been very difficult to obtain adequate resources to implement all of the 

projects outlined under the commitments made under the environmental 

cooperation agreements and associated work plans. Meanwhile, officials 

at key environmental agencies suggested that State could do more to 

involve them in FTA work. 

Lack of funding is seen by many experts as the greatest challenge to 

implementing cooperation projects and in turn to achieving the general 

principles on environment under the FTAs. 

Environmental Projects 

Essential to Meet FTA 

Environmental Objectives 

In the environmental cooperation agreements, the parties agreed that the 

activities outlined therein are subject to the availability of funds. Overall, 

in Jordan and Chile, activities for most projects outlined in the work plans 

have been implemented, while in Singapore and Morocco only a few 

activities have been completed from those agreed upon. Jordan has 

Page 65 GAO-09-439 Free Trade Agreements
 

received some funding for environmental projects from USAID, but Chile, 

Singapore, and Morocco have received very little assistance. The largest 

aid recipient, Jordan, was both satisfied with the assistance U.S. agencies 

provided and able to point to concrete results. U.S. and Chilean officials 

agreed cooperative activities had been of some benefit, but some believe 

that the limited amount of funding narrowed the impact of environmental 

projects. In part, the extent of assistance provided by U.S. agencies is 

influenced by the level of development in the country. For example, 

Singapore is a developed country with little need for assistance. On the 

other hand, Morocco is a developing country and has identified the need 

for assistance. A brief overview follows: 

In Jordan, USAID assistance has contributed to the implementation of 

multiple environmental areas listed under the United States-Jordan Joint 

Statement on Environmental Cooperation. USAID officials in Jordan 

explained that USAID has had a presence in the country for over 50 years 

and that environmental issues have been a part of its portfolio since before 

the FTA was passed. Jordan is one of the largest recipients of USAID 

assistance, receiving an annual average of $250 million since 1996. They 

explained that the areas of cooperation under the U.S.-Jordan Joint 

Statement on Environmental Technical Cooperation are areas that USAID 

already covered; therefore, they have been able to work to address most of 

the issues in these cooperation mechanisms. Even though USAID does not 

plan its projects based on the commitments under the joint statement, they 

said the agreement provided a platform for additional cooperation on the 

environment in Jordan. Overall, USAID has earmarked or spent over $30 

million for environmental projects in Jordan since 2004. Among other 

things, USAID said they have helped Jordan establish a Ministry of 

Environment, create a 400-person strong Environmental Police 

Department, known as the Rangers, enact an environmental law and bylaws, improve biodiversity conservation, and take initial steps to improve 

wastewater treatment and disposal in light of the significant impact of 

export-related apparel production on Jordan’s scarce water resources. In 

addition, EPA reported a $600,000 allocation for 2008-2009 for 

environmental projects. State indicated that EPA has hosted a study tour 

of the United States for Jordanian environmental officials and is now 

training the Rangers to conduct investigations of environmental crimes. 

Jordan 

Page 66 GAO-09-439 Free Trade Agreements
 

Interior is also working with key partners to strengthen Jordan’s ability to 

meet its CITES obligations.59

In Chile, multiple environmental projects have been implemented, but lack 

of funding has limited their impact, and major environmental problems 

have not been addressed. The Chile FTA is the only one that includes 

environmental projects in the associated annex to the text of the 

environmental chapter and that established an Environmental Affairs 

Council (EAC). There are eight projects outlined in the environmental 

cooperation annex, and activities have been implemented in each of these 

areas. Several relate to issues in Chile’s major export industries, namely 

those related to reducing mining pollution and improving agricultural 

practices. However, according to EPA officials, the projects’ impact has 

been limited by the lack of funding to continue the cooperation. They 

explained that the eight projects were expected to work as a “launching 

pad” for additional projects and cooperation. These projects consisted 

mostly of high level information exchange and workshops and guidance 

for pilot projects, and little was done after these initial steps were taken. 

The EAC’s Joint Commission for Environmental Cooperation has 

developed two biannual work plans for 2005-2006 and 2007-2008. These 

contain five areas of priorities, and OES provided summaries of activities 

implemented in each of these areas for the 2005-2006 work plan. OES 

estimates that $1.165 million has been provided to fund these projects. 

Chile 

In Singapore, environmental assistance under the FTA has been limited 

because Singapore has a strong environmental record according to 

government officials, and little need for assistance. However, the United 

States and Singapore signed a memorandum of intent to cooperate on 

environmental matters, under which two biannual work plans were 

developed for 2005-2007 and 2008-2010. U.S. officials did not assess the 

cost of these activities, as they were done as part of normal bilateral 

cooperation. According to State’s officials, the two countries have 

conducted three workshops and a study tour since the FTA was signed. 

Included have been a binational workshop in Singapore to train regional 

port inspectors and customs authorities to identify ramin wood, a training 

workshop on wildlife trade regulation, a workshop on terrain 

decontamination sponsored by EPA, and consultations by the Singapore 

Agri-Food and Veterinary Authority, with the U.S. Fish and Wildlife Service 

Singapore 

 

59CITES stands for the Convention on International Trade in Endangered Species of Wild 

Flora and Fauna, a multilateral environmental agreement. 

Page 67 GAO-09-439 Free Trade Agreements
 

and various other U.S. agencies to exchange information on law 

enforcement methods and CITES implementation practices and systems. 

Environmental cooperation under the Morocco FTA did not meet the 

expectations of the government of Morocco because few projects have 

been funded. While there was no commitment to fund environmental 

projects by the United States, Moroccan government officials said that 

their expectation was that projects would be financed by U.S. government 

agencies. Moroccan government officials from the Ministry of Foreign 

Affairs said that the level of cooperation on environmental projects under 

the U.S.-Morocco Joint Statement of Environmental Cooperation has not 

been satisfactory. Moroccan government officials said that, out of the 24 

projects in the work plan, only 8 have been implemented. They said that 

the projects consisted mostly of workshops and training sessions that 

were informative but have had limited impact in achieving the objectives 

in the work plan. 

Morocco 

Officials at State, however, assessed collaboration with Morocco on 

environmental issues differently. They pointed out that in addition to 

EPA’s involvement in the delivery of 8 trainings, various other U.S. 

agencies including USAID, The Department of the Interior, the U.S. Trade 

and Development Agency, and The National Oceanic and Atmospheric 

Administration’s (NAOAA) National Ocean Service had all engaged with 

Morocco in efforts to help it preserve and protect the environment since 

the 2006 entry-into-force of the FTA. 

Nevertheless, officials at State said that environmental assistance to 

Morocco amounted to only $350,000 funded from the Middle East 

Partnership Initiative program, which is administered by EPA, and about 

$50,000 from Interior. While USAID has a presence in Morocco, unlike 

Jordan, they have not chosen to fund environmental projects developed 

under the FTA. USAID officials explained that in Morocco there is a great 

need to help small- and medium-sized businesses become better prepared 

to export; therefore, much of agency funding related to the FTA has been 

used for that purpose. 

Success in achieving U.S. goals among the four FTAs we examined has 

been mixed. For the most part, commercial results have been very 

positive, as expansion of trade in goods and services since the agreements 

took effect rose sharply since the period immediately prior to the 

agreements. Total two-way trade, U.S. exports, and partner country 

exports for the four selected FTAs all rose, ranging from 42 percent for the 

Conclusions 

Page 68 GAO-09-439 Free Trade Agreements
 

FTA with Singapore to 259 percent for the FTA with Jordan. We also 

observed higher annual average rates of growth for top product categories 

in the period directly following each FTA for both U.S. exports and partner 

country imports than in a similar period prior to the agreements. In 

addition, and consistent with TPA objectives, a large percentage of goods 

became duty-free immediately after FTA implementation. This was a 

significant gain for the United States, as prior to FTA implementation, 

partner countries had enjoyed practically duty-free access to the United 

States, while U.S. exports faced high tariffs that in some cases were as 

high as 70 and 90 percent. Overall, increases in U.S. exports ranged from 

72 percent (for Singapore) to 365 percent (for Chile) since 

implementation. In two partner countries, Singapore and Chile, trade in 

services increased as did the stocks of FDI and the sales of foreign 

affiliates of U.S.-based companies. Representatives of a broad range of 

U.S. industries generally expressed satisfaction with FTA results. 

Some important progress on strengthening partners’ laws and institutions 

on labor the environment has also been attained as a result of these FTAs. 

Our review showed that each of the four partners had taken steps 

consistent with their commitments in FTAs to “strive to improve their 

laws” and enforcement thereof. Moreover, some helpful progress appears 

to be been achieved as a result or with the assistance of FTA-related 

cooperative projects. Nevertheless, the President delegated to USTR and 

USTR redelegated to OMB the responsibility to submit a plan to implement 

and enforce the agreements. Given the broad nature of the labor and 

environmental obligations, significant and sometimes worsening systemic 

deficiencies in certain partner nations, and limited U.S. resources, a plan 

that clearly indicated the executive branch’s analytic approach and likely 

priorities would have been especially useful. In practice, the oversight 

USTR and other agencies put in place—whether in response to statutory 

requirements or at agencies’ discretion—has been ad hoc and lacks key 

elements critical to long-term success. For example, U.S. agencies have yet 

to update and bolster their original 2 page plans for implementing and 

monitoring these agreements, despite acknowledging that present 

approaches, baseline information, staff levels and expertise, and financial 

resources do not enable them to assure meaningful or lasting results. 

Agencies did not seek requisite funding until 2009, and in several cases 

funding was eliminated. Regarding the labor agreements, the United States 

and partner countries lost opportunities to pursue issues of interest as 

mechanisms created in the FTAs for cooperation were not utilized by 

Labor. Finally, the agreements established a number of environmental 

cooperation mechanisms and projects, yet key elements such as State’s 

ability to marshal funding and leverage other agencies’ expertise, gather 

Page 69 GAO-09-439 Free Trade Agreements
 

information on the actual activities by implementing agencies, or provide 

oversight of these projects’ effectiveness, cost, and compliance were 

lacking. Little information was available to Congress and other 

stakeholders regarding these cooperative activities and the extent to 

which they improve partner capacity or otherwise advance FTA 

objectives. As a result, a more robust U.S. approach is needed to assure 

Congress that FTA partners’ can provide and enforce strong protections. 

To reflect the evolving U.S. experience with FTAs and better ensure 

progress in achieving stated U.S. objectives related to labor and the 

environment, we recommend that USTR, in cooperation with other 

agencies, as appropriate, prepare updated plans to implement, enforce, 

monitor, and report on compliance with and progress under the FTAs’ 

labor and environmental provisions. To facilitate oversight and input, 

these plans should reflect ongoing trade developments, be provided to 

Congress, and summarized in USTR’s annual trade agreements report. 

Recommendations for 

Executive Action 

We recommend that the Secretary of Labor direct ILAB, in consultation 

with other agencies as appropriate, take the following action: 

• Reinvigorate its implementation and cooperation responsibilities under 

the FTAs by initiating regular contact with all FTA partners’ ministries of 

labor to review implementation of FTA labor provisions and to develop 

ongoing priorities and plans for technical cooperation on labor matters, as 

guided by the labor cooperation annexes and the partners’ common 

interests and needs. The Department of Labor should consider, identify, 

and if necessary request appropriate resources such as new funding to 

undertake such contact and cooperation, including by coordinating with 

other agencies that can facilitate or assist these efforts. 

We recommend that the Secretary of State take the following two actions: 

• Direct OES to work with other agencies to develop a more structured 

approach to manage and monitor the implementation of environmental 

cooperation mechanisms and projects. This should enable State to more 

readily track progress and include information such as number and nature 

of activities, source and amount of funding, and, to the extent practical, 

performance indicators and benchmarks to measure appropriately the 

progress made in accomplishing or otherwise furthering the goals and 

objectives of such programs, projects, and activities and public reporting 

of that progress. 

Page 70 GAO-09-439 Free Trade Agreements
 

• Direct OES to use this information to publicly report to Congress on 

cooperative activities and projects with FTA partners and their outcomes, 

as well as their role in furthering U.S. trade policy goals and FTA and FTArelated cooperation objectives. 

The three agencies to which GAO directed recommendations said they 

planned to pursue them. Labor concurred with our report and its 

recommendation, indicating that the lack of priority given to assuring that 

workers share in the benefits of trade was a source of concern it intended 

to redress. State and USTR indicated that they would improve monitoring 

and enforcement of the labor and environmental aspects of FTAs, but 

sought greater precision in GAO’s recommendation that agencies revisit 

and strengthen implementation plans for FTA-related labor and 

environmental cooperation. Nevertheless, State and USTR took issue with 

the basis and balance of some of our findings. GAO has made some 

adjustments in response, but continues to believe more robust plans are 

needed to assure progress in meeting the important challenges to labor 

and environmental protection that remain. 

Agency Comments 

and Our Evaluation 

State said GAO had not given partner governments and U.S. agencies 

sufficient credit for the progress made through the FTAs in improving 

structural and institutional capacity to protect the environment and labor 

rights. State highlighted several examples of partner progress as 

particularly meaningful achievements. Nevertheless, State acknowledged 

that it has been severely hampered in undertaking FTA-related labor and 

environmental cooperation work with partner governments by a lack of 

human and financial resources. GAO recognizes that some important 

progress in strengthening partner capacity to protect workers and the 

environment has been achieved through FTAs. We recognize FTAs have 

resulted in or supported some important progress in these areas, notably 

in Jordan, the country whose FTA has been in effect longest and with the 

most sizeable U.S. foreign assistance. We reviewed and revised the report 

to ensure this progress is captured. 

However, GAO believes more progress was likely possible and remains 

desirable, given rapid growth in two-way trade and partners’ 

acknowledged difficulties in enforcement. As GAO already notes in this 

report, the few human and financial resources available for FTA 

cooperation limited progress toward meeting agreed cooperation plans. 

Yet GAO also shows U.S. agencies did not utilize the opportunity that 

existed in TPA or in ensuing budgets to make the case that more resources 

were necessary to assure progress. Our work also showed agencies may 

Page 71 GAO-09-439 Free Trade Agreements
 

not be taking full advantage of the resources already expended. 

Specifically, the report notes that U.S. agencies missed opportunities to 

use the general FTA or specific FTA mechanisms they created on labor to 

engage with FTA partners and encourage improvement. GAO also shows 

agencies did not optimize their current monitoring efforts, such as by 

updating ongoing reports on human rights to address partners’ compliance 

with FTA commitments. 

USTR said that in some instances GAO had portrayed an inaccurate and 

potentially misleading picture of U.S. agency responsibilities, partners’ 

actions, and outstanding challenges. In response, GAO made several 

technical corrections and ensured the criteria we used were cited. In the 

revisions we made, we also sought to make clearer distinctions between 

requirements for U.S. agencies under TPA, FTA chapters, and associated 

cooperation mechanism agreements, versus more general expectations for 

U.S. agencies based on USTR’s overall responsibilities for the operation of 

the U.S. trade agreements program, leading and guiding U.S. trade policy, 

and monitoring and enforcing trade agreements. We acknowledge that 

evaluation of the progress attained was based, in part, on interviews with 

responsible foreign and U.S. government officials and selected private 

sector interests and experts. USTR also indicated that GAO should have 

given more prominence to the FTA commitment that an FTA partner not 

fail to enforce its environmental and labor laws through a sustained or 

recurring course of action or inaction, in a manner affecting trade between 

the parties (USTR’s underlining for emphasis retained). GAO already 

distinguishes between this binding FTA obligation and other, more 

“aspirational” commitments, such as to strive to strengthen environmental 

laws. Weaknesses in laws and enforcement we report involve key and 

rapidly-growing sectors of trade, such as apparel from Jordan, and forestry 

and fishery products from Chile. GAO was struck by U.S. agencies’ 

inattention or inaction on abuses in QIZs during a time when Jordan’s 

apparel exports to the U.S. rose from $43 million to $1.253 billion. 

However, we believe that by definition all of the FTA commitments on 

labor and the environment are trade-related, because they are contained in 

a trade agreement, and thus appropriate for inclusion within the scope of 

our review of progress attained as result or since the entry into force of 

these FTAs. Moreover, some FTA commitments and FTA cooperative 

goals are broad or generally applicable, rather than being limited to traded 

sectors. Nevertheless, we did review the report to remove any 

inappropriate references to non-traded sectors. 

Page 72 GAO-09-439 Free Trade Agreements
 

Labor, USTR, State, and EPA also provided several technical comments, 

which we incorporated or addressed as appropriate. For example, State 

termed our statement that agencies did not commit the bulk of funding for 

the Better Work Jordan project until more than a year after problems in 

the QIZs were publicly exposed as an “unfortunate oversimplification,” 

and provided details on the steps that were undertaken in the intervening 

year. GAO included this new information. However, GAO believes the time 

State shows was required for diagnosing, designing, and delivering 

cooperative assistance to such FTA partners only underlines the 

importance of U.S. agencies having up-to-date plans and more reliable 

oversight, evaluation, and reporting mechanisms. 

As agreed with your office, unless you publicly announce the content of 

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

report date. At that time, we will send copies to the U.S. Trade 

Representative; and the Secretaries of Commerce, Labor, and State, as 

well as the Administrator of EPA, and other interested parties. The report 

also will be available at no extra 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 

at (202) 512-4347 or yagerl@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs can be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix X. 

Sincerely yours, 

Director, International Affairs and Trade 

Loren Yager 

Page 73 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

Page 74 GAO-09-439 

Appendix I: Objectives, Scope, and 

Methodology 

In this report, we assess the progress that has been made through free 

trade agreements (FTA) in (1) advancing U.S. economic and commercial 

interests, (2) strengthening labor laws and enforcement in partner nations, 

and (3) strengthening partners’ capacity to strengthen and enforce their 

environmental laws. We focused on pre-FTA versus post-FTA progress. 

For the purposes of this report, we chose to concentrate on four FTA 

partners so that we could examine the unique set of circumstances for 

each country with some specificity. The four partners on which we chose 

to focus—Jordan, Singapore, Chile, and Morocco—represent a cross 

section of FTA partners’ country characteristics, have FTAs in force the 

longest, and the represent regional dispersion of U.S. FTAs across Asia, 

Latin America, and the Middle East. In addition, we examined U.S. agency 

responsibilities and performance associated with the FTAs. 

