Why should you care about free trade agreements (FTAs)?
If you are looking to export your product or service, the United States may have negotiated favorable treatment for your service or product through an FTA. This treatment should make it easier to export your product to or offer your service in the FTA country’s market. It may also give your product or service a competitive advantage versus products from other countries.
What is an FTA negotiated by the United States?
An FTA is an agreement between two or more countries where the countries agree on certain behaviors that affect trade in goods and services, and protections for investors and intellectual property rights, among other topics. For the United States, the main goal of trade agreements is to reduce barriers to U.S. exports, and protect U.S. interests and enhance the rule of law in the FTA partner country. The reduction of trade barriers and the creation of a more stable and transparent trading and investment environment make it easier and cheaper for U.S. companies to export their products and services to trading partner markets. Forty-one percent of U.S. goods exports went to FTA partner countries in 2010, with exports to those countries growing at a faster rate than exports to the rest of the world from 2009 to 2010, 23% vs. 20%.
FTAs usually build off of the agreements negotiated in the World Trade Organization (WTO). For example, in the WTO, each country agrees to issue, at the request of the importer or exporter, binding advance determinations on where a product will be viewed as coming from, since many products are made up of parts from multiple countries. Under an FTA, importers and exporters can obtain determinations for a broader set of issues, including finding what tariff line the product will be classified under, and value that will use to calculate the tariff.
Other countries also negotiate FTAs and the behaviors covered may not be the same as those negotiated by the United States.
What types of behaviors are addressed in a U.S. FTA?
U.S. FTAs typically address a wide variety of government activity. One example is the eventual elimination of tariffs charged on all products coming from the other country, if the product meets the rules of origin spelled out in the agreement. For example, a country that normally charges a tariff of 5% of the value of the incoming product will eliminate that tariff for products they can certify come from the United States. The rules of origin can make using the FTA negotiated tariffs a bit more complicated, but help to ensure that U.S. exports, rather than exports from other countries, receive the benefits of the agreement.
Some other types of commitments frequently found in FTAs include:
With which countries does the United States have an FTA?
The United States has 12 FTAs in force with 18 countries. The most recent FTA, the U.S.-Korea Free Trade Agreement (KORUS), was entered into force on March 15, 2012.
In addition, the United States has negotiated and ratified FTAs with Panama and Colombia, but these agreements have not yet entered into force. The United States is also in the process of negotiating the Trans-Pacific Partnership, a regional FTA, with Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam.
U.S. FTA Partner Countries
For more information on the FTA countries, visit the Free Trade Agreements page.
How can U.S. companies identify tariffs on exports to FTA partner countries?
The FTA Tariff Tool can help you determine the tariff, or tax at the border, that certain foreign countries will collect when a U.S. exported product enters the country. You can look up the tariff rate for a given product today, as well as identify when in the future the tariff rate will go down further or be eliminated altogether.
If you would like more information on exporting to FTA partner countries, please contact: