Read the Case about Free Trade and Complete the Questions (Global Politics)

Case 316

It’s Not Just the Economy, Stupid: Linking Free Trade and the War on Terror

David Auerswald & Caroline Shaver

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior permission of the Institute for the Study of Diplomacy.

The opinions and analysis contained in this case study are solely those of the author(s), and do not necessarily reflect the views of the Institute for the Study of Diplomacy, the School of Foreign Service, or Georgetown University.

1316 36th St. N.W. Washington, D.C. 20007 | isd.georgetown.edu | [email protected]

ISBN: 1-56927-293-X Copyright © 2007 by the Institute for the Study of Diplomacy

It’s Not Just the Economy, Stupid: Linking Free Trade and the War on Terror

D R . D A V I D A U E R S W A L D A N D M S . C A R O L I N E S H A V E R

COPYRIGHTED MATERIAL © 2007. All rights reserved. Institute for the Study of Diplomacy.

Do not duplicate or place on library shelves/reserves without express written permission. 877-703-4660 (tel) 202-965-5811 (fax)

INTRODUCTION

Between 2000 and 2004, the U.S. government consid- ered a series of bilateral free trade agreements with Aus- tralia, Chile, New Zealand, and Singapore. Some of these countries eventually negotiated a free trade agree- ment (FTA) with the United States. Others did not. For those countries that eventually received an agreement, the timing and procedures for signing each FTA varied in interesting ways.

This case asks you to consider two explanations of U.S. behavior toward these countries. The first explana- tion focuses on purely economic concerns. Was a free

trade agreement in the economic interests of the United States as a whole and/or of major U.S. industries and sectors of the economy? The second explanation focuses on the use of trade to leverage or reward broad security cooperation with the United States, particu- larly after the September 11, 2001, terrorist attacks and in the buildup to the Iraq war. This explanation asks whether the promise of an FTA was used to influence or was in response to each candidate nation’s behavior and attitudes toward U.S. security initiatives.

The following narrative is divided into three parts. Part one discusses the rationales for free trade, as well as the procedural steps required for a free trade agree- ment in this country. That section discusses the eco- nomic benefits of free trade and how trade agreements could be used to entice cooperation on unrelated secu- rity issues in much the same way as economic sanctions are used to punish unwanted behavior and coerce states

1

2 Dr. David Auerswald and Ms. Caroline Shaver

to change their behavior for the better. Part two reviews the economic rationale for bilateral free trade agree- ments between the United States and each of the four countries. Part three discusses the major security poli- cies of each country as it reacted to the September 11, 2001, terrorist attacks on the United States as well as to the U.S. invasion of Iraq in 2003. The conclusion reviews the eventual outcome of each FTA negotiation.

RATIONALES FOR FREE TRADE AGREEMENTS

Economic

Free trade agreements are attractive economically. An FTA can lower or eliminate tariffs imposed by foreign governments on your exports. Eliminating tariffs lowers the price of your goods overseas, making them more attractive in foreign markets. As a result, your export volume should increase, as should your exports as a per- centage of gross national product (GNP). At the same time, an FTA lowers your tariff levels, making imports less expensive for your domestic consumers. In theory then, the economies of both parties to an FTA can ben- efit. There may even be noneconomic spillover effects of such agreements, in that open markets help worldwide economic development; and economic development is significantly correlated with democrati- zation and a decreased chance of war among market democracies.

Consider two scenarios that demonstrate the effects of tariffs on industry profits. Imagine a scenario in which you build one thousand units of some product (widgets) for the overseas market at a cost of $3,000, or $3 per unit. You want to sell those one thousand wid- gets internationally for a price of $5 per widget. At that price, your gross income would be $5,000. Given your initial costs ($3,000), your net potential profit would be $2,000, or $2 per widget. This is your ideal profit in a perfectly open market with no tariffs.

Now change the scenario to reflect a world with high tariffs. The government in your target market adds a 100 percent surcharge – a tariff – of $5 per widget, perhaps in an effort to protect its own domestic widget makers from foreign competition or to raise funds for unrelated government initiatives. Regardless of its motives, the result is that your widget now costs $10 overseas, of which $5 goes to you and $5 goes to the for-

eign government. Imagine that at that $10 price, the overseas market will only support five hundred widgets rather than the one thousand you originally thought it would. Your gross income drops to $2,500, down from $5,000 in the open-market scenario. Given that your costs of production are $3,000, your hypothetical, open-market $2,000 profit has become a debt of $500, thanks to tariffs. As a result, you decide to forgo the international market, depriving your community of jobs from widget production and the international market of the benefits of your brand of widgets.

Tariffs depressed profits and trade in the above sce- nario, which would seem to be a bad outcome. Not everyone agrees. In the short run, free trade can hurt domestic industries and producers, particularly if they are relatively inefficient compared to their interna- tional competitors. Consider the impact of U.S. wheat exports to agrarian, developing nations with relatively primitive farming techniques. Cheap U.S. wheat could undercut the ability of local farmers to sell their grain. Opponents of free trade also complain that free trade may allow overseas manufacturers to exploit cheap, “sweat shop,” or child labor to reduce the costs of pro- duction in countries lacking labor regulations. Prod- ucts utilizing such cheap labor unfairly take market share, and jobs are lost in the more regulated economy. As a result, free trade becomes unfair trade. This has been an argument that U.S. textile workers have used when referring to their Asian competitors. And finally, free trade and the competitive pressures it produces can threaten businesses deemed crucial to national self-suf- ficiency. Such an argument has been used to justify high U.S. tariffs on imported steel.