In gathering information for all the above objectives, we engaged in three 

types of activities: (1) obtaining information and analysis from legal and 

secondary literature sources, (2) obtaining information and perspectives 

of U.S. government and private sector officials and experts, (3) obtaining 

information through partner country visits. In addition, for the analysis of 

the commercial and economic results of the FTAs, we gathered and 

analyzed data on international and bilateral trade and investment. We 

conducted this performance audit work from April 2008 to June 2009 in 

accordance with generally accepted government auditing standards. 

We obtained, reviewed, and analyzed documents from a variety of sources 

including the four FTAs and their associated annexes, Trade Promotion 

Authority (TPA) and other relevant laws, regulations, orders, Federal 

Register notices, and congressional guidance setting forth requirements or 

expectations for U.S. agencies related to the FTAs, the operation of the 

U.S. trade agreements program, and international environmental 

cooperation. We also reviewed reports submitted to Congress in response 

to TPA requirements, including those submitted in conjunction with FTA 

implementing legislation, such as Presidential statements on how the FTAs 

advance U.S. commercial interests, and applicable TPA goals and 

Statements of Administrative Action. We also reviewed pertinent academic 

literature and authoritative reports from government and private sector 

sources. The information on foreign law in this report does not reflect our 

independent legal analysis, but it is based on interviews and secondary 

sources. This report was not designed to assess legal compliance by the 

United States or its partners with FTAs or other requirements. 

We also interviewed U.S. officials responsible for international trade 

policy at the Office of the Office of the U.S. Trade Representative (USTR); 

 Free Trade Agreements 
Appendix I: Objectives, Scope, and 

Methodology 

the Departments of State, Commerce, and Labor; the Environmental 

Protection Agency, as well as officials of the Department of Homeland 

Security—Bureau of Customs and Border Protection. We also obtained 

comment and perspective from a range of subject matter experts and 

economists. 

To assess the extent of progress in each area, we analyzed available data 

and documents on post-FTA developments and testimonial 

characterizations of progress in the post-FTA period compared to what 

was known or reported about the pre-FTA period. We also compared the 

progress to official expectations, including officially agreed expectations 

as set forth in the FTAs and FTA cooperative agreements and associated 

action or work plans, official reports about FTA effects, U.S. TPA 

objectives, and the expectations of cognizant officials in the United States 

and partner governments. Where perspectives on progress differ, the 

various views and their basis are reported. Finally, where material gaps in 

agency documentation and internal controls became evident in the course 

of GAO’s efforts to establish and evaluate FTA-related progress, consistent 

with generally accepted government auditing standards, we report on 

these deficiencies. Key limitations of our work are that the findings are 

largely limited to the partners, private sector representatives, time period, 

and information reviewed. While we considered data on trends after FTA 

implementation and opinions on FTA-induced effects, we did not seek to 

quantitatively isolate FTA-induced effects. Although we gathered 

information through December 2008, the data and foreign interviews do 

not generally capture the full impact of the deterioration in trade that 

ensued as a result of the global financial crisis and economic downturn 

occurring during 2008-2009. 

During the 1-week trips to each of the four trade partner countries we 

focused on, we included meetings with in-country U.S. officials, foreign 

government officials responsible for specific areas of the FTA and its 

implementation, umbrella groups of business groups, such as chambers of 

commerce and industry, officials of international organizations such as the 

ILO, as well as trade union and environmental groups, academics, and 

other subject matter experts. 

Given the complex interactions of the trade agreements themselves and 

data requirements, we did not empirically isolate the exact effects of the 

trade agreements themselves on exports or imports. Instead, we used a 

more indirect, but indicative method to examine the commercial/economic 

effects of the selected FTAs. As a first approximation, we used trade data 

for the United States and the selected FTA countries to examine the trends 

Page 75 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

in trade, at the country level and at a more disaggregate, sectoral level, 

both before and after implementation of the Agreements. As a complement 

to the data analyses on the commercial impacts, we also gathered 

anecdotal evidence (views) about the four selected FTAs effects through 

the fieldwork described above, from U.S. and partner officials, and from 

private sector groups. 

We solicited views from stakeholders including various members of the 

U.S. Trade Advisory Committee System1

 and obtained responses from 

about 30 associations and representatives in response. Notably, we heard 

from the Chairman of the Advisory Committee on Trade Policy and 

Negotiations (ACTPN) and several ACTPN members, the chairman and 

several members of the Intergovernmental Policy Advisory Committee 

(IGPAC), the chairman and several liaisons of the Trade and Environment 

Policy Advisory Committee (TEPAC), several liaisons to the Labor 

Advisory Committee, and a variety of members of the agriculture and 

industry committees, many on behalf of trade associations. Specifically, 

executive branch agencies arranged for GAO to send a letter to all 

members of the system seeking concrete evidence from the U.S. private 

sector about their experiences to date with the FTAs that have entered 

into force since 2001. Topics explored included: 

• FTAs in force of most significance to your sector 

• Trade and investment changes and causes; role of FTAs vs. other factors 

• Nature of FTA Effects on Industry or Product Sector 

• Examples of FTA Effects on Industry or Product Sector 

• Satisfaction with FTA Economic/Commercial Results to Date 

 

1

In 1974, Congress mandated creation of a private sector advisory system to ensure that 

representatives from private business and other groups with a stake in trade policy could 

provide input as negotiations unfolded. See Trade Act of 1974, Pub. L. No. 93-618, 88 Stat. 

1996, codified at 19 U.S.C. § 2155. A three-tier structure of committees advises the 

President on overall U.S. trade policy, general policy areas, and technical aspects of trade 

agreements. GAO reviewed this structure in 2002, see GAO, International Trade: Advisory 

Committee System Should Be Updated to Better Serve U.S. Policy Needs. GAO-02-876

(Washington, D.C.: Sept. 24, 2002). Note that in obtaining comment and perspective, 

members were asked to do so in their individual capacity, rather than in their capacity as 

advisors. The views GAO obtained may not necessarily reflect the views of either other 

participants in the committee system, or of those outside the system. 

Page 76 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

• Areas for Improvement 

Upon receiving responses from a cross-section of members, GAO initiated 

contact and conducted interviews with certain industry groups or firms 

(e.g., the American Chemistry Council, and AdvaMed and the National 

Council of Textile Organizations) in situations where trade had expanded 

and we had not received a response or where we had been told of specific 

benefits (e.g., Lucas Films) or concerns (e.g., regarding public health and 

access to medicines). We acknowledge that this input may not be 

comprehensive or reflective of the U.S. economy as a whole. GAO did not 

independently verify the views and information provided. 

To examine the commercial and economic results of the four selected 

FTAs, our analysis focused on data for three broad trade-related elements: 

merchandise trade, trade in services, and foreign direct investment. Within 

these elements, we also focused on determining results and trends in 

bilateral trade for key industry sectors. We analyzed data for the time 

period before the FTA was implemented and compared results with the 

period after FTA implementation. 

For merchandise trade, we used data from the U.S. International Trade 

Commission’s (ITC) Interactive Tariff and Trade Database from 1994 to 

2008 in order to calculate two-way trade, bilateral trade, and overall and 

product category level growth rates between the United States and our 

trade partners.2

 Using this data, we first calculated the total growth in 

exports and imports from the year just prior to the implementation of each 

FTA up to 2008. To calculate average yearly growth rates overall and for 

product categories, we also calculated the annual average rate of growth 

in U.S. exports and imports with each partner country for several years 

prior to and after the implementation of the FTAs to ascertain the 

differences between the periods. For Jordan, we selected the pre- and 

post-FTA periods, from 1996 to 2001, and from 2002 to 2008, respectively.3

 

2

See the U.S. ITC Interactive Tariff and Trade DataWeb. http://dataweb.usitc.gov/. 

3

For Jordan, in both the overall and the product category analysis, we did not consider the 

year 2001 as “post-FTA” period, as the Jordan FTA came into force in December of 2001. 

Also, for Jordan, for the “overall” comparison of growth rates, we used data from 1994/1995 

to 2000/2001 for the pre-FTA period and 2001/2002 to 2007/2008 for the post-period or 7 

years for each period. For the product category comparison, since this was more data 

intensive and we used a different methodology, we drew only the “current” data from the 

ITC data web which starts in 1996. Therefore, for this analysis, for the pre-FTA categories 

for Jordan, we used data from 1996 through 2001 (6 years) and 2002 through 2008 (7 years) 

for the post-FTA period. 

Page 77 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

For Chile and Singapore, we selected the 5-year pre-FTA period from 1999 

to 2003 and the 5-year post-FTA period from 2004 to 2008. For Morocco, 

we selected the 2003 to 2005 pre-FTA period and 2006 to 2008 post-FTA 

period. Second, for the product category analysis, we obtained end use 

data at the 5-digit aggregation from the ITC’s Interactive Tariff and Trade 

Dataweb. We selected the top 25 U.S. exports and imports by value with 

each partner country to ascertain that these categories were of 

significance in the country’s total trade.4

 Third, we adjusted these series 

for inflation using the Gross Domestic Product’s Implicit Price Deflator 

from the Bureau of Economic Analysis (BEA). Fourth, for our product 

category data analysis, we calculated average annual growth rates for each 

partner-country series by fitting a logarithmic trend line through the 

inflation-adjusted data for each pre- and post-FTA period. We did not use 

the average of annual growth rates for the category data because the 

averages can be skewed by occasional large changes in trade. Fifth, we 

then subtracted the pre-FTA average annual growth rate from the postFTA growth rate and sorted these differences in descending order for each 

product category.5

 For our overall growth rate analysis by country, we 

took the annual average growth rates for total U.S. domestic imports for 

consumption and total U.S. domestic exports with each selected FTA 

country using U.S. ITC Interactive Tariff and Trade Dataweb data and 

compared these growth rates with U.S. growth rates of trade for similar 

time periods with the world (see app. VI). For our market share analysis 

by country, we used data from the Global Trade Atlas and World Trade 

Atlas as well as the International Monetary Fund’s Direction of Trade 

statistics to determine how market share changed for the United States 

and top exporters in partner-country markets. 

For trade in services and foreign direct investment (FDI), we relied mostly 

on data from the BEA, which publishes data on these elements in the 

Survey of Current Business and on its Web site.6

 We also reviewed data on 

 

4

For U.S. exports to these FTA partners, the top 25 end use categories represented 75 

percent for Jordan, 80 percent for Chile, 83 percent for Singapore, and 84 percent for 

Morocco of the total value of U.S. exports to these partner countries in 2008. For U.S. 

imports from these partner countries, the top 25 product categories accounted for 99.5 

percent for Jordan, 97 percent for Chile, 94 percent for Singapore, and 97 percent for 

Morocco of the total value of imports in 2008. 

5

The results of the growth rate analysis by product category for each FTA partner country 

are in appendixes II through V. 

6

www.bea.gov

Page 78 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

services, published by the United Nations (UN),7 and FDI, published by the 

United Nations Conference on Trade and Development, mainly to gain 

insight into worldwide and partner country trends. We also obtained and 

reviewed data from partner countries. 

For trade in services, we analyzed bilateral imports and exports from the 

partner countries and reviewed data for service sector categories. Data on 

services trade by country were not available for Jordan and Morocco and, 

in a few cases, complete data by service industry sector were not available 

due to limitations on the disclosure of proprietary information. For foreign 

direct investment, we focused on the stock of foreign direct investment for 

partner countries, which represents the book value of holdings. We also 

examined data by sector where available, and some of this data were also 

limited for disclosure purposes. In examining the pre- and post-FTA 

results, we generally compared the most recent available data (usually 

2007) with the average of the 3-year period prior to the implementation of 

the respective FTA. In keeping with the methodology employed in prior 

work,8

 FDI stocks and services data are reported in nominal dollars. 

For each of the data sets we used for U.S. and partner-country trade and 

investment, we assessed their relative strengths and limitations through 

interviews with cognizant parties, reviews of the available documentation, 

and performing basic logic checks and found them sufficiently reliable for 

the purposes of this report. We did not assess the reliability of data that we 

obtained directly from partner countries, as these data are used only to 

provide supplementary background and context for our analysis. 

To document and assess labor progress under FTAs, we examined FTA 

provisions in the labor chapters and their annexes for the FTAs with 

Jordan, Chile, Singapore, and Morocco. These FTAs include both “best 

effort” commitments, as well as commitments subject to dispute 

settlement procedures that could lead to the imposition of trade measures. 

For example, the FTA partners commit to “strive to ensure” that their 

domestic laws provide for labor standards consistent with internationally 

recognized labor rights set forth in their respective labor chapters9

 are 

 

7

http://unstats.un.org/unsd/servicetrade/default.aspx

8

GAO-08-59. 

9

 The Jordan FTA states this commitment as “strive to ensure that such labor principles and 

the internationally recognized labor rights set forth in paragraph 6 are recognized and 

protected by domestic law.” 

Page 79 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

recognized and protected by domestic law (a “best effort” or aspirational 

commitment) as well as to “not fail to effectively enforce its labor laws, 

through a sustained or recurring course of action or inaction, in a manner 

affecting trade between the parties” (a commitment subject to dispute 

settlement procedures). GAO considered all the FTA labor provisions to 

be trade-related commitments, even though only some of them specifically 

mention trade and others are more general in nature. 

We looked for evidence that partners were making efforts to meet these 

FTA obligations, such as passing or amending laws or taking steps to 

improve enforcement of laws. Principal sources of information included 

U.S. government reports submitted in connection with TPA and the FTAs 

and U.S. government reports on human rights, child labor, and human 

trafficking, which are not specifically designed to assess compliance with 

the FTAs but do include analysis on the extent to which partners provide 

the five internationally recognized labor rights that are cited in U.S. FTAs. 

In addition, GAO obtained information and analysis on labor law from U.S. 

embassies, partner governments, and international organizations such as 

the International Labor Organization (ILO), the Organization for Economic 

Cooperation and Development, and the International Trade Union 

Confederation. We relied on these sources for the description of legal 

changes and ongoing challenges and did not independently assess them. 

GAO also sought perspectives on the extent of labor progress during 

fieldwork to the FTA partners, where we typically met with U.S. embassy 

labor officers, partner government labor officials, local labor union 

representatives, and international organizations such as the ILO. 

Regarding labor cooperation, we asked U.S. and partner government 

officials for documentation and oral reports about bilateral contacts, joint 

planning and prioritization, and cooperative work on labor matters after 

the FTAs’ entry into force. Where the partner government reported that 

they had had no contact or were disappointed with the level of 

engagement, we report this information but also sought and report 

reaction from U.S. agencies. Although we did not learn of any overall joint 

plans for labor cooperation, we sought information from U.S. government 

agencies and FTA partners about any cooperative activities or capacity 

building projects on labor conducted with the partners since the FTAs’ 

entry into force. We compiled this information and analyzed how it 

compared to U.S. descriptions of labor rights weaknesses in the partner, 

such as the U.S. government’s pre-FTA reports on labor rights. GAO 

considers these efforts to represent labor progress even if they did not 

occur because of the FTA. GAO also consulted with selected experts and 

interest groups in the United States, notably several academics or experts 

Page 80 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

who had written about efforts to tie labor standards to trade programs or 

agreements, members and liaisons of the Labor Advisory Committee (an 

official advisory body to USTR and Labor on trade agreements), 

representatives of the AFL-CIO and Unite Here, the Solidarity Center, the 

International Labor Rights Forum, and the National Labor Committee, the 

nongovernmental organization that exposed problems in Jordan’s QIZs. 

To assess U.S. agency performance on labor matters, we analyzed agency 

responsibilities based on TPA, the FTAs, U.S. trade laws, associated 

Executive Orders and Federal Register notices, and other agency 

guidelines. We also compared what happened after FTA implementation 

with what appeared to be officially expected or enabled in the FTAs (i.e., 

FTAs negotiated after TPA created a labor cooperation mechanism), and 

with key steps for monitoring and enforcement of trade agreements, which 

GAO has established in prior reports. 

To document and assess environmental progress under FTAs, we 

examined FTA provisions, as well as those in environmental cooperation 

agreements and mechanisms. We also analyzed associated U.S.-FTA 

partner agreed documents, such as plans of action and work plans, and 

press releases and other reports on joint meetings and workshops. We 

relied on secondary sources that identified changes in environmental laws 

and enforcement capacity made by partner governments and sought 

authoritative summaries of these. We did not conduct an independent 

analysis of these laws, but relied instead on solicited views and analyses of 

these changes from partner government and U.S. agency officials, as well 

as selected academics and other experts and environmental groups. We 

requested documentation and other information from U.S. agencies on 

each partner country’s environmental regimes, trade-related 

environmental challenges and how they had changed since the FTA’s entry 

into effect, and trade-related cooperative activities, those done both in 

connection with agreed work plans and in connection with U.S. foreign 

assistance or environmental cooperation generally. We solicited views on 

the extent of progress associated with the FTA, FTA cooperative 

mechanisms and cooperative projects, and other activities, including 

foreign and U.S. officials’ satisfaction with and assessments of the results 

to date of their impact. To establish and assess U.S. agency roles, 

responsibilities, and management of FTA-related functions, we relied on 

FTAs and FTA cooperative agreements, TPA, other laws, executive orders, 

and associated notices or reports, and informal oral or written agency 

descriptions by USTR and the Department of State. We compiled data and 

other information about cooperative projects and compared what was 

done relative to agreed plans or expectations. We also solicited 

Page 81 GAO-09-439 Free Trade Agreements
Appendix I: Objectives, Scope, and 

Methodology 

assessments of significance from U.S. and partner government officials, as 

well as selected experts such as international environmental officials and 

experts at the United Nations Environment Programme and the North 

American Agreement on Environmental Cooperation, George Washington 

University Law School, and TEPAC members in their individual capacity. 

Page 82 GAO-09-439 Free Trade Agreements
A

the Jordan F 

ppendix II: Commercial/Economic Results of

TA

Page 83 GAO-09-439 

Appendix II: Commercial/Economic Results 

of the Jordan FTA 

The Jordan FTA entered into force on December 17, 2001. Jordan is a 

lower-middle income country, and was the first Arab country to sign an 

FTA with the United States. Following the implementation of the Jordan 

FTA and the designation of Qualifying Industrial Zones (QIZ) and Jordan’s 

accession to the World Trade Organization (WTO) in 2000, Jordanian 

merchandise goods and services exports increased markedly. Moreover, 

the FTA and other previous investment agreements between Jordan and 

the United States provided a framework for greater investment activity in 

Jordan. 

