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Global Trade

May 2012 - Posts

  • The Trade and Investment Framework Agreement – Creating Important Free Trade Pacts for the US

    Where the standard Free Trade Agreement, or FTA, creates a trade bloc within multiple countries that eliminates tariffs and import quotas between borders, preliminary measures like the TIFA work to expand that bloc's trade activity to include outside nations. Connections with larger economies like the United States can prove beneficial for specific FTA countries that rely on export income to boost low GDPs, and over the past few decades the US has come to agreement with various countries and groups.

    The TIFA, or Trade and Investment Framework Agreement, is exactly what the name implies - it sets the groundwork for the involved countries to come to terms that allow all parties to trade with ease. A TIFA may also serve as sort of a peace treaty in that disputes over import/export issues are resolved, which promotes an ongoing civil relationship. Presently, the United States has such agreements in place with four trade blocs in South America, Africa, and Asia:

    • ASEAN - The ASEAN treaty connects many of the lesser economies in Southeast Asia, including Laos and Myanmar, Indonesia, Cambodia, and Vietnam. While this FTA has been in effect for nearly half a century, it wasn't until recently that the United States took an active involvement in forging solid trade ties. Together, the ten ASEAN nations comprise one of the largest markets importing American goods.
    • CARICOM - This bloc comprises nearly the entire population of the Caribbean, including member nations Jamaica and Haiti, Antigua and Barbuda, Barbados, and Trinidad and Tobago. As recent as early 2012, the United States and the fifteen CARICOM have enjoyed a profitable relationship, with a forty percent increase in bilateral trade. This current TIFA is said to serve as a precursor to the CARICOM nations joining NAFTA, though no plans are solidified.
    • COMESA - The Common Market for Eastern and Southern Africa unifies much of the continent through low to zero tariffs and political stability. Though the majority of America goods traded to this bloc go to Egypt, the United States does deal with several countries for crude oil, textiles and apparel, and coffee and tea.
    • EAC - The United States presently exports an average of $1 billion in goods to the East African Community - comprised of Burundi, Kenya, Rwanda, Tanzania, and Uganda). This current trade relationship is designed to forge better relations in East Africa and improve American standing in their regional businesses.

    In addition to these arrangements with larger blocs, agreements between the United States and individual nations have helped decrease trade deficits throughout the world. Current TIFAs recognized by the US include:

    • Africa - Angola, Ghana, Liberia, Mauritius, Mozambique, Nigeria, Rwanda, South Africa, and the West African Economic and Monetary Union (WAEMU)
    • The Americas - Uruguay
    • Europe and the Middle East - Algeria, Bahrain, Egypt, Georgia, Iceland, Iraq, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Switzerland, Tunisia, Turkey, Ukraine, United Arab Emirates, Yemen
    • South and Central Asia - Afghanistan, Nepal, Pakistan, Sri Lanka, and the Central Asian TIFA (Kazakhstan, Kyrgyzstan, Tajikstan, Turkmenistan, Uzbekistan)
    • Southeast Asia and the Pacific - Brunei, Cambodia, Indonesia, Malaysia, New Zealand, Philippines, Thailand, Taiwan, and Vietnam

    As the United States continues to forge trade relations with other parts of the world for mutual economic benefit, the country stands to gain more importance on the global stage. Foreign investment in American interests present our country with opportunities to strengthen our economy and civil political relations around the world.

  • The EEA and EUCZ - Connecting Europe in Trade

    When one reads news of the European Union, it is important that note that not all European countries are part of the EU. Norway, Iceland, and Switzerland are three notable examples of countries without membership, though this doesn't necessarily mean that these nations are not involved in trade relations with EU members. Changes in the European landscape have brought new nations into the EU over the years, and negotiations with members and non-members work to ensure fair trade agreements for all involved.