Local concerns are important, because free trade agreements are subject to domestic ratification in most countries. In the United States, the ratification process involves congressional consent before a trade agree- ment can be implemented—a process that has at times been a huge impediment to free trade with the United States. Specifically, international trading partners may be reluctant to negotiate trade agreements with the United States if they are unsure whether the United States will implement those agreements. Since passage of the 1934 Reciprocal Trade Agreements Act, trade agreements are considered executive agreements rather than treaties. Instead of requiring a two-thirds Senate majority, as does treaty ratification, executive agree- ments can be implemented with simple majority votes

It’s Not Just the Economy, Stupid 3

in both congressional chambers. In theory, this makes it easier for presidents to negotiate trade agreements. In reality, however, that congressional process opens up the trade agreement to considerable uncertainty. Noth- ing in the process prevents Congress from amending the agreement in ways that favor affected constituencies or industries. As a result, few trading partners want to bother negotiating, much less binding themselves to, agreements that Congress could radically change after international negotiations end. Absent some U.S. guar- antee that what is negotiated with the president will bind the United States, high tariffs have remained in place.

The solution to this dilemma is called trade promo- tion authority (TPA). Under TPA, Congress grants the president the power to negotiate binding trade agree- ments on behalf of the nation. Congress promises to forgo amending the resulting agreement but reserves the right to vote yes or no on the final version of the FTA. Trade agreements thus can still fail to be ratified, but they are not subject to congressional amendment once negotiated. In exchange, presidents have an incen- tive (and often must promise) to incorporate congres- sional preferences into an FTA so as to ensure that the agreement will pass muster on Capitol Hill. Most presi- dents have received TPA when they request it of Con- gress. The most recent exceptions, however, were President Bill Clinton, who was without TPA for the latter part of his tenure in office, and President George W. Bush, who was without TPA until mid-2002. The House of Representatives and the Senate gave the Bush administration trade promotion authority on July 27 and August 1, 2002, respectively.

Political/Security

Economic outcomes are not the sole reason a govern- ment might enter into negotiations over a free trade agreement. The economic instrument of power can be used to help achieve such non-economic goals as gain- ing political concessions from an opponent or reaching military objectives without having to resort to vio- lence. Sanctions are a coercive method of achieving both goals. Foreign aid and trade agreements are inducements used to achieve both goals.

By far the most commonly used economic strategy has been to sanction target regimes. For example, the Covenant of the League of Nations included the right to

boycott trade with aggressive countries. More recent examples include sanctions against the Soviets for restrictive emigration policies, against India and Paki- stan for testing nuclear weapons, and against Zimbabwe for human rights abuses. Certainly sanctions have become the preferred instrument of coercive U.S. eco- nomic policy in recent years.

The logic of sanctions is straightforward. They can be targeted against an offending regime, against the citi- zens of that regime, or both. In the former case, sanc- tions deprive the regime of needed materials and expertise to act aggressively. Sanctions in this instance are a form of containment or denial. Arms embargoes are an example. Sanctions aimed at a regime’s popula- tion deprive the target polity of needed goods, ser- vices, and freedoms. The hope is that the target population will eventually reach a point where it will pressure (or even rebel against) its own regime into changing the regime’s behavior. Such sanctioning efforts are akin to an indirect form of coercive diplo- macy. Examples might include prohibitions on trade, travel, or business ventures with the target regime’s population (i.e., Cuba). Regardless of sanctions’ pur- pose, however, a wide body of scholarly work questions the effectiveness of sanctions as a means of changing an opponent’s policies.1

The economic instrument of power also can be used as an inducement. Foreign assistance is one form of inducement. For instance, the Marshall Plan was aimed at propping up fragile European economies in an effort to undercut communist agitators early in the Cold War. Subsequent bilateral aid programs often had the same intent. More recently, the promise of Euro- pean Union (EU) membership has been an incentive for eastern European countries to resolve a host of poten- tial international conflicts on everything from outstand- ing border disputes to the fair treatment of ethnic minorities.

The promise of trade agreements is another way in which U.S. presidents have used economic power as leverage to achieve noneconomic goals.2 Rather than using coercion, promising trade is an inducement for a target regime to conform to your wishes or a reward for past compliance. The assumption behind this strategy is that open trade is beneficial to the target regime’s econ- omy. The more the target nation has to gain from open trade with you, the greater is your potential leverage. You can ask for significant and unrelated foreign policy

4 Dr. David Auerswald and Ms. Caroline Shaver

concessions in exchange for providing the target regime with a major economic benefit. But note that this lever- age is a relative measure. If you also stand to gain sub- stantially from open trade with the target regime, your leverage on unrelated issues may be undercut. The tar- get regime will know that you have few incentives to withhold trade from it, even if it does not give in on the unrelated issue.