Jordan’s Economy and 

International Trade 

Jordan’s gross domestic product (GDP) in 2008 was estimated at $30.8 

billion (purchasing power parity, PPP) and per capita GDP is estimated at 

$5,000 (PPP). Jordan’s official unemployment rate for 2008 was estimated 

to be 12.9 percent, although unofficial estimates range up to 30 percent. 

While about 86.3 percent of Jordan’s GDP is from the services sector, such 

as tourism, 3.6 percent is from agriculture, and about 10.1 percent is from 

other industries including apparel and clothing, phosphate mining, 

fertilizers, and pharmaceuticals. 

The World Bank’s 2009 Doing Business report shows that Jordan ranked 

101 out of 181 countries in the overall ranking of ease of doing business. 

The American Chamber of Commerce (AmCham) in Jordan noted that, 

according to the World Economic Forum’s Global Competitiveness Report 

for 2007-2008, businesses in Jordan face challenges due to tax regulations, 

inefficient government bureaucracy, and tax rates. At the same time, the 

2009 Doing Business in the Arab World report shows that it has 

improved in certain areas in terms of regulatory reform, notably in regard 

to starting a business and trading across borders. 

In addition to its signing the FTA with the United States and its acceding to 

the WTO in 2000, Jordan is becoming increasingly open to international 

trade, having signed several other bilateral and regional trade agreements. 

These include the Greater Arab Free Trade Area, the Jordan-European 

Union (EU) Association Agreement, the Jordan-European Free Trade 

Agreement, the Jordan-Singapore Agreement, and the Agadir Agreement. 

QIZs are created by their designation as such by the United States under 

authority established by the United States-Israel Free Trade Area 

Implementation Act.1

 The QIZ program provides duty-free, quota-free 

 

1

19 U.S.C. 2112 note. 

 Free Trade Agreements 
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

access to the U.S. market for certain goods imported directly from or 

wholly created in areas designated by the Jordanian and Israeli authorities 

and approved by the U.S. government.2

 Currently, there are 13 QIZs in 

Jordan with over 50 factories that produce mainly apparel. 

Jordan is one of the U.S.’s smaller trading partners, ranked 84th overall in 

2008. In that year, Jordan had an overall trade deficit with the rest of the 

world of about $9.1 billion, with total exports of $6.5 billion and total 

imports of $15.7 billion. Jordan’s major export destination in 2007 was the 

United States, with 22 percent of exports, with other export partners 

consisting of Iraq, India, the United Arab Emirates, Saudi Arabia, and 

Syria. Similarly, Jordan’s major import partners that year were from the 

EU (25 percent), Saudi Arabia (21 percent), China (9.8 percent), the United 

States (4.7 percent), and Egypt (4.4 percent). While Jordan has proximity 

and cultural ties with Europe and the Middle East, it is adept at doing 

business in English, which is its second language after its official language, 

Arabic. Export commodities include apparel; fertilizers; potash, 

phosphates, pharmaceutical products, and vegetables; imports consist of 

crude oil, machinery, transport equipment, iron, and cereals. 

Key Market Access and 

Other Commercial and 

Regulatory Issues 

The U.S.–Jordan FTA was aimed at supporting the economic reform 

efforts of a key regional partner for U.S. efforts in the Middle East peace 

process. The agreement provided for significant and extensive 

liberalization across a wide spectrum of trade issues, such as in 

eliminating all tariffs on industrial and agricultural goods within 10 years, 

and in areas related to trade in services and foreign investment. 

 

2

19 U.S.C. 2112 note. Under the United States-Israel Free Trade Area Implementation Act of 

1985, a qualifying industrial zone is an area that “(1) encompasses portions of the territory 

of Israel and Jordan or Israel and Egypt; (2) has been designated by local authorities as an 

enclave where merchandise may enter without payment of duty or excise taxes; and (3) has 

been specified by the President as a qualifying industrial zone.” In relation to the QIZs, for 

an article to receive an elimination or modification of duties it must be: (1) wholly the 

growth, product, or manufacture of the West Bank, the Gaza Strip, or a qualifying industrial 

zone or is a new or different article of commerce that has been grown, produced, or 

manufactured in the West Bank, the Gaza Strip, or a qualifying industrial zone; (2) imported 

directly from the West Bank, the Gaza Strip, Israel, or a qualifying industrial zone; and (3) 

the sum of the cost or value of the materials produced in the West Bank, the Gaza Strip, 

Israel, or a qualifying industrial zone, plus the direct costs of processing operations 

performed in the West Bank, the Gaza Strip, Israel, or a qualifying industrial zone is not less 

than 35 percent of the appraised value of the product at the time it is entered into the 

United States. 

Page 84 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

Prior to the FTA, the United States had a mean unweighted tariff rate of 6 

percent, while Jordan had a mean unweighted tariff rate of 16 percent.3

The agreement provides for a scheduled elimination of import tariffs: a 10-

year transitional period over which nearly all trade barriers in goods and 

services will be phased out using staged tariff elimination categories. 

Under these categories, initial tariffs of less than 5 percent would be 

phased out in 2 years, those between 5 and 10 percent eliminated in 4 

years, those between 10 and 20 percent eliminated within 5 years, and 

those above 20 percent eliminated within 10 years. There are some 

exceptions to these categories on both sides due to tariff elimination 

pursuant to WTO commitments, those covered by the Generalized System 

of Preferences, and some goods that are sensitive for both parties. By 

2005, almost 96 percent of all tariff elimination was implemented from the 

U.S. side, and over 60 percent of tariffs were eliminated from the 

Jordanian side. For U.S. imports, the remaining 4 percent of goods include 

apparel, footwear, and agricultural products. Tobacco and tobacco 

products are excluded from the agreement, while alcoholic beverages are 

subject to tariff reduction arrangements. One study estimates that, in 2006, 

after 6 years of the agreement, the United States’ average unweighted tariff 

rate for Jordan’s exports was 0.2 percent. By 2010, goods will be virtually 

duty free in almost all consumer and industrial products between the two 

countries. 

Because a number of Jordanian goods are subject to tariff-rate quotas 

when exported to the U.S. market, such as certain dairy products, sugar, 

and chocolate products, the United States will provide increasingly larger 

quantities of these goods over the 10-year period. At the end of 10 years, 

the quota will be eliminated altogether. 

Jordan has provided for similar liberalization in the services sector to 

encourage greater U.S. investment in sectors such as finance, business and 

engineering, tourism, telecommunications, and distribution services. The 

agreement also includes provisions to enhance protection of intellectual 

property rights, particularly in relation to trademarks, patents, unfair 

competition, and trade secrets. In addition, it includes provisions on 

electronic commerce that seek to avoid imposing customs duties on 

electronic transmissions. 

 

3

This tariff rate represents the Most-Favored Nation (MFN) rate to all countries at that time 

and does not include any preferences programs. 

Page 85 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

Observed Results of the 

FTA in Merchandise Trade, 

Services, and FDI 

Since the FTA was implemented, the trade balance for the United States 

went from a trade surplus of $110 million in 2001 to a trade deficit of $234 

million in 2008. Two-way trade between the two countries went from $568 

million in 2001 to $2 billion in 2008, a 259 percent increase in total trade. 

While U.S. exports increased by 167 percent from 2001 to 2008, total 

imports from Jordan after the agreement shot up by 397 percent. 

Merchandise Trade 

In 2008, the highest U.S. export end use categories by value were 

passenger cars, new and used; parts and special category; rice and other 

food grains; parts, special category; other oilseeds and food oils; and 

aluminum and alumina. Top valued U.S. import categories from Jordan in 

2008 included apparel and household goods-cotton; apparel and household 

goods-other textiles; jewelry; apparel and household goods-wool; sporting 

and camping apparel; and medicinal, dental, and pharmaceutical 

preparations. 

Overall U.S. market share in the Jordanian market since implementation of 

the FTA has decreased somewhat and, because of their proximity and 

trade agreements, the EU was the principal exporter into this market in 

2007 (see fig. 5). Overall, in 2007 the United States had a market share of 

about 5 percent in Jordan, while the EU had a market share of 24 percent. 

Also, the second largest exporter to this market, Saudi Arabia, had a 

market share of about 21 percent in 2007. China has doubled its market 

share, going from 5 percent in 2001 to 10 percent in 2007. However, U.S. 

market share has increased in several important products/sectors, such as 

in agriculture products of corn, wheat, rice, and edible fruits and nuts, as 

well as manufactured goods such as automobiles. For example, the U.S. 

market share of Jordan’s corn imports grew from 3 percent in 2001, when 

a 5 percent import tariff on feed grains was removed, to 77 percent in 2007. 

Page 86 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

Figure 5: Market Share of the Top Five Exporting Countries to Jordan, 1999-2007 

Source: GAO analysis using data from the International Monetary Fund’s (IMF) Direction of Trade (DOT).

Year

U.S.-Jordan FTA

Percentage of market share

0

5

10

15

20

25

30

35

United States

Egypt

China

Saudi Arabia

EU

1999 2000 2001 2002 2003 2004 2005 2006 2007

Across product categories, we also calculated the differences between preand post-FTA average annual growth rates for the top 25 U.S. exports and 

imports in value with Jordan. Tables 2 and 3 display the top 25 end use 

categories for U.S. export and import categories for Jordan including their 

description ranked by growth rate, their dollar value, their rank by dollar 

value, their pre-FTA and post-FTA average annual growth rates, and 

change in growth between the two periods. About 64 percent or 16 out of 

the top 25 leading U.S. export product categories saw higher post-FTA 

export growth over the pre-FTA period (see table 2). For the top 25 U.S. 

imports from Jordan, table 3 shows that 40 percent had a higher rate of 

growth after the FTA was implemented (for a more detailed discussion of 

the methodology of this analysis, see app. I). 

Page 87 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

Table 2: U.S. Exports to Jordan: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and Change 

in Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value

 2008 

Rank

 by value 

2008

Pre-FTA 

growth rate 

1996-2001 

Post-FTA 

growth rate 

2002-2008 

Change 

in growth 

rates

Parts; special category goods, not elsewhere classified $41,582 3 -54% 53% 107%

Aluminum and alumina 20,602 6 -18 88 105

Rice and other food grains 58,367 2 -36 55 92

Passenger cars, new and used 215,262 1 -16 70 86

Materials handling equipment 18,453 9 -38 41 80

Laboratory testing and control instruments 9,597 21 -10 42 52

Excavating, paving, and construction machinery 18,624 8 -24 27 51

Miscellaneous domestic exports and special transactions 27,387 4 -28 19 47

Meat, poultry, and other edible animals 12,911 17 -17 24 41

Other industrial machinery 15,216 16 -7 12 20

Minimum value shipments 16,575 12 -5 11 17

Paper base stocks-pulpwood and woodpulp 15,801 14 4 13 9

Other-manufactured and unmanufactured 9,001 23 3 10 7

Electric apparatus and parts, not elsewhere classified 9,044 22 -7 -1 6

Medicinal, dental, and pharmaceutical preparations, 

including vitamins 20,075 7 16 22 6

Other oilseeds and food oils 22,332 5 -11 -9 3

Household and kitchen appliances 8,984 24 9 9 0

Other foods (lard, soft beverages, spices, etc.) 10,326 18 12 6 -6

Other scientific, hospital, and medical equipment 15,633 15 2 -6 -7

Measuring, testing, and control instruments 8,593 25 30 19 -11

Tanks, artillery, missiles, rockets, guns, and ammunition 18,369 10 5 -12 -16

Telecommunications equipment 17,863 11 11 -7 -17

Parts for civilian aircraft 16,113 13 15 -8 -23

Industrial organic chemicals 9,973 20 28 4 -24

Nuts and preparations $10,225 19 42% 18% -24%

Sources: GAO analysis using end use data from the U.S. Department of Commerce (Commerce) and ITC. 

Page 88 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

Table 3: U.S. Imports from Jordan: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and 

Change in Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value 

2008 

Rank 

by value 

2007

Pre-FTA 

growth rate 

1996-2001 

Post-FTA 

growth rate 

2002-2008 

Change in 

growth

 rates

Industrial inorganic chemicals $3,516 9 -7% 227% 234%

Bauxite and aluminum 1,311 18 -27 103 130

Furniture, household items, baskets 567 25 14 88 74

Finished textile industrial supplies (labels, braids, buttons, 

etc.) 1,407 16 -30 35 65

Machine tools, metal working, molding, and rolling mill 

machinery 617 24 17 73 57

U.S. goods returned and reimports 48,915 4 -6 38 44

Other industrial machinery 1,504 14 -30 8 39

Other (boxes, belting, glass, abrasives, etc.) 2,885 11 12 29 17

Vegetables and preparations 1,551 13 54 70 16

Other precious metals 1,379 17 32 37 6

Jewelry (watches, rings, etc.) 73,704 3 33 26 -7

Other (soft beverages, processed coffee, etc.) 1,297 19 20 12 -8

Stone, sand, cement, and lime 1,196 21 32 23 -10

Minimum value shipments 3,170 10 33 23 -10

Household and kitchen appliances 5,681 8 48 36 -12

Books, magazines, and other printed matter 1,968 12 51 14 -37

Other products (notions, writing and art supplies, tobacco 

products, etc.) 1,467 15 78 31 -47

Sporting and camping apparel, footwear, and gear 6,284 6 71 6 -64

Apparel and household goods-cotton 525,907 1 74 9 -65

Medicinal, dental, and pharmaceutical preparations, 

including vitamins 6,046 7 101 31 -69

Toiletries and cosmetics 670 23 68 -8 -76

Apparel and household goods-other textiles 412,280 2 106 25 -81

Apparel and household goods-wool 28,015 5 90 7 -83

Artwork, antiques, stamps, and other collectibles 1,200 20 102 11 -91

Other parts and accessories $727 22 165% 2% -162%

Sources: GAO analysis using end use data from Commerce and ITC. 

In contrast with the Chile and Singapore FTAs, the Jordan FTA’s entry into 

force did not coincide with an increase in growth rates in most of its 

leading product categories. However, this finding is very sensitive to our 

use of 2002 as the start of the post-FTA period. (The FTA entered into 

Page 89 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

effect in December 2001.) In fact, if this year (2001) is placed in the postFTA period, a majority of the product categories, or 60 percent, have a 

higher average annual growth in this period. The findings are also driven 

by the textiles and apparel category, which dominates the leading U.S. 

import categories from Jordan and averaged about 87 percent of total 

imports from 2002 to 2008. Apparel experienced extremely high annual 

average rates of growth with the advent of the QIZ program in 1996. 

Nevertheless, the year-to-year value of Jordanian exports in the apparel 

categories after the FTA was in the hundreds of millions of dollars, 

compared with the pre-FTA period when the yearly value was in the tens 

of millions of dollars.4

Commerce notes that the Jordan FTA opened up trade in services, giving 

American service providers opportunities in Jordan’s financial, education, 

audio-visual, courier and other services. Unfortunately, data on U.S. 

bilateral trade in services with Jordan are not available from BEA, and 

other data are limited, but the UN does provide sufficient data to gain 

some picture of Jordan’s services trade with the world by service sector 

category. 

Trade in Services 

For 2007, the UN estimates that total (world) service exports by Jordan 

reached a level of $2.9 billion in current dollars. This represents growth of 

96 percent compared with the 2001 level. An industry breakdown, based 

on 2006 data, shows that 66 percent of service exports were in the travel 

sector and 21 percent were in the transport sector. The remaining 13 

percent of service exports were in “other services,” and within the “other 

services” category, “other business services” was the dominant category.” 

The UN estimates that, in 2007, Jordan’s service imports (world) totaled 

almost $3.1 billion. This level represents growth of over 78 percent 

between 2001 and 2007. An industry breakdown, based on 2006 data, 

shows that almost 55 percent of service imports were in the transport 

sector, and 23 percent were in the travel sector. The remaining 22 percent 

 

4

We also performed a similar analysis grouping apparel and nonapparel categories 

separately using the same pre- and post-FTA time periods. Here we found that the “apparel” 

results all had greater annual average rates of growth in the pre-FTA period, while a 

majority of the “nonapparel” categories, 52 percent, had greater growth rates in the postFTA period. We believe that this result is due to the influence of the QIZs, which came 

about in the pre-FTA period and affected mostly the apparel industries. Unlike the apparel 

categories, the textile category, however, had greater growth in the post-FTA period. 

Page 90 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

of service imports were in “other services,” notably, insurance, “other 

business services,” and government services.5

The United States has a bilateral investment treaty with Jordan and, as a 

result, the U.S.-Jordan FTA did not include an investment chapter. The 

available data from BEA for U.S. FDI with Jordan is rather sparse, while 

some aggregate data is available from the United Nations Conference on 

Trade and Development (UNCTAD). 6

FDI 

The most recent BEA figures show that, as of 2007, U.S. outward FDI in 

Jordan was only $119 million. This figure is up from $39 million in 2006. 

The 2007 level of FDI represents a minuscule share of total U.S. outward 

FDI (at 0.004 percent). Data for most other years are suppressed to 

prevent disclosure of individual company information. As a result, it is not 

possible to review pre- and post-FTA results using BEA data. Regarding 

inward investment in the U.S. by Jordanian entities, BEA data is mostly 

suppressed for disclosure purposes. The last entry is for 2001 (the last year 

before the FTA) and totaled only $9 million. 

Some UNCTAD FDI data is available for Jordan, which helps put U.S. FDI 

in perspective. Total inward FDI from all countries (including the United 

States) reached $14.5 billion in 2007—a substantial sum. Inward FDI has 

been growing steadily since the mid-1990s, and from 2002 to 2007 grew 

from about $4 billion to over $14.5 billion, or more than tripling. This 

period has coincided with the FTA being in force. However, comparing the 

level of inward FDI from the UNCTAD data to the level of U.S. FDI from 

the BEA data suggests that U.S. FDI has not played a substantial role in the 

growth of FDI in Jordan. 

U.S. and Jordanian 

Perspectives on Issues 

Relating to the FTA 

AmCham in Jordan noted that they have seen increased levels of imports 

coming from the United States, and it believed there would be more 

exports from the United States in the future, especially with the weaker 

dollar. At the present, many businesses pay no customs duty on various 

products such as in the automotive or spare parts industries, so they 

believe that there are some really big advantages since the FTA. According 

 

5

Note that the available data do not tell us the U.S. share of these service exports and 

imports. 

6

Note that BEA data on sales by affiliates of U.S. multinational corporations (MNC) 

(majority-owned funding affiliates, MOFA) is not available for Jordan. 

Page 91 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

to an AmCham official, Jordanian importers are flocking to the United 

States and with the FTA, they will witness greater imports. The U.S. 

textiles and apparel sector noted that the Jordan FTA was one of the most 

important FTAs to their industry, although their views were divided on the 

issue. The apparel manufacturers and importers were more in favor of the 

Jordan FTA, since they favored the Jordanian FTA’s less burdensome rules 

of origin, while the textile manufacturers explained that the increased 

imports cause them production, jobs, and exports. 

From a Jordanian perspective, some officials and business people have 

expressed concerns including: (1) difficulty in meeting export standards, 

especially SPS standards for agricultural products and only one Animal 

and Plant Health Inspection Service person in Middle East and North 

Africa; (2) complex customs procedures; (3) lack of knowledge on 

technical labeling issues that affect exports; (4) a firm’s need for an agent, 

especially in the food sector, in the United States; (5) a tendency to believe 

that the FTA is only for large firms to export under; and (6) a lack of 

knowledge of logistics in the United States and of handling and 

transportation fees. 

As far as IPR, the majority of Jordanian pharmaceutical businesses 

manufacture generic medicines, and there are concerns that the IPR 

provisions of the FTA are hurting the generic industry. One 

pharmaceutical business person in Jordan, whose company specializes 

primarily in generic medicines, noted some frustration that there were 

issues with IPR related to data exclusivity that dealt with a lack of 

transparency in rights and obligations. According to a 2007 study by 

Oxfam on Jordan’s pharmaceutical industry, because of the “TRIPS plus” 

provisions of the WTO and the Jordan FTA, many Jordanian 

pharmaceutical firm’s generic medicines are precluded from the market 

through an acceptance procedure called “data exclusivity.” Through data 

exclusivity, drug regulatory agencies are prevented for a period of 5 years 

from using the clinical trial data developed by the originator company to 

establish the safety and efficacy of the medicine for market approval of a 

generic drug that had already been shown to be equivalent to the original 

one. These delays, according to Oxfam, impede or prevent generic 

competition and can lead to higher prices than would otherwise be the 

case.7

 In contrast, the U.S. pharmaceutical industry, represented by the 

 

7

Oxfam, “All Costs, No Benefits: How TRIPS-Plus Intellectual Property Rules in the USJordan FTA Affect Access to Medicines,” Oxfam Briefing Paper, March 2007. 

Page 92 GAO-09-439 Free Trade Agreements
Appendix II: Commercial/Economic Results of 

the Jordan FTA 

Pharmaceutical Research and Manufacturers of America (PhRMA), noted 

that Jordan is using FTA-related enhancements in IPR to help them attract 

investment in pharmaceutical production.8, 9

There are some USAID commercial/economic programs that led up to and 

currently support the FTA. For example, the Tijara Initiative, funded by 

USAID, is a private-public sector partnership to strengthen two-way trade 

between Jordan and the United States, promote inward investment, raise 

public awareness about the U.S.-Jordan FTA and communicate 

opportunities, and enhance public-private cooperation to create a business 

environment conducive to trade. Also, an initiative called Tatweer, an 

economic development project funded by USAID and managed by the 

Jordan Business Development Center, has conducted workshops for small 

and medium-sized businesses on how to export under the FTA. 

 

8

For evidence of this, PhRMA cites a paper by Michael Ryan, “Intellectual Property 

Reforms, Pharmaceuticals, and the Health Competitiveness in Jordan: Misunderstanding 

and Misinformation from Oxfam International,” Creative & Innovative Economy Center, 

George Washington University Law Center (Washington, D.C.: 2007). 

9

For more information on IPR and international trade policy and public health policy, see 

GAO, Intellectual Property: U.S. Trade Policy Guidance on WTO Declaration on Access to 

Medicines May Need Clarification, GAO-07-1198 (Sept. 28, 2007). 

Page 93 GAO-09-439 Free Trade Agreements
Appendix III: Commer

of the Singapor

cial/Economic Results

e FTA 

Page 94 GAO-09-439 

Appendix III: Commercial/Economic Results 

of the Singapore FTA 

The Singapore FTA, which entered into force on January 1, 2004, 

represented an agreement with an already well-established U.S. trading 

partner and an economically advanced nation. While it is a geographically 

small island city-state, Singapore is a high-income country that is one of 

the most open and competitive in the world in terms of international trade 

and foreign investment. The FTA appears to have helped increase bilateral 

merchandise trade, as well as improved the market access for services and 

the climate for foreign direct investment. Enhanced intellectual property 

rights protections also appear to have had a positive impact on commerce 

and investment and are providing a model for other agreements. 

Singapore’s Economy and 

International Trade 

Openness to trade has long been a hallmark of Singapore’s economy. 

Recently, total trade in goods and services has accounted for about four 

times the GDP. Singapore has historically maintained very few trade 

barriers, and according to World Trade Indicators the country ranks first 

in the world in trade openness, ease of doing business, and trade 

facilitation. At the same time, as a small nation, Singapore is subject to 

external market fluctuations and, as a result, strives to maintain its 

competitiveness by implementing policies that develop and diversify its 

economy. Since recovering from recession in the early 2000s, Singapore 

has shown strong GDP growth through 2008. Its per capita gross national 

income (GNI) places it on a par with other high-income countries; on a 

purchasing power basis, its rank is equivalent to that of the United States. 

It has maintained strong economic fundamentals and prudent 

macroeconomic policies that have kept unemployment and inflation low, 

although current worldwide economic conditions are presenting 

challenges. In addition to the FTA with the United States, Singapore has 

been aggressive in signing FTAs with a number of countries including the 

Association of Southeast Asian Nations (ASEAN), New Zealand, Japan, 

Europe, Australia, India, and most recently, China. 

The United States has been an important bilateral partner for Singapore. 

While regional partners have come to encompass a greater share of trade, 

as of 2005, the United States was still Singapore’s second largest export 

market, and the United States remains Singapore’s second ranked source 

of imports, behind Malaysia and just ahead of China. In 2008, Singapore 

was the United States’ 12th largest export market and the 27th largest 

importer to the United States. 

 Free Trade Agreements 
Appendix III: Commercial/Economic Results 

of the Singapore FTA 

As Singapore1 was already an open economy for U.S. products (99 percent 

duty-free), the FTA removed the few remaining tariffs on U.S. exports—on 

products such as alcoholic beverages. Meanwhile, the United States 

agreed to remove tariffs on most (about 92 percent) Singapore goods. The 

remaining U.S. tariffs are to be phased out over 3-10 years. A provision 

extending preferences to a limited amount of textile and apparel imports 

made without U.S. or Singapore yarn, for a limited time, was also included. 

Key Market Access and 

Other Commercial and 

Regulatory Issues 

With trade in goods already open, a key focus of the Singapore FTA was 

providing greater access in the market for services and an even more 

favorable investment climate. Substantial access was provided across a 

wide spectrum of services, using a “negative list” approach,2

 and this 

process was to be facilitated by commitments on nondiscriminatory 

treatment and regulatory transparency. Market access commitments in 

services span a range of sectors. Some of the more significant service 

sectors benefiting from the FTA include the following: 

• banking, with lifting the ban on new banking licenses, expansion of 

locations, and access to ATM networks; 

• insurance, with the ability to establish a market presence, offer marine, 

aviation and transport insurance (MAT), and expand the provision of 

insurance services in many lines; 

 

1

For more detailed description of the Singapore FTA and other information see: The United 

States-Singapore Free Trade Agreement: Message from the President of the United States 

transmitting a draft of proposed legislation and supporting documents to implement the 

United States-Singapore Free Trade Agreement (FTA), pursuant to 19 U.S.C. 

3805(a)(1)(A) and (B) 108th Congress, 1st Session, House Document 108-100, July 16, 

2003; Dick K. Nanto, The U.S.-Singapore Free Trade Agreement: Effects After Three Years 

(Washington, D.C.: Congressional Research Service, RL34315, Jan. 7, 2008); Dick K. Nanto, 

The U.S.-Singapore Free Trade Agreement (Washington, D.C.: Congressional Research 

Service, RL31789, June 15, 2004).

2

The comprehensive inclusion of all service sectors, unless otherwise specified in the list of 

reservations, under the specific disciplines of the services chapter and the general 

disciplines of the trade agreement. A “negative list” approach requires that discriminatory 

measures affecting all included sectors be liberalized unless specific measures are set out 

in the list of reservations. This contrasts with the “positive list” approach, which involves 

the voluntary inclusion of a designated number of sectors in a national schedule indicating 

what type of access and what type of treatment for each sector and for each mode of 

supply a country is prepared to contractually offer service suppliers from other countries. 

(http://www.sice.oas.org/Dictionary/SV_e.asp) 

Page 95 GAO-09-439 Free Trade Agreements
Appendix III: Commercial/Economic Results 

of the Singapore FTA 

• securities and related financial services, with the ability to establish a 

market presence and offer expanded pension and portfolio management 

services; 

• express delivery services; 

• professional services in a number of areas; and 

• telecommunications, with the ability to compete on nondiscriminatory 

basis in access to networks and providing services, along with improved 

regulatory transparency. 

According to USTR, the FTA contained cutting-edge provisions on 

electronic commerce. The parties agreed not to discriminate on digital 

products delivered electronically (via Internet) and not to charge customs 

duties on such products. These commitments apply as well to services, 

such as financial services, provided electronically. 

With the United States already a large investor in Singapore, the FTA has 

provisions to improve the investment climate and provide further 

protections. The agreement assures legal protections for all forms of 

investment in Singapore, and national treatment, except for those sectors 

specifically exempted via a “negative list” approach. Also, a transparent 

dispute settlement process is provided. 

In submitting the agreement to Congress, the President noted that the FTA 

provided for a very high level of IPR protection including state-of-the-art 

protections for trademarks and digital copyrights, as well as expanded 

protection of patents and proprietary information. The agreement also 

provides for strong enforcement and tough penalties, including the 

establishment of actual damages for violations. 

The FTA contains a number of provisions in other areas such as 

competition policy, government procurement, customs procedures, 

regulatory transparency, visas for professionals, labor and environmental 

provisions, and dispute settlement. These provisions are noteworthy in 

part due to the relatively large role played by the state and state-linked 

corporations in Singapore. 

Page 96 GAO-09-439 Free Trade Agreements
Appendix III: Commercial/Economic Results 

of the Singapore FTA 

Observed Results of the 

FTA in Merchandise Trade, 

Services, and Foreign 

Direct Investment 

While many factors affect the commercial and economic results in the 

post-FTA period (2004-2008), observed results show greater overall trade 

and investment, and growth in trade in a number of sectors following the 

implementation of the FTA. 

Overall two-way trade (import plus exports) between the United States 

and Singapore was $41.4 billion in 2008, an increase of 42 percent over 

2003, the year prior to FTA implementation. U.S. trade with Singapore 

prior to the FTA was in deficit or close balance, but after the FTA, U.S. 

exports to Singapore grew more than U.S. imports, leading to a positive 

net trade balance. 

Merchandise Trade 

The U.S. trade surplus with Singapore increased about five times during 

the first year of FTA implementation, reaching $3 billion in 2004, $3.6 

billion in 2005, $4.2 billion in 2006, 4.5 billion in 2007, and $9.9 billion in 

2008. The level of U.S. exports increased to $25.7 billion in 2008, an 

increase 9 percent over 2007, and a 72 percent increase over 2003. U.S. 

imports from Singapore grew to a level of $15.7 billion in 2008, an increase 

of 10 percent over 2003, but a decrease of almost 18 percent since 2007. 

This dramatic decline in Singapore’s trade reflects the global financial 

downturn and the substantial role of trade in Singapore’s economy. 

As figure 6 shows, the U.S. share of total world exports to Singapore has 

declined since 1999, from 17 to 12 percent, as the trend has continued into 

the post-FTA period. However, this trend has also characterized some of 

Singapore’s other major trading partners, such as Malaysia and Japan. 

China’s exports to Singapore, however, have grown since 1999, from 5 to 

12 percent in 2007, dropping to 11 percent in 2008. 

Page 97 GAO-09-439 Free Trade Agreements
Appendix III: Commercial/Economic Results 

of the Singapore FTA 

Figure 6: Market Share of the Top Five Exporting Countries to Singapore, 1999-2008 

Sources: GAO analysis using data from the World Trade Atlas, Global Trade Information Service (GTIS), in

cooperation with the Economic Research Service, U.S. Department of Agriculture (USDA).

Year

U.S.-Singapore FTA

Percentage of market share

0

2

4

6

8

10

12

14

16

18

20

United States

Japan

Malaysia

EU

China 

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Despite the overall decline in share of exports going into Singapore, the 

United States remains a strong presence, despite several other major trade 

agreements by Singapore with key trading partners, such as China, 

Malaysia, and Japan. 

By value for 2008, the top U.S. exports to Singapore were semiconductors 

and related devices; fuel oil; civilian aircraft; other industrial machinery; 

and drilling and oil field equipment. Top valued U.S. imports from 

Singapore in 2008 included computer accessories; medicinal, dental, and 

pharmaceutical preparations; semiconductors and related devices; 

industrial organic chemicals; and other scientific, medical, and hospital 

equipment. 

Across product categories, we also calculated the differences between preand post-FTA average annual growth rates for the top 25 U.S. exports and 

imports in value with Singapore. Tables 4 and 5 display the top 25 end use 

categories for U.S. export and import categories with Singapore: their 

Page 98 GAO-09-439 Free Trade Agreements
Appendix III: Commercial/Economic Results 

of the Singapore FTA 

description ranked by growth rate, their dollar value, their rank by dollar 

value, their pre-FTA growth rate, post-FTA growth rate, and change in 

growth between the two periods. As table 4 shows, we found that 23 out of 

the top 25 export categories by value, or 92 percent, had grown faster after 

the FTA came into force. For U.S. imports from Singapore, table 5 shows 

that 64 percent of the top product categories experienced higher annual 

average growth after the FTA came into force (for a more detailed 

discussion of the methodology of this analysis, see app. I). 

Table 4: U.S. Exports to Singapore: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and 

Change in Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories ranked 

by largest percentage change in growth rate 

Dollar 

value

2008 

Rank

 by value 

2008

Pre-FTA 

growth Rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change 

in growth 

rates

Drilling and oil field equipment includes rigs and platforms $1,448,294 5 7% 37% 30%

Generators, transformers, and accessories 305,038 20 -4 21 25

Fuel oil 1,986,344 2 15 35 20

Semiconductors and related devices 2,434,835 1 -17 3 20

Industrial engines, pumps, compressors, and generators 623,417 14 1 19 18

Industrial organic chemicals 887,873 9 -2 14 16

Other industrial machinery 1,590,274 4 -10 6 16

Excavating, paving and construction machinery 267,728 22 -4 11 15

Laboratory testing and control instruments 248,713 24 5 20 15

Plastic materials 822,127 10 -1 14 14

Minimum value shipments 672,591 12 -5 8 14

Other-manufactured and unmanufactured 430,149 18 -3 9 12

Parts for civilian aircraft 987,122 8 1 11 10

Other chemicals (coloring agents, photographic chemicals, 

printing inks, paint) 656,976 13 1 11 10

Materials handling equipment 252,546 23 -3 7 10

Electric apparatus and parts, n.e.c. 619,950 15 -10 -4 5

Finished metal shapes and advanced metal mfgrs, incl. 

advanced steel 275,503 21 11 16 5

Measuring, testing, and control instruments 801,269 11 -5 -1 4

Miscellaneous domestic exports and special transactions 215,543 25 4 8 4

Other scientific, hospital and medical equipment 361,593 19 -1 3 4

Telecommunications equipment 570,442 17 -2 1 4

Engines for civilian aircraft 1,398,740 6 7 8 1

Computer accessories, peripherals and parts 1,052,448 7 -8 -8 0

Page 99 GAO-09-439 Free Trade Agreements
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of the Singapore FTA 

Dollars in thousands 

End use category description–top 25 categories ranked 

by largest percentage change in growth rate 

Dollar 

value

2008 

Rank

 by value 

2008

Pre-FTA 

growth Rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change 

in growth 

rates

Other petroleum products 595,732 16 11 9 -3

Civilian aircraft, complete-all types $1,916,489 3 34% 6% -28%

Sources: GAO analysis using end use data from Commerce and ITC. 

Table 5: U.S. Imports from Singapore: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and 

Change in Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories ranked 

by largest percentage change in growth rate 

Dollar 

value

2008 

Rank 

by value 

2007

Pre-FTA 

growth rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change in 

growth

 rates

Woodworking, glass working, and plastic and rubber molding 

machinery $139,798 16 -18% 111% 129%

Industrial organic chemicals 1,017,728 5 12 105 93

Other chemicals (coloring agents, photographic chemicals, 

printing inks, paint) 73,873 25 -13 68 81

Other parts and accessories 240,198 11 -14 27 41

Computers 160,647 15 -33 -11 22

Household and kitchen appliances 111,544 20 -9 12 21

Photo and service industry machinery and trade tools 281,030 10 -6 15 21

Laboratory testing and control instruments 122,878 19 10 29 19

Semiconductors and related devices 1,361,468 3 -19 -2 17

Telecommunications equipment 544,550 7 1 13 12

Parts for civilian aircraft 110,859 21 1 12 11

U.S. goods returned, and reimports 1,342,962 4 -5 5 10

Electric apparatus and parts 323,875 9 -8 1 9

Minimum value shipments 96,407 23 -8 0 8

Engines for civilian aircraft 229,404 12 25 28 4

Other scientific, medical and hospital equipment 574,365 6 5 7 3

Computer accessories, peripherals and parts 4,276,149 1 -12 -12 0

Other (clocks, portable typewriters, other household goods) 526,541 8 8 7 -1

Books, magazines, and other printed matter 132,821 18 -1 -3 -2

Measuring, testing, and control instruments 183,510 13 1 -5 -6

Radios, phonographs, tape decks, and other stereo 

equipment and parts 101,451 22 -9 -16 -7

Other industrial machinery 137,826 17 5 -3 -8

Other (boxes, belting, glass, abrasives, etc.) 90,738 24 12 0 -12

Page 100 GAO-09-439 Free Trade Agreements
Appendix III: Commercial/Economic Results 

of the Singapore FTA 

Dollars in thousands 

End use category description–top 25 categories ranked 

by largest percentage change in growth rate 

Dollar 

value

2008 

Rank 

by value 

2007

Pre-FTA 

growth rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change in 

growth

 rates

Medicinal, dental and pharmaceutical preparations, including 

vitamins 2,391,790 2 27 15 -12

Plastic materials $178,816 14 51% 9% -43%

Sources: GAO analysis using end use data from Commerce and IYC. 

