Free Trade Agreement might become a nightmare

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Exporting goods to the US from countries that don't have a free trade agreement is actually easier and cheaper than within the framework of FTA's such as the Central American Free Trade Agreement (CAFTA), writes Heide B. Malhotra in the Epoch Times.

The argument made in the article should cause anyone pushing for ratification of the FTA Panama-US to rethink that policy. Here are some quotes:

WASHINGTON—A number of existing trade agreements, especially the Central America Free Trade Agreement (CAFTA) are a nightmare for importers and exporters alike.

Importers are burdened with regulations that are restrictive and expensive to implement, while exporters can’t sell their goods in the United States unless they comply with the regulations and other stipulations.

Economists categorically state that there are no “truly free” free trade agreements. All free trade agreements are managed trade agreements. Underlying economic theory demands that supply and demand is not restricted by government market intervention. Fundamentally, managed trade is protectionist trade.

“Better yet, to accurately reflect their true nature, all of them [free trade agreements] should be called Managed Trade because on each page within every agreement are quotas, stipulations, and byzantine clauses that rival the federal tax code,” according to an article on the Ludwig von Mises Institute Web site, an Austrian think tank.

On the other hand, importing from countries not governed by free trade agreements with the United States is cheaper and easier, as they are not governed by costly and unwieldy regulations and the United States operates under an open door trade policy.

Rules on tariff liberalization, place of origin, restrictive standards and controls, consumer protection requirements, custom duties, labor standards, and intellectual property rights make some free trade agreements nightmarish.

Trade conflicts, non-tariff barriers, and dumping do not disappear; they often go underground, which makes detection and cooperation more difficult.

To benefit from CAFTA, importers must comply with specific custom regulations and provide detailed information that is extremely time consuming to put together and often difficult to ascertain.

The importer must “conduct regular factory visits to their foreign suppliers’ manufacturing locations to make sure that the goods for which they claim trade preferences are legitimately entitled to them,” according to a recent Knowledge@Wharton (KW) report on the free trade subject. (...)

Read the full article here.

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