The Bush administration incorporated both eco- nomic and security rationales into its use of trade agree- ments. According to then U.S. Trade Representative (USTR) Robert Zoellick, the administration had as a priority the negotiation of trade agreements with those countries that supported U.S. foreign and security poli- cies. Other, presumably lesser priorities, included agreements with countries that supported U.S. eco- nomic policies or where increased trade could foster political and economic reform; agreements that would counteract trading blocks that did not include the United States, agreements that were desired by U.S. firms, businesses, or Congress; and agreements that could eventually be used as a model for regional eco- nomic integration.3

The case reviewed below provides you with enough information to assess both economic and politi- cal/security motivations for granting or withholding free trade agreements with each of the four target coun- tries: Australia, Chile, New Zealand, and Singapore. We first turn to the economic rationales for the four possi- ble trade agreements.

ECONOMIC RATIONALE

Australia

Australia was an advanced economy of moderate size (approximately $400 billion in 2002), with impressive real economic growth of 3.9 percent of gross domestic product (GDP), on average, between 1999 and 2003. The economy was heavily oriented to services rather than manufacturing. Trade between the United States and Australia amounted to $18.7 billion in 2002.4 For- eign direct investment had grown tremendously at the turn of the twenty-first century, almost tripling between 1998 and 2002 to $16.6 billion. Australia’s twenty million people were well educated, long lived, and healthy. Roughly half the population owned a per-

sonal computer and used the Internet as of 2002. At $19,530, Australia’s 2002 per capita gross national income (GNI) put it in the upper echelon of nation- states.

The United States represented an important export market for Australia. Overall Australian exports to the United States during the 1990s accounted for anywhere between 6 and 10 percent of Australia’s total exports, depending on the year, and totaled $6.4 billion in 2002.5

As a result, widespread Australian support existed for a free trade agreement with the United States. Increased and less restricted trade with the United States was esti- mated to be worth an additional $4 billion to the Aus- tralian economy, according to a 2001 Australian government study. That figure represented an approxi- mate 1 percent potential increase in both Australia’s GNI and GDP, a significant amount, given that by 2002 Australia’s annual economic growth had been halved to 2.7 percent from its 5.3 percent peak in 1998.

Australian exports to the United States steadily increased beginning in 1994 but had failed to apprecia- bly boost their share of the U.S. market. When broken down by commodity, meat, fuel, wine, inorganic chem- icals, automobiles and auto parts, and precious stones and metals dominated Australia’s exports to the United States during the 1990s.6 Australian meat exports to the United States rose increased dramatically beginning in 1996, due to a general increase in U.S. consumption, and by 1999 were Australia’s dominant export to the United States.7 Despite this absolute increase from 1996 onward, Australian meat producers did not raise their share of the U.S. market, holding steady at between one-quarter and one-third of all U.S. meat imports. Put another way, while Australia responded to the increased demand from U.S. consumers, Australian producers were unable to increase their U.S. market share.8

This pattern of unchanged market share was not limited to an individual commodity. Australia’s other three major exports to the United States did not enjoy a large market share either. U.S. imports of Australian coal and precious stones and metals were not signifi- cant in terms of total U.S. imports of those products, accounting for less than 1 percent of market share in most cases. U.S. imports of Australian inorganic chemi- cals, which had reached almost 20 percent of U.S. chemical imports in 1992, had dwindled to just barely 4 percent by 2001. For all these reasons, an FTA would

It’s Not Just the Economy, Stupid 5

serve as an important stimulus to a seemingly stagnant Australian export market.

From the U.S. perspective, an FTA with Australia was a less vital economic issue. U.S. imports of Austra- lian goods were an insignificant percentage of overall U.S. imports. Between 1992 and 2001, Australia sup- plied just over one-half of 1 percent of all U.S. imports. That said, some models estimated that a U.S.-Australian FTA would be a $19.39 billion economic windfall for the United States.9 Moreover, under most scenarios, a FTA posed little threat to U.S. producers. Consider three examples. For most of the 1990s, U.S. meat pro- ducers were generally increasing production in an attempt to meet domestic demand. At the same time, prices were declining, as evidenced by the fact that total meat production in 2000 was valued almost identically to that in 1992, despite a three-billion-pound increase in production over the same period. And while falling prices may have made U.S. meat producers leery of a free trade agreement, price volatility had more to do with dietary changes than with import levels. Or con- sider domestic coal production. During the 1990s, the U.S. coal industry was producing sufficient coal to meet domestic energy demands; imported coal was used to generate energy that was eventually exported. And while the average price of coal dropped over the decade from 0.97 per Btu (British thermal unit) in 1992 to 0.75 in 2000, the U.S. coal industry still dominated the domestic market. Finally, consider the chemical mar- ket. U.S. production of inorganic chemicals increased steadily throughout the 1990s and then began to fall toward the end of the decade, in line with other U.S. manufacturing industries. Despite this, employment in inorganic chemical production fell only 5 percent from 1990 to 2000, making it among the most stable of U.S. industries. In sum, the U.S. industries in direct competi- tion with Australian imports were healthy and capable of withstanding increased competition.

Australia was never a dominant trading destination for U.S. goods. Overall U.S. exports to Australia accounted for a mere 2 percent of the total U.S. export market in 1992 and had edged downward since 1997 to about 1.5 percent by 2001. The United States exported $12.3 billion worth of goods to Australia in 2002.10

When broken down by individual goods, the most financially significant U.S. exports to Australia were manufactured goods such as nuclear reactors and parts, aviation equipment, motor vehicles, and audio/visual

equipment. Australia accounted for about 2 percent of U.S. exports in each of these industries by the late 1990s, having fallen gradually throughout the decade. The exception was exports of U.S. motor vehicles to Australia, which showed a modest upward trend during the same period. An FTA would have helped boost exports of these commodities at the margins and could have helped stem the loss of U.S. manufacturing jobs associated with the production of capital goods, autos and consumer goods that took place in the late 1990s. But in and of itself, an FTA with Australia was not going to single-handedly stimulate U.S. exports.

Chile

There were two principal economic reasons the Ameri- cans wanted an FTA with Chile, neither of which pro- vided immediate economic gain to the United States. First, both the Clinton and Bush administrations believed an FTA would help sustain Chile’s economic growth and economic and political reforms. By the start of the twenty-first century, Chile was considered a tre- mendous economic success story.11 At $4,250, Chile’s 2002 per capita gross national income put it in the mid- dle echelon of nation-states but the second most-pros- perous nation in Latin America.12 Though the Chilean economy was only one sixth the size of Australia’s, Chile had an impressive average growth rate of over 3 percent in real GDP between 1998 and 2003, even accounting for the global economic downturn in 1999 and the financial collapse of neighboring Argentina.13 The Chil- ean economy was tilted toward the service sector, though the industrial sector remained strong. Chilean economic success had translated into benefits for its six- teen million people. The population was reasonably educated, long lived, and healthy. Approximately one in nine people owned a personal computer and roughly one-fifth of the population used the Internet. The weakest aspect of the Chilean economy was foreign direct investment, which was $1.7 billion in 2002.

The United States was one of Chile’s most impor- tant trading partners. Total trade between the two countries was $5.9 billion in 2002. Exports to the United States accounted for $3.6 billion of that total, which equated to between 12 and 19 percent of Chile’s total export economy from 1992 to 2001.14 As was the case with Australia, Chile stood to gain from an FTA with the United States. Industries accounting for the bulk of

6 Dr. David Auerswald and Ms. Caroline Shaver

Chilean exports to the United States involved agricul- tural goods and raw materials. Specifically, fish, fruit and nuts, wine, wood products, and copper accounted for the bulk of Chilean exports to the United States between 1992 and 2001. Exports of copper to the United States were increasingly important to Chilean- U.S. trade relations. Thirteen percent of U.S. imported copper came from Chile in 1992. By 2001, that number had jumped to an astonishing 35 percent. Chile’s share of the U.S. market in imported fruit and nuts also grew, though at a slower pace, from just over 12 percent in 1992 to over 16 percent in 2001. During the same period, Chile doubled its share of the U.S. imported wood and fish markets, a development that posed a moderate threat to U.S. producers.15 An FTA would sustain or even increase Chilean market share at an important time in Chile’s economic and political devel- opment.

The second reason an FTA was attractive to the United States was that it could serve as a spring-board for a broader Free Trade of the Americas Agreement (FTAA).16 A free trade zone covering all of the Ameri- cas had been a long-standing U.S. goal, both as a coun- terbalance to the EU’s economic muscle and as a means of fostering democratization and prosperity in the region. The potential benefits to the United States were many, including greater access to the hemisphere’s mar- kets, decreases in illegal immigration, increases in regional political stability, and even a potential decrease in the drug trade. Chile was considered a lynchpin state on the path to an FTAA.17

Nonetheless, there were few direct economic bene- fits to the United States from a potential U.S.-Chile FTA given the size of the Chilean economy and the already low tariff levels between the two countries.18 Major Chilean imports from the United States accounted for a modest $2.3 billion annually—less than 1 percent of total U.S. exports during the 1990s.19 The projected benefits of an FTA were only $4.41 billion to the U.S. economy.20 U.S. exports to Chile were concentrated on machinery, electronics and computers, aviation parts, motor vehicles, and audio/visual equipment.21 U.S. exports to Chile had been falling for at least four years by 2001 as the region underwent an economic down- turn. So there was little to support the idea of Chile as a crucial economic partner for the United States.

A free trade agreement between the United States and Chile had first been proposed in 1994, yet little progress was made over the next six years except for the establishment of the Chile-U.S. Joint Commission on Trade and Investment in 1998. On November 29, 2000, two months before leaving office, President Bill Clinton announced the opening of formal negotiations between the two countries. Negotiations were continued in ear- nest by the George W. Bush administration. In April 2001, USTR Zoellick visited Chile and Chilean Presi- dent Ricardo Lagos traveled to Washington for formal White House talks with President Bush. At the conclu- sion of that visit, Bush expressed hope that negotiations would be complete by the end of the year. Lagos was more reserved in his expectations, stating that much work had been completed but that much was still left to be done, perhaps because President Bush had yet to receive TPA from Congress.