Factors other than the FTA were important in trade between the United 

States and Singapore during this period including other bilateral and 

regional trade, for instance the fact that Singapore is a market platform for 

many countries, competition by other Asian suppliers in the U.S. market, 

and growth, among other market dynamics. For example, Singapore is part 

of many Asian regional trade agreements such as the ASEAN Free Trade 

Area, which could affect the level of trade with other more distant trading 

partners such as the United States.3

 Also however, the United States and 

Singapore have similar degrees of openness prior to the U.S.-Singapore 

FTA, which could suggest an even greater amount of trade between the 

countries following the agreement. 

The United States traditionally has maintained a positive trade balance in 

services, both overall and with Singapore specifically. Furthermore, the 

United States has experienced strong growth in its overall services trade 

since 2004, a period that happens to coincide with the implementation of 

the Singapore FTA. To assess the growth of services trade overall, and in 

the context of the FTA, we took an average of the levels in 2001 through 

2003, the 3 years prior to the FTA, and compared it with 2007 levels. The 

total (all countries) U.S. exports of services are almost 71 percent higher, 

and U.S. imports of services have grown 61 percent. The overall U.S. trade 

surplus in services in 2007 was nearly $139 billion. 

Trade in Services 

U.S. exports of services to Singapore have grown in the post-FTA period 

and were about 24 percent higher in 2007 compared with the pre-FTA 

period (2001-03). This represents a decline, however, in the share of total 

 

3

The Association of Southeast Asian Nations or ASEAN was established in 1967 in Bangkok 

by the five original member countries, Indonesia, Malaysia, Philippines, Singapore, and 

Thailand. Brunei Darussalam joined on 1984, Vietnam on 1995, Lao PDR and Myanmar on 

1997, and Cambodia on 1999. Launched in 1992, the ASEAN Free Trade Area aims to 

promote the region’s competitive advantage as a single production unit. The elimination of 

tariff and nontariff barriers among member countries is expected to promote greater 

economic efficiency, productivity, and competitiveness. 

Page 101 GAO-09-439 Free Trade Agreements
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of the Singapore FTA 

U.S. exports going to Singapore, as overall U.S. service export growth has 

been more rapid than that with Singapore. However, most major service 

sectors (categories) of exports to Singapore have shown strong growth in 

the post-FTA period. In particular, the “other private services” category 

has almost quadrupled, and within this group, “business, professional and 

technical services” is up over 800 percent. Royalties and license fees had 

exhibited strong growth through 2006, although 2007 has shown a decline 

from the 2006 level. 

U.S. imports of services from Singapore, in contrast with exports, have 

grown significantly in the post-FTA period, up 90 percent in 2007 

compared with the pre-FTA period level. This represents an increase in 

Singapore’s share of all U.S. service imports, although its share in 2007 

was still a modest 1.1 percent. All the major categories of services imports 

from Singapore have grown; in particular, “other private services” are up 

almost 800 percent and, within that category, “business, professional and 

technical services” are over 12 times higher in the post-FTA period. The 

“royalties and licensure fees” category was almost 140 percent higher. 

Overall, total (all countries) U.S. FDI (both outward and inward) has 

shown strong growth in the period since 2004. Total outward U.S. FDI 

stocks reached a level of almost $2.8 trillion in 2007. Comparing this 2007 

level with the average of the 3-year period 2001-2003 shows that U.S. 

outward FDI was 73 percent higher. As for FDI in the United States 

(inward), in 2007, it reached a level of almost $2.1 trillion. Comparing 2007 

to the average of the 2001-2003 period, FDI in the United States is 54 

percent higher. 

FDI 

In 2007, the U.S. stock of FDI in Singapore (outward) reached a level of 

over $82 billion. Compared with the period prior to the FTA (2001-2003), 

this level is 73 percent higher. Since this growth rate corresponds to that 

of overall U.S. FDI, it implies that Singapore’s share of U.S. FDI has 

remained stable at about 3 percent of total. U.S. FDI in Singapore is 

concentrated in financial services and manufacturing. Recently released 

data from BEA show that, in 2007, over 62 percent of the total U.S. stock 

of FDI in Singapore was in holding companies.4

 This figure may reflect the 

role of Singapore as a base for investment, not only in Singapore, but 

throughout the region. Including banking and finance with the holding 

 

4

A holding company is a corporation that limits its business to the ownership of stock in 

and the supervision of management of other corporations. 

Page 102 GAO-09-439 Free Trade Agreements
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of the Singapore FTA 

company figure, the total financial sector-related U.S. FDI constitutes 

about 70 percent of the U.S. total in Singapore. About 17 percent of U.S. 

FDI in Singapore is in the manufacturing sector. Breaking down the 

manufacturing U.S. FDI category, the computer and electronics category 

constitutes 60 percent of total manufacturing FDI; transportation 

equipment, chemicals, and machinery each constitute about 10 percent of 

total FDI. 

While Singapore’s share of foreign investment in the United States (inward 

FDI) was less than 0.5 percent in 2007, the level of FDI in the United States 

by Singaporean firms has grown over 370 percent since 2003 (the year 

before the FTA was implemented). While BEA sector data do not provide a 

complete breakdown (disclosure limited), Singapore government data 

suggest that their FDI in the United States is concentrated in financial and 

insurance services, and also in manufacturing. 

A useful indicator of greater economic integration is the growth in sales by 

majority-owned foreign affiliates (MOFA) of U.S. multinational 

corporations (MNC). These sales can be viewed as a complement to FDI in 

so far as the investment in foreign affiliates leads to greater access to the 

domestic market. In fact, sales by foreign affiliates can exceed the amount 

of cross-border trade in goods and services. Data for sales by U.S. MOFAs 

in Singapore in 2006 totaled over $193 billion, of which $182 billion was in 

goods and over $9.3 billion was in services. Compared with the 3-year 

average prior to the FTA (2001-2003), total U.S. affiliate sales grew 

117 percent, with sales of goods growing 123 percent, and services, 

growing 48 percent. 

U.S. and Singaporean 

Perspectives on FTA 

Results 

Overall, U.S. and Singaporean officials, market participants, and experts 

are very positive about the trade and commercial results of the Singapore 

FTA. Singaporean trade officials cited export increases associated with 

lowering of U.S. tariffs, and U.S. government officials and private sector 

market participants have noted the sizable U.S. export increases to 

Singapore. 

Officials of both governments also noted substantial market openings in 

services trade and foreign direct investment resulting from the FTA. For 

example, a significant market opening has taken place in the financial 

services area, where Citibank has been able to substantially expand its 

operations by building a retail banking network. In addition, U.S. mutual 

fund and securities firms have expanded their asset management services 

in the Singapore market. In the FDI area, some increases in investment in 

Page 103 GAO-09-439 Free Trade Agreements
Appendix III: Commercial/Economic Results 

of the Singapore FTA 

manufacturing have occurred, but notable effects have been associated 

with a more favorable investment climate and enhancements in 

intellectual property rights (IPR) protection. These changes, in particular 

in IPR, appear to have had an impact across the board in merchandise 

trade, services and FDI. For example, the expanded IPR protection has 

been a factor for Lucas Films in making an investment in Singapore, where 

they are doing postproduction film work and conducting business 

development activities. Microsoft established a new software development 

center in Singapore. The pharmaceutical industry is also an excellent 

example of the interaction of a number of factors. IPR protection makes 

direct investment in Singapore more attractive for U.S. pharmaceutical 

firms. The incentives to invest are further enhanced by the efforts of the 

Singapore government and private sector to develop Singapore as a 

pharmaceutical manufacturing hub. As pharmaceutical firms develop their 

manufacturing capabilities in Singapore, this leads to increased exports 

(machinery and materials) from the United States with subsequent export 

activity (finished products) from Singapore, much of it back to the U.S. 

market. The professional services market may benefit as well from these 

activities. 

Page 104 GAO-09-439 Free Trade Agreements
A

the Chi

ppendix IV: Commercial/Economic Results of

le FTA 

Page 105 GAO-09-439 

Appendix IV: Commercial/Economic Results 

of the Chile FTA 

The Chile FTA entered into force on January 1, 2004. Chile, a small uppermiddle income country with an open economy and liberal trading regime, 

has rapidly increased trade with the United States and the world. The 

Chile FTA appears to have increased trade between the two countries, 

strengthened the regulatory framework for services and investment, and 

provided a template for other trade agreements between Chile and other 

countries. 

Chile’s Economy and 

International Trade 

Chile’s economy has had dramatic growth in GDP over the last two 

decades with reductions in poverty while its government has taken steps 

to stabilize its macroeconomy, perform structural reforms, and increase 

competitiveness. For 2008, Chile’s GDP was estimated at $245 billion 

(PPP) and GDP per capita at $14,900 (PPP) with a growth rate at 4 percent 

supported primarily by copper and other export earnings. Copper earnings 

have typically been about 10 percent of Chile’s total income. More recently 

however, with the global economic downturn, copper prices have fallen 

from highs of $4 per pound in 2008 to $1.50 per pound in early 2009, with 

the value of Chilean copper exports down 66 percent in March 2009 

compared with a year earlier. Since copper prices have been volatile over 

the years, the government has established a countercyclical 

macroeconomic policy accumulating surpluses in a sovereign wealth fund 

in years of higher copper prices, and only allowing deficit spending in 

years of lower copper prices. Also, according to the Organization for 

Economic Co-operation and Development (OECD), years of sustained 

growth has caused the poverty rate to decline precipitously from 38.6 

percent of the population in 1990 to 13.7 percent in 2006.1

 At the same 

time, while there was some improvement between 2003 and 2006, Chile’s 

level of income inequality has remained relatively high by Latin American 

and international standards.2

Chile’s principal export destinations in 2007 included China, the United 

States, and Japan, and its principal import partners included the United 

 

1

Organization of Cooperation and Development, OECD Reviews of Labour Markets and 

Social Policy - Chile, 2009. 

2

In 2007, the World Bank estimated Chile’s Gini coefficient, an index of income inequality, 

was at 54.9 percent, which is high by Latin American and world standards. The OECD 

estimated that the Gini coefficient for Chile was 53 percent during the mid-2000s, while the 

OECD average is at 0.31. The values of the Gini coefficient range between 0, “perfect 

equality” (everyone has the same income) and 1, which represents “perfect inequality” (or 

all income goes to one person). 

 Free Trade Agreements 
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

States, China, and Brazil. Overall, in 2008 Chile was the United States’ 24th 

largest export market, up from 35th in 2003. In addition to the United 

States, Chile has signed FTAs with numerous countries, including the 

Mercosur countries, Canada, Mexico, Central America, the EU, South 

Korea, the European Free Trade Association countries, China, Singapore, 

New Zealand, Brunei, India, Panama, Peru, Columbia, and Japan. In the 

world market, Chile’s exports include copper, fruit, fish products, pulp and 

paper, chemicals, and wine; its imports include petroleum, chemicals, 

electrical and telecommunication equipment, industrial machinery, 

vehicles, and natural gas. In agricultural products, because of opposite 

growing seasons, trade between the United States and Chile is 

complementary. The World Bank’s 2009 Doing Business report ranked 

Chile 40th out of 181 economies in its global overall rank of “ease of doing 

business.” 

Key Market Access and 

Other Commercial and 

Regulatory Issues 

The U.S.-Chile FTA is aimed at improving market access to one of South 

America’s most important economies and “leveling the playing field” for 

U.S. products. Chile had already entered FTAs with Canada, Mexico, and 

the EU, leaving many U.S. products at a disadvantage in the Chilean 

market because of existing tariffs. 

Prior to the FTA, Chile had remained a small trading partner with the 

United States over a long period. The United States was subject to a 

uniform 6 percent average most favored nation applied tariff rate, along 

with certain nontariff barriers on agricultural products. Nevertheless, 

Chile faced varying levels of tariffs on the U.S. side, although some 

products entered duty-free. The Chile FTA eliminates tariffs through five 

product-specific staging categories over a transition period that extends 

up to 12 years, from 2004 to 2016. For the United States, the agreement 

allows for 85 percent of all consumer and industrial goods to be duty-free 

immediately, with about 75 percent of all agricultural products duty-free 

within 4 years, and the rest eligible for duty-free status over time. For 

Chile, it allows for market access for 95 percent of all consumer and 

industrial goods immediately with 1.2 percent falling into the 12-year 

period. Access to each country’s market was immediate for certain 

products such as pork, some fruits and vegetables, and tree nuts while 

tariffs to beef, poultry, and some processed vegetables are eliminated in 

schedules over 4 to 12 years. 

In addition to reducing and eliminating tariffs, the agreement also contains 

provisions aimed at establishing a better, more transparent climate to 

foster trade and investment. The agreement restricts the application of 

Page 106 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

nontariff barriers, provides broadened coverage for U.S. service providers, 

improves access to the Chilean government procurement market, and 

provides for easier entry and exit of business persons. For example, the 

FTA addresses certain nontariff barriers through the recognition of U.S. 

food standards, the recognition of the U.S. meat inspection system, and 

the elimination of “price bands” for wheat and other agricultural imports, a 

system Chile has used to maintain prices of certain grain and vegetable oil 

products. Other commitments on merchandise goods in the FTA include 

an elimination of the luxury tax on automobiles over 4 years, as well as 

provisions for customs administration procedures. The agreement also 

uses a “negative list” approach to trade in services opening access to 

service markets such as financial services, telecommunications, insurance, 

and express delivery services. According to the 2003 Bush administration, 

the agreement also establishes a more secure, predictable legal framework 

for U.S. investors in Chile, including dispute settlement procedures. 

Moreover, the legal framework was to include higher standards and 

enforcement of intellectual property protections, building on the standards 

set in the WTO Agreement on Trade-Related Aspects of Intellectual 

Property Rights. It recognized the evolution and development of digital 

products and included provisions for their protection that were a 

breakthrough for the South American region. 

Observed Results of the 

FTA in Merchandise Trade, 

Services, and FDI 

After implementation of the FTA, total U.S. exports to Chile increased by 

365 percent, from $2.4 billion to $11.4 billion from 2003 to 2008. During the 

same time period, Chile’s imports from the United States rose from $4 

billion to $8.2 billion, or by 106 percent. Two-way trade between the 

countries increased from $6.4 billion in 2003 to $19.5 billion in 2008 or by 

204 percent between 2003 and 2008. The balance of trade showed a 

somewhat widening trade deficit for the United States from 1999 to 2007, 

which then turned into a trade surplus of $3.2 billion in 2008. 

Merchandise Trade 

During the period after the agreement came into force, the United States 

regained its overall market share in the Chilean market that it had lost 

before the agreement. Figure 7 shows that following the FTA, the United 

States regained market share that it had lost to Argentina in that market 

Page 107 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

prior to 2004.3 U.S. market share, which had been at 24 percent in 1998, 

had fallen to 15 percent in 2003. After the FTA, the United States regained 

its market share, which rose to 19 percent in 2008. 

es regained 

Figure 7: Market Share of the Top Five Exporting Countries to Chile, 1998 to 2008 

Sources: GAO analysis using data from the World Trade Atlas, GTIS, in cooperation with the

Economic Research Service, U.S. Department of Agriculture (USDA).

Year

U.S.-Chile FTA

Percentage of market share

0

5

10

15

20

25

United States

Korea, South 

Argentina 

Brazil 

China 

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

For U.S. exports to Chile, the highest end use categories by value for 2008 

were fuel oil, other petroleum products, civilian aircraft, materials 

handling equipment, and excavating, paving, and construction machinery. 

Looking at broader sectors, after the FTA came into force, Chile’s official 

trade statistics show that U.S. agricultural exports to Chile, including 

agricultural commodities, horticultural products, and livestock grew 

tenfold, from $25 million in 2004 to $256 million in 2007, representing 

 

3

Argentina is a member of Mercosur, a regional trade agreement including Brazil, 

Argentina, Paraguay, Uruguay, and Venezuela that Chile entered into as an associate 

member in 1996. 

Page 108 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

growth from 6 percent to 26 percent during this period.4 Top valued U.S. 

import categories from Chile included copper, fruits and preparations, fish 

and shellfish, nonmonetary gold, and steelmaking and ferroalloying 

materials. 

Across product categories, we also calculated the differences between preand post-FTA average annual growth rates for the top 25 U.S. exports and 

imports in value with Chile. Tables 6 and 7 display the top 25 end use 

categories for U.S. export and import categories with Chile: their 

description ranked by growth rate, their dollar value, their rank by dollar 

value, their average annual pre-FTA and post-FTA growth rates, and 

change in growth between the two periods. Table 6 shows that post-FTA 

growth rates were higher than pre-FTA growth rates for all, or 100 percent 

of the top 25 U.S. export categories to Chile, while table 7 shows that of 

the top 25 U.S. import categories from Chile, 52 percent were higher in the 

post-FTA than the pre-FTA period (for a more detailed discussion of the 

methodology of this analysis, see app. I). 

