Click to edit Master subtitle styleWorld Economy:Free Trade and Free Trade Agreements

Daniele S. LongoVice President, Business Growth, Healthcare Solutions, International Affairs

Northern Kentucky Chamber of CommerceNorthern Kentucky International Trade Association

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Agenda

• Customs and Duties – Background

• The Importance of Free Trade

• U.S. Free Trade Agreements – Facts and Figures

• Resources

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Customs and Duties - Background

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Customs and Duties - Background

- After declaring its independence in 1776, the U.S, almost in bankruptcy, needed revenues.

- President George Washington, with the Tariff Act of July 4, 1789, authorized the collection of duties on imported goods.

- The Act was called "the second Declaration of Independence".

- Four weeks later, on July 31, the fifth act of Congress established Customs and its ports of entry.

- For nearly 125 years, Customs funded virtually the entire government, and paid for the nation's early growth and infrastructure.

- By 1835, Customs revenues alone had reduced the national debt to zero!

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Examples:

• Purchase of Louisiana, Oregon, Florida and Alaska;

• National Road from Cumberland, Maryland, to Wheeling, West Virginia;

• Transcontinental Railroad;

• Lighthouses;

• U.S. military and naval academies;

• City of Washington.

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

City of Washington.

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• Most of the rates of the revenue tariff were between 5 and 10 percent, depending on the value of the item.

• Secretary of Treasury Alexander Hamilton was anxious to establish the tariff as a regular source of government revenue and to encourage the growth of domestic manufacturing to lessen America's then-heavy dependence on foreign-made products.

• Still a source of revenue (over $16.00 return) to the taxpayer for every dollar appropriated by Congress.

• U.S. Customs Service was the parent or forerunner to many other agencies

• Administration of military pensions (Department of Veterans Affairs); • Collection of import and export statistics (Bureau of Census); • Supervised revenue cutters (U.S. Coast Guard);• Collected hospital dues to help sick and disabled seamen (Public Health Service);

• Established standard weights and measures (National Bureau of Standards).

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

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• When shipments of goods arrive at a border crossing or port, customs officers:• Inspect the contents;

• Charge a tax according to the tariff formula.

• Since the goods cannot continue on their way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small.

•When shipments of goods arrive at a border crossing or port, customs officers:Inspect the contents;Charge a tax according to the tariff formula.

Since the goods cannot continue on their way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small.

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The Importance of Free Trade

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The Importance of Free Trade

Definition:• Unilateral or bilateral treaty between two or more

countries allowing commerce in goods and services without tariffs.

• Examples:• NAFTA• CAFTA• EU

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The Importance of Free Trade

• Free Trade Agreements – Unite States

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The Importance of Free Trade

• Free Trade Agreements – European Union

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The Importance of Free Trade

United States

European Union

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• Example : Turkey• Population: 77M• Age 15-65: 66%• PPP: $12,300• Imports:

• 166.3 billion (2010)

• Machinery, Chemicals, Semi-finished goods, fuels,

transport equipment

• FTAs: EU, Macedonia, Croatia, Bosnia-Herzegovina, Tunisia, Morocco, the Palestinian Authority, Syria, Egypt, Georgia and Albania

•Example : TurkeyPopulation: 77MAge 15-65: 66%PPP: $12,300Imports:166.3 billion (2010)Machinery, Chemicals, Semi-finished goods, fuels, transport equipment

FTAs: EU, Macedonia, Croatia, Bosnia-Herzegovina, Tunisia, Morocco, the Palestinian Authority, Syria, Egypt, Georgia and Albania

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Importance of Free Trade

Price=Sale Price +Tariff Price=Sale Price

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U.S. free trade Agreements

Facts and Figures

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U.S. FTAs – Facts and Figures

• Trade agreements • Help open markets.• Expand opportunities for American workers and businesses.• Help companies enter and compete more easily in the global

marketplace.• Promote fair competition • May include

• Intellectual property right protection

• Labor rights

• Government procurement

• Service sectors

• Environmental standards

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U.S. FTAs – Facts and Figures

• Current FTAs Country 2007 MMUSD

2008 MMUSD

Percent Change

NAFTA 384, 806 412, 369 6.45%

Canada 213,118 222,424 4.40%

Mexico 119,381 131,507 10.20%

CAFTA-DR 21,274 23,922 12.45%

Costa Rica 4,224 5,047 19.50%

Dominican Rep 5,793 6,293 8.60%

Guatemala 3,872 4,493 16.00%

Honduras 4,327 4,699 8.60%

Nicaragua 846 1,030 21.70%

El Salvador 2,209 2,357 6.70%

Australia 17,916 20,948 16.90%

Bahrain 565 779 37.80%

Chile 7,610 11,366 49.40%

Israel 9,940 10,238 3.00%

Jordan 831 904 8.70%

Morocco 1,333 1,506 12.90%

Oman 1,034 1,380 33.40%

Peru 3,764 5,686 51.10%

Singapore 23,576 25,655 8.80%

Total 420,348 456,319 8.60%

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U.S. FTAs – Facts and Figures

• Pending FTAs:• Colombia;

• Panama;

• South Korea;

• Current Negotiations:• Malaysia;

• Thailand;

• United Arab Emirates;

• Southern African Customs Union (SACU) which includes Botswana, Lesotho, Namibia, South Africa, and Swaziland.

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U.S. FTAs – Facts and Figures

Exports from Kentucky to FTA countries have increased since the year of the FTA implementation:

• North American Free Trade Agreement 247% increase since 1994

• U.S.-Singapore Free Trade Agreement76% increase since 2004

• U.S.-Australia Free Trade Agreement12% increase since 2005U.S.

• Dominican Republic-Central America FTA114% increase since 2006

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U.S. FTAs – Facts and Figures

Trade Benefits for Kentucky:

• In 2008, Kentucky exported $19.1 billion in manufactured goods, which supported over 154,000 manufacturing jobs.

• In 2008, Kentucky exported $1.6 billion in agricultural products, which supported over 18,500 agricultural jobs.

• 77% of the 3,101 Kentucky companies that exported goods in 2007 were small and medium-sized enterprises with fewer than 500 employees.

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Resources

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