Domestic political concerns in the United States had little effect on U.S.-Chilean free trade negotiations. Industry lobbying groups for the major commodities traded between the United States and Chile remained silent or expressed support for an FTA. One reason was that Chile had concluded FTAs with Canada and Mex- ico in 1996 and additional FTAs with South Korea and the EU in 2002. U.S. firms were concerned that they would be disadvantaged relative to firms from these countries in the absence of a U.S.-Chile agreement.22

For instance, the Coalition for Fair Lumber Imports, the Southern Shrimp Alliance, and other groups repre- senting U.S. industry stated that they supported a free trade agreement with Chile if it meant that the Chilean market would be equally open to U.S. goods, regardless of the effect on their domestic business. Labor and envi- ronmental groups were much more vocal in their con- cerns about job losses due to cheaper labor costs and environmental degradation but were unable to mount a serious domestic challenge either during the initial dis- cussions in the first Bush and Clinton administrations or during the formal negotiations that the second Bush administration held.

From the Chilean perspective then, there was every reason to desire an FTA with the United States. The United States was Chile’s largest export market, with a potential for significant growth. There was less economic rationale for an FTA from the U.S. perspec- tive. While there was only selective opposition to an agreement from affected U.S. industries, at the same

It’s Not Just the Economy, Stupid 7

time an FTA would provide only marginal improve- ments in U.S. exports. Therefore, the economic ratio- nale for a U.S.-Chile FTA was based on its indirect economic benefits. An FTA could help sustain Chile’s economic and political transformation and could become the basis for a broader regional trade agree- ment linking the hemisphere’s economies.

New Zealand

Though it had a population only a quarter the size (four million) of Chile, New Zealand had an economy that was only slightly smaller than that of Chile, with a GNI of approximately $52 billion and a GDP of $59 billion in 2002. New Zealanders were well educated, long lived, and healthy. As with Chile, only one in nine New Zea- landers owned a computer, but almost half the popula- tion used the Internet. At $13,260, New Zealand’s per capita gross national income put it in the upper echelon of nation-states. As of 2002, New Zealand had a postin- dustrial economy that was heavily oriented to services rather than manufacturing. Of the nonservice indus- tries, New Zealand’s economy was centered on agricul- ture and raw materials: meat, edible animal products (honey, milk, eggs, etc.), wood products, and industrial animal products.

An FTA was crucial to New Zealand’s long-term economic prospects, however, New Zealand already had free trade agreements with both Singapore and Australia, two countries that were either already engaged in or about to begin negotiations on free trade agreements with the United States, which would seem to make a similar agreement with the United States a logical outcome. Yet the ongoing bilateral FTA negotia- tions between the United States and Australia, in partic- ular, raised concerns in New Zealand’s government. The worry was that in the absence of their own agree- ment with the United States, New Zealand-based busi- nesses that traded with the U.S. would relocate to Australia once a U.S.-Australian FTA was enacted, and business leaders thinking of moving to either New Zea- land or Australia for quality of life issues would choose Australia for its more beneficial economic climate.

The New Zealand government had reason to be worried. Foreign direct investment in New Zealand had been cut in half from the late 1990s level, down to $823 million in 2002, or roughly one-twentieth the amount flowing into Australia. Moreover, New Zealand had

one-fifth the population of Australia, giving it a much smaller potential workforce. In short, the New Zealand government was right to be concerned about an accel- erated economic flight from New Zealand to Australia, particularly if the Australians got a free trade agreement and New Zealand did not.

New Zealand’s total exports to the United States amounted to only $1.7 billion in goods and were domi- nated by lamb, poultry and dairy products, seafood and fruit. Throughout the 1990s, the economic value of meat products exported to the United States was four times greater than any other New Zealand product. Although New Zealand’s percentage of the U.S. imported meat market declined from 24 percent in 1992 to 15 percent in 2001, the value of those exports rose beginning in 1996. Of the other key goods exported to the United States, animal products (industrial and edi- ble) also maintained significant market share in the United States. During the 1990s, New Zealand was the source of between 8 and 19 percent of U.S. imported eggs and dairy products, with a steady upward trend toward the end of the decade, and between 13 and 19 percent of imported industrial animal products. Though New Zealand’s share of the imported U.S. wood market was negligible and its share of U.S. fish imports had been in a slow decline since early in the decade, New Zealand’s overall exports to the United States increased from 1996 through 2001 such that it ran a trade surplus with the United States by 2000.

Open trade with New Zealand posed a threat to specific U.S. agricultural producers, however. For instance, the heavily regulated U.S. dairy market had faced minimum competition in the 1990s, with imports making up less than 5 percent of the market. Domestic egg production had increased steadily throughout this time, despite a downward trend in the average price per dozen. Eliminating tariffs, and more importantly the possibility of eliminating government price supports, was a dangerous scenario for the U.S. dairy industry. The U.S. fish and lumber industries would be under increased pressure from an FTA as well. Both industries had been in decline since the mid-1990s. Duty free imports from New Zealand could have a negative impact on either industry. The exception was U.S. meat producers. The U.S. meat industry was thriving and capable of facing increased competition. In short, U.S. industries that would come into direct competition

8 Dr. David Auerswald and Ms. Caroline Shaver

with increased New Zealand imports had very mixed views of an FTA.

As the same time, open trade with New Zealand also represented a relatively small opportunity for U.S. producers. New Zealand was not a significant market for U.S. products, totaling only $1.7 billion in 2002.23

U.S. exports to New Zealand centered on advanced industrial parts, audio/visual equipment, and aviation. U.S. exports to New Zealand held steady at a relatively low level of three tenths of a percent of all U.S. exports.