Table 6: U.S. Exports to Chile: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and Change in 

Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value

2008 

Rank by 

value 

2008

Pre-FTA 

growth rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change 

in growth 

rates

Civilian aircraft, complete-all types $630,343 3 -56% 99% 155%

Wheat 132,056 19 6 128 122

Fuel oil 2,844,925 1 -12 103 115

Corn 107,652 24 -20 57 77

Generators, transformers, and accessories 128,546 20 -25 31 56

Passenger cars, new and used 261,197 8 3 56 53

Telecommunications equipment 203,520 11 -19 20 40

Minimum value shipments 434,783 6 -8 30 38

Materials handling equipment 539,980 4 1 37 36

Plastic materials 366,887 7 -2 34 36

Newsprint and other paper products 109,192 22 -10 26 35

Industrial inorganic chemicals 192,547 13 1 31 30

Industrial organic chemicals 250,710 9 0 30 30

 

4

Central Bank of Chile. 

Page 109 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value

2008 

Rank by 

value 

2008

Pre-FTA 

growth rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change 

in growth 

rates

Excavating, paving, and construction machinery 525,030 5 -8 19 26

Other petroleum products 724,890 2 1 27 26

Photo and service industry machinery and trade tools 105,856 25 2 27 25

Computers 139,838 18 -4 21 25

Fertilizers, pesticides, and insecticides 230,725 10 5 29 24

Other chemicals (coloring agents, photographic 

chemicals, printing inks, paint) 189,247 14 -3 18 21

Trucks, buses, and special purpose vehicles 184,155 15 1 21 21

Other parts and accessories 126,254 21 1 21 20

Other-manufactured and unmanufactured 107,675 23 -8 8 17

Industrial engines, pumps, compressors, and generators 170,035 16 -2 12 14

Computer accessories, peripherals, and parts 158,089 17 -14 -1 13

Other industrial machinery $198,889 12 0% 12% 12%

Source: GAO analysis using end use data from Commerce and ITC. 

Table 7: U.S. Imports from Chile: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and Change 

in Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value

2008 

Rank 

by value 

2008

Pre-FTA 

growth rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change 

in growth 

rates 

Other precious metals $162,079 11 -31% 78% 110%

Pulpwood and woodpulp 30,461 23 -29 22 52

Finished metal shapes and advanced manufactures, 

except steel 66,091 15 -9 32 41

Miscellaneous nonferrous metals (cobalt, mercury, 

antimony, etc.) 55,896 16 5 36 30

Nonmonetary gold 379,228 4 -5 25 30

U.S. goods returned, and reimports 92,066 13 -8 21 28

Copper 2,695,147 1 6 26 21

Industrial inorganic chemicals 277,213 7 -2 19 20

Vegetables and preparations 40,978 18 -13 7 20

Farming materials, including farm animals and animals 

for breeding 174,353 10 0 14 14

Other (tobacco, waxes, nonfood oils, fatty acids, natural 

materials used in the preparation of medicines, dyes, 

and perfumes) 27,717 25 -2 11 13

Page 110 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value

2008 

Rank 

by value 

2008

Pre-FTA 

growth rate 

1999-2003 

Post-FTA 

growth rate 

2004-2008 

Change 

in growth 

rates 

Minimum value shipments 34,644 22 4 14 10

Wine and related products 223,817 8 2 8 6

Other (soft beverages, processed coffee, etc.) 30,202 24 36 35 -1

Fruits and preparations, including frozen juices 1,493,268 2 8 7 -1

Fish and shellfish 985,523 3 10 8 -2

Other (boxes, belting, glass, abrasives, etc.) 35,297 21 4 2 -2

Fertilizers, pesticides, and insecticides 37,940 19 -1 -4 -3

Other nonagricultural foods and food additives 70,490 14 11 7 -4

Steelmaking and ferroalloying materialsunmanufactured 305,604 6 25 18 -7

Lumber and wood in the rough 191,926 9 3 -12 -15

Automotive tires and tubes 37,064 20 4 -11 -16

Other-finished (shingles, molding, wallboard, etc.) 361,415 5 9 -13 -21

Plywood and veneers 104,289 12 29 7 -22

Industrial organic chemicals $41,470 17 20% -18% -38%

Sources: GAO analysis using end use data from Commerce and ITC. 

Factors other than the FTA were important in trade between the United 

States and Chile during this period including high commodity prices, 

exchange rates, other bilateral and regional trade and growth, among 

other dynamics of the market. For example, U.S. grain prices, as well as 

Chilean copper prices, reached record levels in 2008, which affected the 

value of imports and exports. However, the dramatic decline in both grain 

and copper prices in the later half of 2008, has also affected export 

earnings for both countries. Also, while in Chile, we were told that the 

lower value of the U.S. dollar relative to the Chilean peso made Chilean 

exports to the United States more expensive and U.S. imports relatively 

inexpensive. One Chilean academic noted that, with the low value of the 

U.S. dollar, the retail industry and construction in Chile have been thriving, 

partly due to cheaper U.S. imports. 

Commerce notes that the Chile FTA provided new market access for 

service industries, including groundbreaking transparency rules to ensure 

that service regulators operate fairly. Some of the key sectors expected to 

benefit from the agreement are computer and related services, 

telecommunications services, financial services, construction and 

engineering, express delivery, professional services (e.g., architects, 

Trade in Services 

Page 111 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

engineers, accountants, legal services), and distribution services (e.g., 

wholesaling, retailing, franchising). 

Recently revised data from the BEA show that U.S. services exports to 

Chile in 2007 were about $1.76 billion, less than one-tenth of 1 percent of 

the total. Comparing the 2007 figure with the 3-year average prior to the 

FTA, 2001-2003, exports to Chile were about 47 percent higher. This 

represents substantial growth and, given the very strong growth of overall 

U.S. services exports, it represents only a slight decline in the share of the 

U.S. total going to Chile. Of U.S. services exports to Chile, “other private 

services” represents the largest category at about 44 percent in 2007. The 

next largest services sector category is “travel” at about 25 percent with 

“other transportation” representing almost 16 percent. Comparing 2007 

with the 3-year average prior to the FTA, the “other private services” 

category has grown over 100 percent, and the subcategory “business, 

professional and technical services,” which constitutes over one-half of 

the “other private services” category, has grown about 168 percent. This 

strong growth seems consistent with the improved market access 

provided in the FTA. Financial services also are garnering a sizable share 

of “other private services” U.S. exports. In addition, the “royalties and 

licensure fees” category has grown over 140 percent, with computer and 

information services representing a sizable share of this category. 

We can infer whether the U.S. share of the Chilean services market has 

risen or fallen by looking at UN services data. These data show that total 

Chilean services imports from all partners totaled $9.95 billion in 2007. 

Comparing this figure with the 3-year average prior to the FTA (2001-

2003), we find that Chilean service imports grew 89 percent. If we compare 

this figure with BEA data on U.S. exports to Chile, we see that U.S. exports 

grew only 47 percent. So, given the sizable Chilean growth in worldwide 

service imports, we can infer that the U.S. share of Chilean imports has 

likely fallen in the post-FTA period. Nonetheless, the services market 

openings provided by the FTA seem to have shown some positive results. 

U.S. services imports from Chile in 2007 were only about $868 million, 

which is a very small percentage of overall U.S. service imports. 

Comparing the 2007 figure with the pre-FTA 3-year average, 2001-2003, 

service imports from Chile were about 19 percent higher. This modest 

increase, given the strong growth in U.S. services imports overall, suggests 

that services imports from Chile have declined as a share of the U.S. total. 

Travel, “other transportation,” and “other private services” represent 32 

percent, 24 percent, and 29 percent, respectively, of total U.S. service 

imports from Chile. “Other private services” has increased about 162 

Page 112 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

percent in the post-FTA period, and the largest sectors are education 

services and business services and professional and technical services, the 

latter of which has grown almost 700 percent in the post-FTA period. 

The Chile FTA has helped to consolidate Chile’s status as a secure location 

for foreign investment, according to Commerce. All forms of investment 

are covered by the FTA, including direct ownership of companies, real 

estate, intellectual property rights, government concessions and debt 

instruments. The IPR provisions of the FTA build on existing international 

standards, with emphasis on new and emerging technologies. The FTA 

includes state-of-the-art protection for trademarks and copyrights, 

expands protections for patents and undisclosed information, and calls for 

strong enforcement mechanisms. 

FDI 

In 2007, BEA data showed that the U.S. stock of outward FDI in Chile 

totaled $12.6 billion. This level represents less than 1 percent (0.45) of 

total U.S. outward FDI. Since 1998, Chile’s share of U.S. outward FDI has 

been under 1 percent of total and has shown a slow secular decline since 

before the FTA. Despite this secular decline, there has been growth in U.S. 

FDI since the FTA. A comparison of the 2007 level of FDI with the 3-year 

average prior to the FTA shows that U.S. FDI in Chile has increased 33 

percent. This is based on growth of 20 percent in 2004 and 11 percent in 

2007, while growth in 2005 and 2006 was 3 percent and 2 percent, 

respectively. Chilean government data show that historically, the United 

States and Spain have been the major foreign investors in Chile. However, 

more recent data (2007) show that Canada, the United States, and 

Colombia are now the largest foreign investors. 

U.S. FDI in Chile is distributed across several sectors, with no one sector 

strongly dominating U.S. FDI. The breakdown is as follows: finance and 

insurance (22 percent); manufacturing (17 percent); other industries (16.5 

percent); mining (11.5 percent); depository institutions (11.5 percent); 

wholesale trade (7 percent); and holding companies (7 percent). A 

breakdown of the manufacturing category (17 percent of total) excludes 

some categories for disclosure purposes, but available data show that 

chemicals comprise about 31 percent of U.S. FDI in manufacturing. 

Page 113 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

As for FDI by Chilean firms into the United States in 2007, the BEA reports 

a negative $430 million inward FDI.5

 Inward FDI had shown some growth 

in 2005 and 2006, reaching a positive $288 million in 2006. 

Data for sales by MOFAs of U.S. MNCs in Chile totaled about $14.8 billion 

in 2006, based on preliminary BEA data. Of this total, two-thirds (67 

percent) is sales of goods. Compared with the 3-year average prior to the 

FTA, total U.S. affiliate sales in Chile grew 72 percent, with sales of goods 

growing faster than sales of services. This suggests that U.S. MNCs are 

integrating well into the Chilean domestic market. 

U.S. and Chilean 

Perspectives on FTA 

Results 

Overall, Chilean officials and experts that we spoke with were very 

positive about the trade and commercial results of the FTA. One official, 

who was one of the major negotiators of the agreement, said that he 

thought the FTA provided an improved regulatory framework through 

which trade and investment can occur. The FTA was important on the 

cooperation side, in making changes in domestic legislation and diffusing 

this information to small-and-medium-sized enterprises and poorer regions 

in Chile. He explained that exports and imports between the United States 

and Chile had been increasing very fast, and trade with China and the EU 

also have increased. But the trade with China could be about 95 percent 

explained by copper and cellulosic goods. However, trade with the United 

States is much more diversified, and this is very important because it 

creates more employment within Chile. In agriculture, a representative of 

Chilean fruit and vegetable exporters provided examples of diversification 

of exports into new areas such as clementines, cranberries, and 

avocadoes. Also, according to AmCham in Chile, American firms have 

been particularly successful in exporting mining equipment and heavy 

machinery, as well as technological products such as computers. Here 

Chile’s 6 percent tariff was not trivial and the fact that the United States’ 

main competitors in the EU already had duty-free access meant they had 

been gaining market share at U.S. expense; since the FTA, U.S. firms have 

won most of this back. 

From a U.S. perspective, however, there is disappointment in Chile’s 

implementing its IPR obligations in the FTA. In 2007, Chile was moved 

 

5

A negative position for the stock of FDI seems odd but can occur due to a number of 

valuation adjustments to historical-cost positions, as discussed in Jeffrey H. Lowe, “Direct 

Investment, 2004-2007: Detailed Historical-Cost Positions and Related Capital and Income 

Flows,” Survey of Current Business (2008) 38. 

Page 114 GAO-09-439 Free Trade Agreements
Appendix IV: Commercial/Economic Results of 

the Chile FTA 

from the WTO’s Watch List to the Priority Watch List because of 

inadequate protection in IPR.6

 While noting concerns, there is some 

agreement by Chilean officials that they were actually making “a bit of 

progress” in these areas. Specifically, they cited recent progress in 

protecting copyrights, especially in the area of computer software. 

However, they acknowledged the IPR issues surrounding the presence of 

Chile’s large generic pharmaceutical industry. All in all, they felt that with 

more knowledge, more direction, and better infrastructure within Chile for 

determining clear-cut authority, they will move in the right direction 

toward strengthening IPR protection. However, U.S. officials and others 

believe that while Chile is working on this issue, they still have not gone 

far enough and are not fully committed to meeting the IPR provisions 

provided in the FTA. For example, representatives of AmCham in Chile 

noted that this was proving to be a problem for many U.S. businesses in 

that they were not only losing opportunities and sales, but also losing time 

and money in bringing law suits against firms that infringed upon their 

patent rights. 

From the Chilean side, several important issues remain outstanding. For 

instance, several officials that we spoke with hadn’t seen any improvement 

with trade on the services side, and moreover there was a general 

dissatisfaction with the level of U.S. investment in Chile since the FTA 

came into force. Some officials in Chile blamed this on the fact that the 

United States and Chile have not agreed on a bilateral tax treaty.7

 Others 

say that there are other reasons for this, including geography, the small 

size of their market, and that the fact that the United States is 

concentrating on other markets, in particular China and the “new” Europe. 

 

6

More specifically, this was due to concerns about inadequate protection against unfair 

commercial use for data generated to obtain marketing approval; insufficient coordination 

between Chile’s health and patent authorities to prevent the issuance of marketing 

approvals for patent-infringing pharmaceutical products (commonly known as “linkage”); 

continuing copyright piracy and trademark counterfeiting; and the need for greater efforts 

to meet standards set out in the TRIPS Agreement of the U.S.-Chile FTA and other 

international agreements. 

7

The main objective of a bilateral tax treaty is to avoid double taxation. Countries enter into 

bilateral income tax treaties to allocate taxing rights on cross-border income between the 

source and residence state, thus avoiding excessive taxation that could otherwise result if 

both countries applied the full force of domestic law. In addition, tax treaties mitigate 

differences between two tax systems by coordinating definitions and practices of taxation, 

and establish methods of cooperation in tax administration. 

Page 115 GAO-09-439 Free Trade Agreements
Appendix V: Co

t

mmercial/Economic Results of

he Morocco FTA

Page 116 GAO-09-439 

Appendix V: Commercial/Economic Results 

of the Morocco FTA 

The Morocco FTA entered into force on January 1, 2006, and was the 

second agreement, after Jordan, signed by the United States with an Arab 

country. Morocco, a lower-middle-income country in Northwest Africa, 

has experienced a gradual improvement in living standards and increased 

per capita income in recent years, through sound macroeconomic policies 

and sustained structural reforms. Three years after implementation of the 

FTA with the United States there have been increases in trade and 

investment for both partners, as well as strengthened regulatory and IPR 

laws. 

Morocco’s Economy and 

International Trade 

Morocco had a GDP estimated at $137.3 billion (Purchasing Power Parity, 

PPP) in 2008 ($75 billion in 2007) with a GDP per capita income estimated 

at $4,000 (PPP). While mining, textiles, tourism, and construction are 

important sectors in Morocco’s economy, the agricultural sector is also 

significant, accounting for about 15-20 percent of total GDP and about 40-

45 percent of the total workforce. However, the country is highly 

vulnerable to dry weather events. It suffered a severe drought in 2007, 

causing an 18 percent drop in agricultural production—real GDP growth 

fell significantly from 7.8 percent in 2006 to 2.7 percent in 2007. Morocco’s 

unemployment rate was estimated at about 10 percent in 2008. 

While certain business and trade indicators reveal Morocco is making 

reforms and moving forward, others show some competitive challenges 

remain. The World Bank’s 2009 Doing Business report shows that 

Morocco has made progress in improving administrative procedures and 

has introduced major reforms, such as credit verification and reducing the 

tax rate from 35 to 30 percent, but it still remains relatively lower ranked 

in indicators such as the labor code, collateral law, and commercial courts 

functioning. In addition, using revealed comparative advantage indicators, 

the International Monetary Fund (IMF) demonstrated some 

competitiveness challenges in the Moroccan goods market, although it has 

gained market share in the services sector. Specifically, this analysis 

suggested losses in comparative advantage in sectors such as clothing and 

fresh food and some increases in processed foods, leather products, and 

electronic goods. According to their analysis, some new emerging sectors 

included basic manufacturing and transportation equipment. A 

comprehensive trade indicator, the Trade Performance Index, revealed 

that, among other regional economies that export to the EU market, 

Morocco ranks at best third among similar exporters in fresh and 

processed food trade in that market. 

 Free Trade Agreements 
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

In external trade, Morocco’s overall trade deficit with the rest of the world 

was estimated at about $18.3 billion or close to 13 percent of GDP in 2008. 

In addition to joining the WTO in 1995, and entering into the FTA with the 

United States, it has entered into several bilateral and regional trade and 

economic agreements with other Middle East and North African countries, 

as well as European countries. These include an Association Agreement 

with the EU (2000), an FTA with Turkey (2006), and the Agadir Agreement 

between Morocco, Tunisia, Egypt, and Jordan (2006). Morocco’s 

merchandise trade is mainly focused on the EU, with France the largest 

trading partner. Morocco has proximity, cultural, and language ties with 

Europe, and with France in particular, which makes it a natural trading 

partner. In 2008, Morocco was the 80th largest trading partner with the 

United States. 

Key Market Access and 

Other Regulatory Issues 

The U.S.–Morocco FTA aimed to create a preferential regime across a 

negotiated range of goods and services and included commitments 

covering other trade-related matters. The agreement would phase out 

tariffs on certain goods over periods of up to 18 years, but it would neither 

cover every aspect of bilateral trade nor all goods under any tariff 

category. Some tariff benefits would be limited during a transition period. 

The aim of the FTA was to strengthen the bilateral partnership, raise living 

standards in both countries, improve the business climate and 

competitiveness of firms, provide predictable rules, and build on the 

commitments to the WTO. Also, the U.S.-Morocco FTA was part of an 

overall effort by the United States to create a Middle East Free Trade 

Agreement (MEFTA). 