    The European Economic Area agreement that connects three members of the European Free Trade Association (EFTA) to the European Union was established in 1994 for the purpose of allowing all countries involved to freely trade products and services. The EFTA states are treated as a single market, or "Internal Market," and while they work with the rest of Europe to promote continental tourism and environmental issues they do not utilize the Euro or observe certain policies involving agricultural trade.


    The EFTA member states affected by the tenets of the EEA include:

    Iceland: Given the nation's geographical location and isolation from the continent, Icelanders rely heavily on the export of fish and fish products.  While more than half of overall exports come from the fisheries, Iceland also produces manufactured aluminum to ship to major trade partners. Less than five percent of their output is traded beyond Europe.

    Liechtenstein: While a geographically small country, Liechtenstein exports approximately $3 billion in goods annually, apart from their economic alliance with Switzerland. Machinery and audio/video components are major exports.

    Norway: Like its Scandinavian neighbors, Norway's export industry centers primarily on maritime products and natural resources - shipbuilding, seafood, and petroleum. Like Iceland, a small percentage of trade is exported outside of Europe.

    While Switzerland is also a member of the EFTA, the country is not part of the European Economic Area agreement. This country has an agreement with EU nations unique to the EEA.

    Involvement of the EUCZ

    Independent of activities with the EFTA, the European Union Customs Union holds that tariffs on goods traded across EU borders - and specific nations signed to the agreement - are levied. During international trade negotiations , this union allows the EU to act as a single entity.

    The European Union Customs Union is comprised of all EU members and the following nations:

    Andorra: Andorra relies more upon tourism than trade to maintain a stable economy. What they do offer to export - tobacco, for one - is traded almost exclusively to France and Spain.

    San Marino: San Marino has perhaps one of the most unusual but sought-after exports - commemorative stamps and coins, which contribute to their booming tourism.

    Monaco:  Known more as a luxurious tourist destination on the French Riviera, this principality relies solely on tourism and its status as a tax haven to generate income.

    Turkey: Turkish textiles and apparel are coveted globally, as are exotic foodstuffs. The largest economy of the four non-EU members in this agreement, Turkey trades exports primarily with Western Europe nations.

    As non-member nations join the EU, they will also apply to join the EEA agreement and in turn fall under the policies of the customs union. With only a handful of countries left - the majority of them located in Eastern Europe - time will tell how new members benefit from inclusion.

  • The Central European Free Trade Agreement – Does It Remain Relevant?

    To look at a series of maps highlighting of the history of the Central European Free Trade Agreement, one will be amazed to see how the landscape has drastically changed in the last decade. Founding members of the FTA have long since left the union, while lesser Balkan states comprise the bulk of the trade zone. Economical changes in Europe have had a great effect on CEFTA and how it operates, which may led some to speculate if this agreement will remain valid in the near future, or else become absorbed into the European Union.


    CEFTA has its roots in an agreement finalized in 1992 that created a free trade area between Poland, Hungary, and what was then known as Czechoslovakia, which split into the Czech Republic and Slovokia by the time CEFTA went into effect two years later. The original intent of CEFTA served to assist these countries in not only taking advantage of tariff-free trade with each other, but to become better integrated with markets in Western Europe and eventually operate with them as equals. One can say that CEFTA served as a base to prepare these economies for inclusion in the European Union.

    While CEFTA admitted new member nations over the years - namely Slovenia, Romania, Bulgaria, Croatia, and Macedonia - others took their leave over time to join the European Union. In 2004, the founding nations left the treaty for the EU, and others have since followed suit. Presently, CEFTA is comprised of the following:

    • Albania - Albania is a prime exporter of textiles and footwear in Eastern Europe. More than half their output is traded to Italy, which is also their main import partner.
    • Bosnia and Herzegovina - Aluminum, wool, and steel comprise the bulk of this area's export trade. CEFTA member Croatia counts among the area's more frequent trade partners.
    • Croatia - While Croatia is perhaps the most advanced nation to come out of Yugoslavia, a good amount of their export product is agrarian - lumber, grains, and other foods.
    • Kosovo - Kosovo is primarily a mining economy, and as such exports metals to trade partners, of whom Macedonia is the most frequent.
    • Macedonia - Once the poorest province of Yugoslavia, Macedonia has enjoyed a steady increase in GDP in recent years. The nation relies upon machinery and industrial imports from European trade partners and exports a variety of foodstuff to CEFTA neighbors.
    • Moldova -While one of the poorer nations in CEFTA, Moldova maintains their GDP with help from their active wine production. As one of the top thirty wine producers in the world, Moldova exports the bulk of their output throughout Europe.
    • Montenegro - Agricultural output - foodstuffs and raw materials - make up the bulk of this nation's export product. Switzerland is a prime trade partner.
    • Serbia - The bulk of Serbian exports - which consist of iron and metals - are traded exclusively throughout Europe, with nearly a third going to CEFTA members.

    In 2013, Crotia will join the European Union and likely withdraw from CEFTA. Other nations within this agreement have also begun preparations for EU candidacy, which may lead some to believe that CEFTA may go the way of another agreement, the Baltic Free Trade Area (BAFTA) as members defect. In truth, these secessions are not likely to threaten the future of CEFTA, as the agreement may still welcome other nations in Eastern Europe. As of 2012, Belarus and Ukraine, for example, are members of neither union, and that could change.

    CEFTA serves as a valuable springboard for lesser Eastern economies seeking union and trade benefits with Western nations in Europe. So long as these countries require preparation, CEFTA will remain relevant.

  • The African Free Trade Zone Agreement – Uniting the Continent Through Trade

    Within the African Union of fifty-four sovereign states exists a free trade zone that encompasses nearly half of the countries, one designed to improve individual economies and give support to eradicated tariffs and common currency. Plans for an African Free Trade Zone (AFTZ) began as early as 2008, yet progression toward goals set forth in the agreement have are recently coming to fruition. According to the Christian Science Monitor, this trade zone is expected to affect more than half a billion people and generate a trillion dollars in economic output.


    Taking a cue from similar agreements incorporated in the European Union and North America, the primary goal of AFTZ is to create flexible borders within Africa. Because many of the countries involved in this agreement maintain low economies - a recent editorial in Forbes points out that some countries' GDPs are lower than those of some cities in Europe - the abolition of customs fees and a proposed common currency like the Euro stands to benefit everyone involved. While installation of a common franc is not expected for another decade, the twenty-six countries in the AFTZ may still take advantage of improved trade relations.

    The AFTZ is presently comprised of nations from the following trade blocs:


    The Common Market for Eastern and Southern Africa has worked in various incarnations for nearly fifty years to promote political and economic stability among member nations. Of the three blocs comprising AFTZ, COMESA is the largest with nineteen members: Burundi, The Comoros, Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe.


    The East African Community has endured a tumultuous history, having been dissolved thirty years ago and revived in 2000. The EAC has since worked to evolve its five members (Burundi, Kenya, Rwanda, Tanzania, and Uganda) into a single state which would allow residents a common passport and currency. More recently, the EAC is preparing to admit South Sudan into membership.


    The Southern African Development Community was formally established more than thirty years ago and has worked to maintain good relations between neighboring nations in the southern region of the continent. While challenges such as livestock disease and civil war have threatened the overall economy of the area, the union has worked to overcome obstacles. Members of SADC include Angola, Botswana, Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, the Seychelles, South Africa, Swaziland, Tanzania, Zambia, and Zimbabwe.

    Economic critics have praised the formation of the AFTZ as a means of improving individual economies and perhaps forging new relationships outside the zone. Presently, less than ten percent of trade occurs between AFTZ nations. If the trade blocs expect to achieve their trade liberalization goals, these nations must focus more on communication and trade with each other. Given the low GDPs of various member nations, the relief from tariffs is one way to preserve income and invest toward a brighter future.