The first public mention of the possibility of a free trade agreement between the United States and New Zealand came in response to congressional interest. When asked about potential agreements with Australia and New Zealand in March 2001 congressional testi- mony, USTR Zoellick responded that discussions were underway with Australia but that nothing similar was taking place with New Zealand. “Based on this exchange,” he said, “I expect I will [begin discussions].” New Zealand’s Trade Negotiations Minister Jim Sutton responded positively the next day and stated that New Zealand was interested in increased trade relations through either bilateral or multilateral arrangements. In mid-May, a bill to authorize free trade agreement nego- tiations between the United States and New Zealand was read in committee by Senator Max Baucus, chair- man of the Senate Finance Committee. Although the bill never left the committee, Trade Negotiation Minis- ter Sutton again responded positively. That said, from an economic perspective it was clear that New Zealand very much desired a free trade agreement with the United States. The United States had less economic incentive for such an agreement.

Singapore

Negotiations on a U.S.-Singapore FTA were initially authorized by the Clinton administration in November 2000 (two weeks before the announcement of similar arrangements for Chile). The first round of negotiations was completed less than a month later. Negotiations continued in earnest through 2001. Prime Minister Goh Chok Tong visited the Bush White House for the first time on June 11, 2001, and the two leaders described their defense and economic relationships as “robust.”

Singapore had a well-established, postindustrial economy. Despite having a relatively small population (4.2 million) on par with that of New Zealand, Singa-

pore had an economy that measured a respectable $87 billion in terms of both GNI and GDP in 2002. The pop- ulation was relatively educated, long lived, and healthy. Surprisingly for such an industrialized nation, only one- seventh of the population owned a personal computer in 2002, though that number was increasing, and half the population were Internet users. At $20,690, Singa- pore’s per capita gross national income was even better than Australia’s, putting Singapore in the upper eche- lon of nation-states. And like Australia and New Zea- land, Singapore’s economy was heavily oriented to services rather than manufacturing.

With few natural resources and a unique geo- graphic locale, Singapore was heavily dependent on trade and foreign investment. Foreign direct investment was in decline during the FTA negotiations, down to $6.1 billion in 2002 from a high of almost $11 billion in 2001. Trade with the United States totaled $28.8 billion in 2002, down from the at least $30 billion annual figure through the 1990s. The value of overall exports from Singapore to the United States was $14.1 billion in 2002, equating to between four and ten times that of Austra- lia, Chile, or New Zealand.24 Unlike the three other countries, Singapore’s major exports to the United States were finished, manufactured goods such as com- puter equipment and circuitry, machinery and elec- tronics, consumer goods, chemicals, and mineral fuels.25 However, Singapore’s share of the U.S. high- tech market had been declining since 1997. Its share of the U.S. organic chemicals import market also declined for most of the 1990s, though they were able to rebound somewhat by the end of the decade.

In terms of trade volume, a U.S.-Singapore FTA would make little difference to the United States, because there were few if any tariffs between the two nations even absent an FTA.26 As such, U.S. firms had already adjusted to international competition from Sin- gapore. For instance, the U.S. domestic chemicals mar- ket had steadily increased production throughout the 1990s despite a 5 percent drop in its workforce. The value of domestic production of electrical parts for nuclear reactors (the only portion of the nuclear parts market that is routinely monitored) followed an upward trend throughout the 1990s, although drops in the abso- lute volume of production occurred roughly every two years. U.S. production of audiovisual equipment fol- lowed a steady, increasing trend throughout the 1990s and into the 2000s, despite producers facing strong

It’s Not Just the Economy, Stupid 9

competition from lower-priced imports in the con- sumer retail sector. Thus, the domestic industries in direct competition with Singapore’s main exports were healthy and capable of withstanding increased competi- tion.

Exports from the United States to Singapore during the 1990s gradually increased both in terms of value and their share of total U.S. exports. At $14.7 billion in 2002, U.S. exports to Singapore dwarfed U.S. exports to the other three countries in this study. But more important than trade in goods was the potential for a huge boost in services trade between the two countries. In particular, U.S. firms desired access to Singapore’s lucrative tele- communications, banking, insurance, and government procurement sectors, to say nothing of better protec- tion of intellectual property rights. By one estimate, the value to the United States of such changes could be upwards of $17.5 billion for the U.S. economy.27 In sum then, an FTA was in the interests of both the United States and Singapore.