Prior to the FTA, the United States was subject to an average tariff on all 

industrial goods exported to Morocco of 28 percent, with duties on certain 

products as high as 50 percent. There were also numerous nontariff 

barriers that restricted trade. After the FTA, many key U.S. export sectors 

became duty free immediately and others would gain access within 9 years 

benefiting industries such as information technology, machinery, 

construction equipment, and chemicals. Originating textile and apparel 

goods receive preferential duty treatment according to a 10-year tariff 

reduction schedule. 

For most agricultural goods, duty-free access was immediate over a period 

of years, although some remain exposed to tariffs. All tariffs on U.S. 

agricultural products are phased out within 15 years. Tariffs on feed 

grains, soybeans and soybean products, and nuts and processed food 

products were cut significantly or removed immediately. Because of the 

Page 117 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

size, sensitivity, and importance of the wheat sector to Morocco, a 

complex arrangement of tariff-rate quotas was negotiated for durum and 

common wheat. Some U.S. agricultural commodities have long phase-out 

periods or are subject to indefinite border protection in the agreement 

including wheat, beef, and chicken leg quarters and wings. Similarly, some 

Moroccan agricultural exports to the United States would face long tariff 

phase-out periods including dairy products, preserved tomato products, 

and dried onions. Notably, the FTA includes a supplier preference clause 

that guarantees the United States the best market access afforded any 

other subsequent supplier should Morocco negotiate future trade 

agreements. 

The FTA includes intellectual property protections and led Morocco to 

strengthen its own IPR laws. Specifically, it includes antipiracy provisions 

and the right for authorities to seize counterfeit and pirated goods. Test 

data and trade secrets for the purpose of product approval are protected 

against unfair commercial use for 5 years for pharmaceuticals and 10 years 

for agricultural chemicals. 

The FTA contains investment provisions that protect all forms of 

investment such as enterprises, debt, concessions, contracts, and 

intellectual property. 

Observed Results of the 

FTA in Merchandise Trade, 

Services, and FDI 

Unlike the period prior to the FTA, in 2006, 2007, and 2008, the United 

States held a trade surplus with Morocco. Although much of this increase 

can be attributed to an increase in Moroccan agricultural imports due to 

the drought and high commodity prices, our growth analysis shows that 

other U.S. product categories, such as plastic materials, excavating, 

paving, and construction machinery, and industrial organic chemicals also 

have benefited since the FTA was implemented. 

Merchandise Trade 

The United States had a merchandise goods trade surplus with Morocco of 

$626 million in 2008. Since 2005, the year before the FTA was 

implemented, total U.S. exports to Morocco increased by 190 percent, and 

imports from Morocco grew by 87 percent. Also, from 2007 to 2008, U.S. 

exports to Morocco grew by 13 percent, while Moroccan exports to the 

U.S. were 41 percent higher. Two-way trade, the sum of exports to and 

Page 118 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

imports from Morocco, has more than doubled from about $988 million in 

2005 to $2.39 billion in 2008. 

Overall, U.S. market share in the Moroccan market since implementation 

of FTA has increased marginally, but overall trade in this market is still 

dominated by EU trade (see fig. 8). While the EU had a 63 percent market 

share in 2007, the U.S. market share was only about 5 percent, with 

China’s market share at 8 percent in the Moroccan market. However, U.S. 

market share has increased in several important products/sectors, mostly 

in agriculture products. In cereals, for instance, in 2007, the U.S. market 

share in the Moroccan market was about 30 percent, up from 14 percent 

prior to the FTA. This was compared with the EU in this market of about 

41 percent in 2007, although they accounted for about 42 percent prior to 

the agreement. 

Figure 8: Market Share of the Top Five Exporting Countries to Morocco, 1999 -2007 

Source: GAO analysis using data from IMF’s DOT.

Year

U.S.-Morocco FTA

Percentage of market share

0

10

20

30

40

50

60

70

80

90

United States

Iran

Saudi Arabia

EU

China 

1999 2000 2001 2002 2003 2004 2005 2006 2007

Page 119 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

By product category, for U.S. exports to Morocco, the highest-valued end 

use categories for 2008 were civilian aircraft, coal and related fuels, 

oilseeds and food oils, corn, and dairy products and eggs. Top valued U.S. 

import categories from Morocco included sulfur and nonmetallic minerals, 

semiconductors and related devices, fertilizers, pesticides, and 

insecticides, vegetables and preparations, and cotton apparel and 

household goods. 

Across product categories, we also calculated the differences between preand post-FTA average annual growth rates for the top 25 U.S. exports and 

imports in value with Morocco. Tables 8 and 9 display the top 25 end use 

categories for U.S. export and import categories with Morocco including 

their description ranked by growth rate, their dollar value, their rank by 

dollar value, their average annual pre-FTA and post-FTA growth rates, and 

change in growth between the two periods. For the 25 largest U.S. export 

categories to Morocco, 60 percent had higher post-FTA annual average 

growth rates than pre-FTA growth rates (see table 8). As table 9 shows, 

post-FTA growth rates were higher in 40 percent of the largest 25 

categories of U.S. imports from Morocco over pre-FTA growth rates (for a 

more detailed discussion of the methodology of this analysis, see app. I). 

Table 8: U.S. Exports to Morocco: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and Change 

in Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value

 2008 

Rank

 by value

2008

Pre-FTA 

growth rate 

2002-2005 

Post-FTA 

growth rate 

2006-2008 

Change in 

growth rates

Steelmaking and ferro-alloying materials $18,700 16 -85% 13,575% 13,660%

Iron and steel mill products 27,223 13 -86 546 632

Dairy products and eggs 77,774 5 9 320 311

Other coal and related fuels 146,836 2 -32 235 267

Industrial organic chemicals 15,197 20 -35 213 247

Other oilseeds and food oils 122,598 3 -92 153 245

Wheat 59,886 7 -74 26 100

Other chemicals (coloring agents, photographic 

chemicals, printing inks, paint) 17,981 19 16 101 86

Other petroleum products 66,911 6 6 80 74

Plastic materials 58,912 8 -43 12 55

Excavating, paving, and construction machinery 26,497 14 -5 36 41

Industrial engines, pumps, compressors, and generators 31,558 12 59 98 38

Other industrial machinery 13,053 24 -16 6 22

Page 120 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth rate 

Dollar 

value

 2008 

Rank

 by value

2008

Pre-FTA 

growth rate 

2002-2005 

Post-FTA 

growth rate 

2006-2008 

Change in 

growth rates

Telecommunications equipment 18,875 15 0 4 4

Miscellaneous domestic exports and special transactions 13,977 21 -2 1 4

Newsprint and other paper products 18,426 17 12 9 -3

Civilian aircraft, complete-all types 233,432 1 8 -2 -9

Soybeans 48,231 10 2 -19 -21

Passenger cars, new and used 13,182 22 70 47 -23

Other agricultural materials for industry-unmanufactured 35,013 11 86 52 -34

Parts for civilian aircraft 18,256 18 63 24 -39

Corn 90,094 4 45 -18 -62

Electric apparatus and parts, not elsewhere classified 11,543 25 99 -13 -112

Nonfarm tractors and parts 13,106 23 396 268 -128

Other animal feeds, not elsewhere classified $54,258 9 313% 75% -238%

Sources: GAO analysis using end use data from Commerce and ITC. 

Table 9: U.S. Imports from Morocco: Top 25 Categories by Value, Pre- and Post-FTA Average Annual Growth Rates, and 

Change in Growth Rates between Periods 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth 

rate 

Dollar

 value

 2008

Rank 

by value 

2007

Pre-FTA 

growth Rate 

2002-2005 

Post-FTA

 Growth Rate 

2006-2008 

Change in 

growth 

rates 

Fertilizers, pesticides, and insecticides $65,213 3 -86% 5,620% 5,705%

Fruits and preparations, including frozen juices 26,721 9 -56 53 109

Generators, transformers, and accessories 2,802 23 -39 41 80

Sulfur and nonmetallic minerals 368,788 1 13 83 70

U.S. goods returned, and reimports 4,172 20 -49 5 55

Sporting and camping apparel, footwear, and gear 4,569 19 18 55 37

Apparel and household goods-cotton 43,992 5 -23 12 35

Minimum value shipments 5,130 18 6 34 28

Vegetables and preparations 53,299 4 1 20 20

Fish and shellfish 29,961 8 -1 11 12

Apparel and household goods-other textiles 29,994 7 -21 -24 -3

Other (clocks, portable typewriters, other household 

goods) 3,002 22 5 2 -3

Other (tobacco, waxes, nonfood oils, fatty acids, 

natural materials used in the preparation of 

medicines, dyes, and perfumes) 12,006 12 5 -2 -7

Page 121 GAO-09-439 Free Trade Agreements
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the Morocco FTA 

Dollars in thousands 

End use category description–top 25 categories 

ranked by largest percentage change in growth 

rate 

Dollar

 value

 2008

Rank 

by value 

2007

Pre-FTA 

growth Rate 

2002-2005 

Post-FTA

 Growth Rate 

2006-2008 

Change in 

growth 

rates 

Semiconductors and related devices 92,390 2 1 -16 -17

Tea, spices, and preparations 8,898 15 38 21 -18

Artwork, antiques, stamps, and other collectibles 1,990 24 6 -48 -53

Apparel and household goods-wool 13,716 11 42 -12 -54

Toiletries and cosmetics 8,680 16 89 11 -79

Footwear of leather, rubber, or other materials 9,290 14 67 -14 -82

Other parts and accessories 16,023 10 125 -4 -129

Electric apparatus and parts, not elsewhere classified 1,871 25 134 -19 -154

Liquified petroleum gases 3,953 21 236 20 -216

Food oils and oilseeds 9,672 13 288 -21 -309

Miscellaneous nonferrous metals (cobalt, mercury, 

antimony, etc.) 32,312 6 504 103 -401

Industrial organic chemicals $8,667 17 495% -18% -514%

Sources: GAO analysis using end use data from Commerce and ITC. 

Factors other than the FTA were very important in trade between the 

United States and Morocco during this period including weather, exchange 

rates, high commodity prices, and growth, among other dynamics of the 

market. For example, Moroccan officials noted that factors such as 

competition with Asian producers, the expiration of the multifiber 

agreement, and the exchange rate hampered Morocco’s export sales to the 

United States of textiles and apparel. U.S. apparel importers, however, told 

us that the strict rules of origin, combined with concerns over whether 

Moroccan suppliers could meet associated customs documentation and 

accounting requirements, were also factors dampening buyer’s initial 

enthusiasm in Moroccan apparel suppliers after the FTA, despite their 

reputation for fashion. 

Commerce notes that services (mainly tourism) represent about 54 

percent of Morocco’s GDP. The FTA helps reinforce the ongoing 

development of Morocco’s legal and regulatory reforms and development 

plans for a number of sectors that are of interest to U.S. service providers 

in areas such as telecommunications, e-commerce, and various 

professional services areas. The FTA has also helped to enhance 

transparency in Morocco’s regulatory framework. Unfortunately, data on 

U.S. bilateral trade in services with Morocco are not available from the 

BEA, and other data are limited, but the UN does provide sufficient data to 

Trade in Services 

Page 122 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

give some picture of Morocco’s services trade with the world by service 

category. 

For 2007, the UN estimates that Morocco’s total service exports to the 

world reached $13.4 billion, representing growth of over 230 percent since 

2001. Based on 2006 data, about 61 percent of services exports was in 

travel, 15 percent was in transport, and 24 percent was in “other services.” 

Over half of the “other services” category was composed of “other 

business services,” and government services and communications also 

represented sizable shares. 

The UN estimates that Morocco’s total services imports from the world 

attained a level of $5.97 billion, representing growth of 181 percent since 

2001. Based on 2006 data, about 45 percent of services imports were in 

“other services,” 39 percent were in transport, and almost 16 percent were 

in travel. Within the “other services” category, most was in either “other 

business services” or government services.1

Some data on FDI for Morocco are available from BEA, and they can be 

supplemented with data from UNCTAD and other sources. 2

 Regarding 

U.S. (outward) FDI in Morocco, the most recent figures show that, as of 

2007, the stock of U.S. FDI in Morocco was only $238 million. This level of 

FDI represents a minuscule share of total U.S. outward FDI (0.008 

percent). Although the small level of FDI represents a large increase over 

the level in 2006, the first year of the FTA, the level of U.S. outward FDI in 

2007 is still lower than total U.S. outward FDI during the period 2001-2003. 

FDI 

UNCTAD data provide figures for total inward FDI in Morocco, including 

FDI by the United States, that helps put these figures into perspective. 

Total inward FDI has been growing steadily, reaching $32.5 billion in 2007. 

In fact, between 2000 and 2007, inward FDI in Morocco had an annual 

average growth rate of over 50 percent. Comparing the level of inward FDI 

from the UNCTAD data with the level of U.S. FDI into Morocco from the 

 

1

Again, note that the available data do not tell us the U.S. share of these service exports and 

imports. 

2

Note that BEA data on sales by affiliates of U.S. MNCs (MOFAs) are not available for 

Morocco. 

Page 123 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

BEA data suggests that U.S. FDI has not played a significant role in the 

growth of investment in Morocco.3

Turning to outward FDI, UNCTAD data show that Morocco’s FDI appears 

to have been growing steadily, reaching $2.0 billion in 2007. The major 

countries in which Morocco invests include France, Canada, and 

Mauritania. By industry, Moroccan FDI is in mining and services 

(specifically, finance and business services). BEA data on inward U.S. FDI 

from Morocco shows a level of only $5 million, which did not change over 

the period 2004-2007. 

U.S. and Moroccan 

Perspectives on Issues 

Related to the FTA 

Although the Moroccan FTA has only been in force since 2006, from the 

U.S. perspective, there have been some promising commercial trends. For 

instance, the American Farm Bureau Federation (AFBF) told us that, since 

the FTA came into force in 2006, U.S. agricultural exports to Morocco have 

grown exponentially, and Morocco’s rank as a U.S. export destination for 

agriculture rose from 38th to 24th.4

 Most of this gain has been the result of 

grain exports; however, some horticultural products have also expanded 

trade. For instance, the apple industry began exporting to Morocco as a 

result of the duty-free tariff rate quota established under the U.S.-Morocco 

FTA. Until that FTA was implemented, the 50 percent tariff served as a 

very effective barrier to trade, according to the AFBF. On the investment 

side, an official of AmCham in Morocco noted that many U.S. businesses 

have interests in Morocco, including Pfizer and Coca Cola. As far as the 

textile industries, AmCham explained that Fruit of the Loom recently 

invested $166 million in a new business in Morocco that was linked to the 

U.S.-Morocco FTA. AmCham added that they invested because of the 

lower customs duties brought about by the FTA. 

From the Moroccan perspective, some government officials noted that so 

far they had not benefited from the agreement as they had hoped. 

Moroccan trade concerns included trade statistics discrepancies, the lack 

of sanitary and phytosanitary (SPS) certification issues for tomatoes; 

 

3

Secondary source data (AmCham) indicate that France constitutes 75 percent of FDI in 

Morocco, followed by Spain with 5 percent, while the United States has less than 1 percent 

(apparently consistent with BEA data). AmCham indicates that almost 60 percent of inward 

FDI is in telecommunications, and almost 12 percent is in tourism. 

4

The American Farm Bureau also noted that while these trends were promising, they were 

likely aided by recent global trade trends, such as the increases in global commodity prices. 

Page 124 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

customs obstacles; and a request for early phasing out of U.S. tariffs on 

certain Moroccan goods, which was not accepted. 5

Also, a private 

association of businesses in Morocco stated that “since Moroccan firms 

conduct business in French, the barrier to obtaining information about the 

rules, the U.S. market, and promotion is language.” Logistics was also cited 

as a problem. Some officials noted that there is no direct shipping line 

between Morocco and the United States, thereby increasing the costs for 

Moroccan firms. Currently, this business association envisions the port in 

Tangier (Tangier-Med) to act as a hub. Other Moroccan officials stated that 

the benefits of the agreement lie in the future. Other Moroccan officials 

stated that the benefits of the agreement lie in the future. For instance, one 

Moroccan academician agreed with this view and stated that one should 

not only look at the FTA’s impact on trade but also at the “spillover 

effects” of the agreement including technological changes, government 

institutions, and reforms. 

There are several trade and regulatory capacity building programs 

associated with the U.S.-Morocco FTA. Commerce’s Commercial Law 

Development Program (CLDP) Team works with developing countries in 

adjusting their laws relating to investments and regulatory policy to 

conform with new trade agreements. Along with the United States Agency 

for International Development, they helped Morocco institute commercial 

laws and arbitration laws, as well as insurance laws and pharmaceutical 

laws, without which firms could not invest previously. The Morocco New 

Business Opportunities (NBO) program was initiated in response to the 

FTA in 2006 and is a 4-year program financed by USAID in partnership 

with the Ministry of Commerce, Industry and Economic Upgrading. The 

main objective of the NBO is to assist Moroccan enterprises in the 

manufacturing sector to take advantage of exporting opportunities to the 

U.S. The two priority sectors that are part of their national strategy to 

 

5

Concerning the issue with the Moroccan trade statistical discrepancies, the two countries 

are having ongoing consultations among participants from the U.S. Census and USTR, and 

the Moroccan Office des Changes (Foreign Exchange Office) to resolve these issues. U.S. 

officials explained that after an examination of this issue by both countries, it was found 

that Moroccan statistics had failed to fully account for exports sent to the United States via 

third countries which resulted in U.S. import statistics showing a higher volume of imports 

from Morocco than Moroccan statistics show as being exported to the United States. 

Concerning partner countries meeting U.S. standards, including sanitary and phytosanitary 

standards, U.S. officials commented that it often takes many years for the Animal and Plant 

Health Inspection Service (APHIS) of the U.S. Department of Agriculture, to certify 

products. For Moroccan tomatoes, we were told that APHIS has published a draft 

regulation, which is the first step in the process. 

Page 125 GAO-09-439 Free Trade Agreements
Appendix V: Commercial/Economic Results of 

the Morocco FTA 

build capacity to develop and maintain long-term, commercial 

partnerships with U.S. companies are the textile and garment industry and 

the leather industry. Specifically, the NBO program provides technical 

support, training, and business contacts to Moroccan exporters in order 

for them to successfully promote their products in the U.S. market. 

Page 126 GAO-09-439 Free Trade Agreements
Appendix

Bi

Compared with Overa

 VI: Average Annual Growth Rates of

lateral Trade with FTA Partner Countries 

ll U.S. Trade 

Page 127 GAO-09-439 

Appendix VI: Average Annual Growth Rates 

of Bilateral Trade with FTA Partner Countries 

Compared with Overall U.S. Trade 

For each of the four selected FTAs, we examined the average annual 

growth in bilateral trade for several years prior to the agreements and 

compared that with growth rates after the agreements for a similar period 

of years (see table 10). Across partner countries, we found that post-FTA 

average annual growth rates for U.S. exports were all higher than pre-FTA 

growth rates and, in some instances, average growth went from negative 

to positive. For U.S. imports, we found that average annual growth rates 

were higher in three out of the four partner countries, all except for 

Jordan, which had a high rate of growth pre-FTA. Also, except for 

Singapore, the average annual growth rates for U.S. exports and imports 

with the partner countries were all higher in the post-FTA period than 

those for similar time periods for total U.S. exports and imports with the 

rest of the world. 

Methodology and Data 

Used 

First, to calculate average annual growth rates for U.S. exports and 

imports with the partner countries, we selected an equal number of years 

both before and after the selected FTAs came into force. For example, 

since both the Singapore FTA and Chile FTA came into force in 2004, we 

calculated an average annual growth rate of bilateral trade for a pre-FTA 

period of 5 years before 2004 and a post-FTA period of 5 years after 

implementation. For the Morocco FTA, which came into force in 2006, we 

calculated equal periods of 3 years before and after the agreement. 

Similarly, for Jordan, which came into force on December 2001, we 

calculated estimates of growth based on equal 7-year periods before and 

after the agreement came into force. Second, we obtained trade data for 

the United States and the partner countries from the ITC Interactive Tariff 

and Trade Dataweb for the appropriate years. Third, we adjusted the 

export or import series for inflation using the GDP’s Implicit Price 

Deflator. Fourth, we calculated year-to-year growth rates for the series and 

then took an average growth rate for each pre- and post-FTA period. Fifth, 

we then subtracted the pre-FTA average annual growth rate from the postFTA growth rate and sorted these differences in descending order for each 

product category. Finally, for comparison, we also calculated the average 

annual growth rates of U.S. trade with the world for the same periods as 

for each of the FTAs.1

 

1

Many other factors were also likely affecting trade in both the pre- and post-FTA periods, 

such as commodity price changes, exchange rates, and other bilateral and regional trade 

agreements. As well, FTA specific changes such as lowering tariff and nontariff barriers 

increase market access and provide gains from trade. 

 Free Trade Agreements 
Appendix VI: Average Annual Growth Rates of 

Bilateral Trade with FTA Partner Countries 

Compared with Overall U.S. Trade 

Table 10: Average Annual Growth Rates of Bilateral Trade with Partner Countries Pre- and Post-FTA and U.S. Growth in Trade 

with the World for Similar Time Periods 

Average annual growth 

rates of bilateral trade with 

partner countries 

Average annual growth rates 

for U.S. trade for similar time 

periods as FTA 

Bilateral FTA partner country 

Pre-FTA 

period

Post-FTA 

period

U.S. exports 

and imports 

with world 

Pre-FTA 

period Post-FTA period

Singapore (5-year average period) 

 U.S. exports to Singapore -0.9% 8.6% U.S. exports -1.2% 9.3%

 Imports from Singapore to United States -6.1 -0.3 U.S. imports 4.9 7.8

Chile (5-year average period) 

 U.S. exports to Chile -9.1 32.6 U.S. exports -1.2 9.3

 Imports from Chile to United States 9.3 14.1 U.S. imports 4.9 7.8

Morocco (3-year average period) 

 U.S. exports to Morocco -4.5 40.8 U.S. exports 5.6 10.3

 Imports from Morocco to United States 4.0 20.6 U.S. imports 9.9 5.1

Jordan (7-year average period) 

 U.S. exports to Jordan 1.6 12.5 U.S. exports 3.1 5.8

 Imports from Jordan to United States 52.9% 27.2% U.S. imports 6.4% 6.5%

Sources: GAO analysis using data from Commerce and ITC, years 1994 through 2008. 

Results of Overall Growth 

Rates for Trade with 

Partner Countries Pre- and 

Post-FTAs 

Across partner countries, we found that post-FTA average annual growth 

rates for U.S. exports were all higher than pre-FTA growth rates, and for 

Singapore, Chile, and Morocco, average growth went from negative to 

positive. Also, except for Singapore, these growth rates with partner 

countries for U.S. exports were also higher than average annual growth 

rates of all U.S. exports during the same time periods. For the Chilean and 

Moroccan FTAs, the post-FTA annual growth rates for U.S. exports were 

considerably higher than the pre-FTA period growth rates, increasing from 

-9.1 percent to 32.6 percent, and from -4.5 percent to 40.8 percent, 

respectively. The growth in U.S. exports to Jordan and Singapore were 

more modest, increasing to 12.5 percent and 8.6 percent, respectively. U.S. 

import growth rates for the four partner countries were larger or less 

negative in the post-FTA period than the pre-FTA period for Singapore, 

Chile, and Morocco, but less for Jordan. The result for Jordan, in which 

overall growth goes from 52.9 percent in the pre-FTA period to 27.2 

percent in the post-FTA period, coincides with our analysis for the product 

categories where less than half of the top 25 U.S. import categories from 

for Jordan experienced growth in the post-FTA period (see app. II for an 

Page 128 GAO-09-439 Free Trade Agreements
Appendix VI: Average Annual Growth Rates of 

Bilateral Trade with FTA Partner Countries 

Compared with Overall U.S. Trade 

analysis of pre- and post-FTA growth rates of U.S. imports from Jordan by 

product category). However, this result is likely due to the fact that the 

QIZ program spurred such huge rates of growth prior to the Jordan FTA, 

especially in the apparel categories. However, the growth rates of U.S. 

imports from Jordan following the FTA and their value were quite sizeable 

also, but just not as large as pre-FTA levels. Notably, except for Singapore, 

the average annual growth rates of U.S. exports and imports with the 

partner countries were all higher in the post-FTA period than those for 

similar time periods for total U.S. exports and imports with the rest of the 

world. 

Page 129 GAO-09-439 Free Trade Agreements
Appendix VII: Comments from the Appendix VII: Comments from the Department of Labor 

Department of Labor 

Page 130 GAO-09-439 Free Trade Agreements 
Appendix VIII: Comments from the Appendix VIII: Comments from the Department of State 

Department of State 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

Page 131 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

See comment 1. 

See comment 2. 

Page 132 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

Page 133 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

See comment 3. 

Page 134 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

See comment 4. 

Page 135 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

Page 136 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

Page 137 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

See comment 5. 

Page 138 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

Page 139 GAO-09-439 

The following are GAO’s comments on the Departments of State’s letter 

dated May 19, 2009. 

1. GAO agrees that some important progress in strengthening 

environmental and labor protection has been achieved in FTA 

partners, notably in putting in place structures and institutions that 

had been absent in some countries, such as the Ministry of 

Environment in Jordan. As a result, we changed the title of our report 

from “Selected FTAs Resulted in Commercial Benefits, but Progress on 

Labor and the Environment Has Been Limited” to “Four FTAs GAO 

Reviewed Resulted in Commercial Benefits, but Challenges on Labor 

the Environment Remain.” We reviewed the body to ensure these 

positive steps and U.S. officials’ perspectives on progress are given due 

weight. For example, we added new information on environmental 

cooperation projects such as Interior’s help to Jordan on CITES and 

noted Chile’s nascent steps to allow civil society input into 

environmental decision making. In addition we recognize that the 

existence of FTA obligations may have been a factor in influencing 

partner action. The labor law improvements Morocco enacted had 

been long-pending prior to the FTA. The QIZ program does not require 

adherence to core labor standards, but the Jordan FTA requires 

partners to strive to ensure that labor principles and internationally 

recognized labor rights set forth in the FTA are recognized and 

protected by domestic law. Under the Jordan FTA, parties also 

commit to not fail to enforce its laws, through a sustained or recurring 

course of action or inaction, in a manner affecting trade between the 

parties. 

GAO Comments 

2. GAO has revised the report to more clearly distinguish between FTA 

environmental chapters and environmental cooperation mechanisms 

and recognize the partners’ are obligated by their FTA commitments. 

3. State suggests GAO’s report sets an unrealistic standard for 

determining success on the environment. GAO disagrees. 

First, GAO’s standards for judging FTA success in producing 

environmental progress are grounded in TPA goals and FTA 

requirements, and ensuing, related commitments or agreed goals on 

environmental cooperation. For example a principal negotiating 

objective under TPA is to strengthen the capacity of United States 

trading partners to protect the environment through the promotion of 

sustainable development. An FTA requirement on the environment call 

for parties to “strive to ensure” or “ensure” that their laws provide for 

 Free Trade Agreements 
Appendix VIII: Comments from the 

Department of State 

high levels of environmental protection and to continue to improve 

those laws as well as to “not fail to effectively enforce its 

environmental laws, through a sustained or recurring course of action 

or inaction, in a manner affecting trade between the parties.” As State 

notes, some of these are FTA requirements are quite broad. 

Second, GAO’s judgments are based on the evidence made available to 

it about post-FTA developments and their significance. While the 

evidence we gathered has certain limitations, it nonetheless is 

authoritative and sufficient in the sense that it truly represents what 

can and cannot be said about FTA partners’ “progress to date.” In 

terms of evidence, GAO appreciates State’s call for us to “determine 

whether there has been substantial progress by partners in improving 

environmental laws and enforcement.” Indeed we had hoped to do just 

that. Unfortunately, the information made available to us by U.S. 

agencies about partners’ laws and enforcement did not permit such an 

evaluation by GAO. As noted in the report, a baseline assessment of 

the partners’ laws and enforcement is not included in any depth in the 

environmental review prepared by USTR. Though some partners 

reportedly did prepare them, agencies produced no such documents in 

response to our request for background on partner environmental 

regimes. Our interviews with EPA indicated that they may informally 

review or comment on partners’ environmental regimes, but that no 

template or check list of what a strong environmental regime should 

include is used. EPA officials rather stressed that a lot depended on 

the country’s legal context and its institutional and technical starting 

point. Moreover, State, USTR, and EPA told us they do not routinely 

monitor or report on changes in partners’ environmental regimes. 

These agencies’ responses to our document requests bore this out and 

did not surface much information. 

Absent agreed or available baseline documentation and ongoing 

monitoring reports, GAO undertook efforts to identify on its own legal 

and institutional changes that had occurred in conjunction with or 

after the FTA’s entry into effect, as well as FTA-related cooperative 

projects. This was done by searching secondary sources of foreign 

laws and soliciting documentation from U.S. agencies such as State 

and Labor in Washington, and U.S. Embassies abroad during 

fieldwork. However, we did not independently assess or evaluate the 

foreign laws. We sought to compare the project-related information to 

agreed plans and priorities, but this often proved difficult to match in 

practice. In the case of labor, there were no articulated priorities or 

plans, though there usually were project evaluations. In the case of the 

environment, there were agreed priorities and plans, but their general 

Page 140 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

nature made it difficult to match projects, determine their significance, 

or assess the extent to which they satisfied expectations. The 

particulars of what a project involved in terms of funding or activities 

conducted often did not exist, nor were project evaluations available. 

We also solicited partners’ and U.S. officials’ own assessment of this 

progress and the significance of their remaining challenges. U.S. 

officials’ for example noted that due to the directional and aspirational 

nature of FTA commitments, they seek to “do no harm” and “do good 

works” and pointed to visible signs of improvement in certain partners, 

notably Jordan. We supplemented this information from official 

sources on partner developments versus expectations with feedback 

from selected experts and environmental stakeholders. For example, 

we spoke with an expert at the NAFTA Environmental Commission 

involved in a 10-year retrospective on progress under that cooperative 

arrangement, with ECLAC and ILO officials in Chile, with the chair and 

several liaisons to the Trade and Environment Policy Advisory 

Committee, and with in-country environmental groups identified and 

arranged by our State Embassy control officers. We relied on, report, 

and attribute the information we were able to gather. We have 

expanded the discussion of these sources and their limitations in the 

scope and methodology sections of the report. 

Third, GAO took steps to assure a fair and balanced assessment of the 

extent of progress. On environment, for example, U.S. and partner 

government officials both told GAO that the FTAs were not intended to 

resolve all environmental problems and we now highlight this in the 

report. GAO had already noted in the background that differences in 

country context and the length of time FTAs have been in effect likely 

are important factors in the extent of observable progress. We reiterate 

this now in the conclusion. While the evidence we obtained led GAO to 

conclude that there has been some progress to date in improving 

partners’ capacity to protect the environment, we do not suggest that 

FTAs fix all of the partners’ environmental problems in a few years. 

GAO also includes information provided by agency officials intended 

to place these four FTAs in the broader context of progress over time 

and with more experience and resources. 

4. State highlights, by partner, examples of environmental progress. We 

have supplemented somewhat our treatment of these developments in 

the report. 

Page 141 GAO-09-439 Free Trade Agreements
Appendix VIII: Comments from the 

Department of State 

5. GAO has expanded its description of the gaps and clarified its 

recommendation for a “more structured approach” in response to 

State’s request for a better explanation of what is missing and would 

be helpful. 

Page 142 GAO-09-439 Free Trade Agreements
Appendix IX: Comments from the Office of Appendix IX: Comments from the Office of the United States Trade Representative 

the United States Trade Representative 

Note: GAO comments 

supplementing those in 

the report text appear at 

the end of this appendix. 

Page 143 GAO-09-439 Free Trade Agreements 
Appendix IX: Comments from the Office of 

the United States Trade Representative 

See comment 1. 

See comment 1. 

Page 144 GAO-09-439 Free Trade Agreements
Appendix IX: Comments from the Office of 

the United States Trade Representative 

Page 145 GA

The following are GAO’s comments on the Office of the United States 

Trade Representative’s letter dated June 9, 2009. 

1. USTR said in some instances GAO had portrayed an inaccurate and 

potentially misleading picture of U.S. agency responsibilities, partner’s 

actions, and outstanding challenges. In response, GAO made several 

technical corrections and ensured criteria were cited. In the revisions 

we made, we also sought to make clearer distinctions between 

requirements for U.S. agencies under TPA, FTA chapters, and 

associated cooperation mechanism agreements, versus more general 

expectations for U.S. agencies based on USTR’s overall responsibilities 

for the operation of the U.S. trade agreements program, leading and 

guiding U.S. trade policy, and monitoring and enforcing trade 

agreements. We acknowledge that evaluation of the progress attained 

was based, in part, on interviews with responsible foreign and U.S. 

government officials and selected private sector interests and experts. 

USTR also indicated that GAO should have given more prominence to 

the FTA commitment that an FTA partner not fail to enforce its 

environmental and labor laws through a sustained or recurring course 

of action or inaction, in a manner affecting trade between the parties

(USTR’s underlining for emphasis retained). GAO already distinguishes 

between this binding FTA obligation and other, more 

“aspirational”commitments. However, we believe that by definition all 

of the FTA commitments on labor and the environment are traderelated, because they are contained in a trade agreement, and thus 

appropriate for inclusion within the scope of our review of progress 

attained as result or since the entry into force of these FTAs. 

Moreover, some FTA commitments and FTA cooperative goals are 

broad or generally applicable, rather than being limited to traded 

sectors. 

GAO Comments 

In each of the four FTAs and associated annexes we reviewed, 

partners recognize that cooperation provides enhanced opportunities 

to improve labor standards and strive to ensure their laws provide for 

high levels of environmental protection. Moreover, in contesting the 

Labor Advisory Committee’s criticisms of the Chile and Singapore 

FTAs, we note that USTR itself stated that FTA labor provisions 

“create a forum to in which disputes regarding any labor-related matter 

of concern may be raised” and “create cooperative mechanisms to 

O-09-439 Free Trade Agreements 
Appendix IX: Comments from the Office of 

the United States Trade Representative 

improve worker rights.”1 USTR added that “the U.S. Department of 

Labor had already embarked upon a cooperative program with Chile to 

improve the administration of its labor laws and enhance labor 

justice.” Finally, while GAO relied on the information available to 

document partner progress on labor, we reviewed the report to 

eliminate references to lack of protections for workers in non-traded 

sectors.2

 GAO notes that some of the FTA-related cooperative plans 

and projects address labor and environmental matters that are more 

general in nature, versus being strictly trade-related. For example, one 

of the agreed areas of focus for cooperation in the U.S.-Chile FTA is 

increasing the use of cleaner fuels,3

 and one of the associated 

environmental cooperation projects State documented in Chile 

pertains to diesel bus emissions in Santiago. We continue to include 

this among the FTA-related progress reported. 

 

1

See Office of the United States Trade Representative, Response to the Labor Advisory 

Committee Report on the Proposed Chile and Singapore FTAs, pp. 2-3. 

2

For example, State issues annual reports and human rights which include descriptions of 

whether trade partners’ provide the 5 core ILO labor rights in law and practice and the 

International Trade Union Confederation regularly issues reports on countries’ compliance 

with these core labor standards in conjunction with WTO Trade Policy Reviews. 

3

Chile FTA, Annex 19.3, para. 1 (h). 

Page 146 GAO-09-439 Free Trade Agreements
Appendix X: 

A

GAO Contact and Staff 

cknowledgments 

Page 147 GA

Appendix X: GAO Contact and Staff 

Acknowledgments 

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

In addition to the individual named above, Kim Frankena, Assistant 

Director; Venecia Kenah, Analyst-in-Charge; Ann Baker; Kenneth 

Bombara; Barbara El Osta; Francisco Enriquez; Leyla Kazaz; Karen Deans; 

Etana Finkler; and Grace Lui contributed to this report. Expert advice 

was provided by Martin DeAlteriis, Mike Hix, and Revae Moran. 

O-09-439 Free Trade Agreements 

GAO Contact 

Staff 

Acknowledgments 

(320544) 
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