Yesterday, with bipartisan votes, Congress approved legislation proposed by President Obama to implement free trade agreements (FTAs) with South Korea, Colombia and Panama. The votes are the most significant milepost to date on the road to greater market access for U.S. electroindustry exporters to these 3 important markets in Asia and Latin America — a road that began way back in 2004 in the case of Panama. President Obama, who is meeting with the South Korean President today prior to Mr. Lee Myung-bak's speech to a joint session of Congress and his country's legislative approval of the deal, must sign the legislation into law and direct his trade lawyers to select the earliest date possible for each deal to take effect. While U.S. business would prefer a January 1, 2012, effective date, that may be too ambitious. Some have pointed to March 1 as the earliest possible date.
What will happen on the effective date(s), you may ask? The first and immediate order of business will be elimination of many customs tariffs that make U.S. shipments more expensive. U.S. electrical and medical imaging manufacturers exported over $1billion in product to the 3 countries in 2010, while facing tariffs and other barriers. Once the trade agreements take legal effect most tariffs on U.S. electrical equipment will be dropped to zero immediately. Depending on the country, current tariffs on U.S. shipments range from 3-20 percent. A few examples of the many products that face tariffs now but will not under the Agreements are: electric motors and parts, electrical control and distribution boards and panels, arc welding equipment, insulated coaxial power cables and electricity meters. Tariffs on some other products will be cut in half immediately and then brought to zero over the next few years.
Moreover, the U.S. agreements with South Korea and Colombia will bring the U.S. up to speed with their counterparts in the European Union and Canada, which implemented their own FTAs with Korea and Colombia (respectively) over the summer.
The U.S. agreements with Korea, Colombia and Panama also provide preferential access to each county’s government procurement market as well as their markets for energy and environmental services.
Watch this space for more details on the market access benefits of the FTAs for U.S. electroindustry companies.