SECURITY RATIONALE

Australia

The prenegotiation process on a U.S.-Australian FTA was under way well before September 11, 2001, includ- ing bilateral meetings of the necessary economic offi- cials and an official visit by Australian Prime Minister John Howard to the White House on September 10, 2001.28 Negotiations really took off, however, when the U.S. House and Senate gave President Bush trade pro- motion authority on July 27, 2002, and August 1, 2002, respectively. On November 13, 2002, USTR Robert Zoellick sent a letter to Congress announcing the presi- dent’s intention to pursue a free trade agreement with Australia.29

Between September 11, 2001, and Zoellick’s November 2002 letter, Australia had expressed strong support for the U.S. war on terror. Three days after the attacks on the World Trade Center and the Pentagon, Prime Minister Howard invoked article IV of the ANZUS Treaty, which stated that an attack on any member of the treaty becomes an attack against all three.30 The Australian government took a series of concrete steps in support of U.S. retaliatory action in Afghanistan. By the end of September, the Australian

government had frozen suspected terrorist assets and had extended the deployment of the HMAS ANZAC on its mission in the Persian Gulf at the U.S.’ request.31 By the end of the year, Australia had made specific force commitments to the international coalition taking part in Operation Enduring Freedom, including aircraft, spe- cial forces, and additional maritime support.32

Close diplomatic relations continued between the two nations throughout the next year, as Australia remained vocal about its support for coalition actions in Afghanistan. Prime Minister Howard visited the White House a second time in June 2002 and also addressed a joint session of Congress, praising the bilateral strategic and trade relationships that existed between the two governments.33 During this same period, USTR Zoel- lick was equally vocal about the advantages of and his desire to see a free trade agreement between the United States and Australia. From January to November 2002, he gave three speeches that expressly supported a free trade agreement, which is rather remarkable consider- ing his office was negotiating two other bilateral free trade agreements at this time.34 On November 13, USTR Zoellick announced that formal negotiations would begin shortly.35

Australia also expressed support for all U.S. actions in Iraq. In January 2003, while claiming that he had not yet decided whether or not to take part in any military action, Prime Minister Howard stated that if he did take part, he had already decided that Australia would con- tribute special forces with support units, naval vessels, and some fighters.36 When asked if he would support U.S. action without the approval of the UN Security Council, he refused to answer but later noted that the U.S. military buildup in the region was not an act of aggression but a logical, tactical maneuver to push Iraq toward a peaceful solution.37 By the end of the month, Prime Minister Howard had ordered some special forces and reconnaissance teams to the region to pre- pare in case of military action, and his public statements expressed his views that Iraq’s nuclear proliferation must be stopped.38 By the middle of February, addi- tional special forces had been mobilized and sent to the region.39

At a White House visit on February 9, 2003, Presi- dent Bush stated that he believed Australia was a part of the “coalition of the willing.”40 Prime Minister Howard responded that Australia had been helping in prepara-

10 Dr. David Auerswald and Ms. Caroline Shaver

tions for war but would wait until the Security Council acted before making a final decision.41 When asked if strong Australian support of the United States in Opera- tion Enduring Freedom and the future Iraqi conflict would improve Australia’s chances for an FTA, Howard responded diplomatically that he did not believe the two issues were related in any way.42

At the end of the month, Prime Minister Howard expressed strong support for the new U.S. resolution authorizing force in Iraq. He found it “hard to believe that logically any party or nation that voted for Resolu- tion 1441 fifteen weeks ago, would not now vote for this resolution” and repeated the U.S. position that military action had previously been authorized by other Secu- rity Council resolutions and that further resolutions were not necessary for a military response.43 Two weeks later, on March 10, Prime Minister Howard stated that the two most important factors in deciding whether or not to take part in military action in Iraq were (in order) (1) the presence of weapons of mass destruction (and their possible use or sale by Saddam Hussein) and (2) Australia’s security relationship with the United States.44

On March 18, Prime Minister Howard announced to parliament that the cabinet had authorized the chief of the Australian Defense Force to use Australian forces as part of any U.S. military action.45 He stated that Aus- tralia and her allies were acting under the authority of previous Security Council resolutions and asked for parliamentary support of a resolution condemning Iraq.46 The next day, USTR Zoellick thanked the Aus- tralians for being “stalwart friends and allies.”47 At the end of the month, Australian Foreign Minister Alexan- der Downer visited the United States and met with Vice President Cheney, Secretary of State Powell, and National Security Advisor Rice before heading to New York to encourage UN Secretary General Kofi Annan, the president of the World Bank, and the International Monetary Fund director to take an active role in Iraq’s postwar reconstruction.48

In early May, Prime Minister Howard visited Presi- dent Bush at his Texas ranch and was thanked by Bush for Australia’s involvement in Operation Iraqi Free- dom.49 Bush also expressed strong support for the FTA currently under negotiation and called on Congress to show similar support.50 In October, President Bush vis- ited Australia and, at a press conference with Prime

Minister Howard, again thanked Howard for Australian support and stated that the proposed free trade agree- ment would be good for both countries.51 Two months later, Trade Minister Mark Vaile finalized Australia’s financial contribution to Iraq’s reconstruction, which would total $470 million, plus continuing support for agricultural reconstruction to which they had already agreed.52 Then on January 5, 2004, Foreign Minister Downer welcomed the new Afghan constitution and reiterated Australia’s commitment to supporting food security, rebuilding governing institutions, and eradi- cating landmines.53 On February 8, the final text of an Australian-U.S. free trade agreement was announced by USTR Zoellick and Australian Trade Minister Vaile.54

The FTA entered into force on January 1, 2005.

Chile

By September 11, 2001, formal free trade agreement negotiations between the United States and Chile had been under way for almost a year, with at least five rounds of negotiations completed. Immediately follow- ing the September 11 terrorist attacks, the Chilean Inte- rior minister issued a statement on behalf of President Ricardo Lagos expressing his country’s condolences and declaring a national day of mourning.55 While not contributing militarily to Operation Enduring Freedom in Afghanistan, President Lagos offered postconflict humanitarian assistance to the Afghan people and expressed strong diplomatic support for the military action, making a point about “Chile’s solidarity and sup- port for the United States.”56

Final FTA negotiations coincided with the initial UN debate over Security Council Resolution 1441 in late 2002. Chile was in a particularly sensitive position. It held one of the rotating seats on the Security Council, and the Bush administration was counting on its vote. Resolution 1441 passed the Security Council on November 8, 2002, with Chile’s support. Negotiations were completed on the U.S.-Chile FTA on December 11, a mere month later.57

Chile was less supportive of initiating Operation Iraqi Freedom than it was of Operation Enduring Free- dom, and there was some concern that its position would jeopardize the formal signing and implementa- tion of the FTA. Chile’s position on Iraq was certainly criticized by U.S. officials.58 Chile’s hesitation to use

It’s Not Just the Economy, Stupid 11

force was plain to see. On March 7, 2003, in prepared remarks before the UN Security Council, Chilean For- eign Minister Soledad Alvear stated that Iraq was not in sufficient compliance with its UN obligations but that force was a last resort and all peaceful options had not yet been exhausted.59 A week later, President Lagos made a statement noting that he understood U.S. con- cerns regarding Iraq but that Chile supported a continu- ing multilateral effort to avoid war and uphold international law. As a result, he said, Chile would not vote for a resolution that did not fully exhaust peaceful options. On March 20, President Lagos issued a state- ment to reassure his country that Chile had done every- thing it could to avoid the war and that the war’s repercussions should be minimal for Chile. He expressed hope that great harm would not come to the innocent and stated his desire for future UN involve- ment.60

The Chilean government had real concerns about the linkage between its opposition to the Iraqi conflict and the future of the FTA.61 The agreement was ini- tially scheduled for an April 2003 White House signing ceremony. This was cancelled by the U.S. side.62 On June 6, the free trade agreement finally was signed, but in Miami rather than at the White House, and by USTR Zoellick and Foreign Minister Maria Alvear Valenzuela rather than their respective heads of state.63 When asked three days later whether Chile was simply an eco- nomic and not a strategic partner, Secretary of State Powell stated that although the United States was disap- pointed that Chile did not feel it could support a second resolution on the use of force in Iraq and could not take part in Operation Iraqi Freedom, the United States con- sidered Chile a friend.64 He did not call Chile an ally, and he finished by stating that Chile was a democracy, free to make its own choices.65 U.S. disappointment notwithstanding, the FTA entered into force on Janu- ary 1, 2004.

New Zealand

Following September 11, 2001, the New Zealand gov- ernment of Prime Minister Helen Clark expressed guarded support for U.S. action in Afghanistan, at some risk to her domestic standing. New Zealand privately offered military assistance to the U.S.-led coalition mili- tary effort in Afghanistan but did not invoke the joint

defense article IV of the ANZUS Treaty as had the Aus- tralians. On October 1, parliament voted in favor of both the U.S. approach planned for Operation Enduring Freedom and for the UN Security Council resolution that condemned the September 11 attacks.66 It also secretly moved some military forces to the Afghan the- ater of operations.67 Public revelation of these deploy- ments in mid-December led to criticism of Clark by the less hawkish governing coalition partner, the Alliance Party, and from opposition parties like the Greens.68 In March 2002, the United States revealed that New Zea- land’s participation included aircraft, specialized per- sonnel, and high level administrative staff.69

Later that month, Clark visited the White House for the first time and apparently brought up the free trade agreement.70 President Bush issued no public statement on the FTA. There were no further develop- ments on either the military or economic front until November 2002, when Clark announced that New Zea- land would be expanding its participation in Operation Enduring Freedom with the addition of a frigate and a naval patrol aircraft.71 Two days later, USTR Zoellick sent a letter to Congress advising it of the state of FTA negotiations with Australia and solicited congressional opinion on the possibility of an FTA with New Zealand in light of New Zealand’s preexisting agreements with Australia and Singapore.72

By the end of 2002, however, New Zealand was not as far along in the free trade agreement process as Chile and Australia. In fact, the only reason an agreement was being discussed at all was due to congressional interest and in conjunction with the negotiations already under way with Australia and Singapore. This is not to imply that New Zealand’s case was considered an after- thought, but it is fair to say that administration leaders were not yet completely on board.

Progress on an FTA, already slow to begin with, ground to a halt during Operation Iraqi Freedom. New Zealand offered much more qualified support, if not downright opposition, for U.S. policy toward Iraq. However, New Zealand supported the U.S. effort to put multilateral pressure on Iraq via UN Resolution 1441 and even pledged to take part in a military response if such a response were UN sanctioned.73 Without UN authorization, however, New Zealand vowed to restrict its involvement to postwar reconstruction and humani- tarian efforts.74 Following Secretary of State Powell’s

12 Dr. David Auerswald and Ms. Caroline Shaver

speech at the United Nations, Prime Minister Clark stated that she still felt a multilateral approach toward the Iraq problem was necessary and that Powell’s evi- dence, while strong, did not constitute the “smoking gun” she felt was required to authorize military action.75 She also stated that a war in Iraq without Security Council sanction would increase Islamic extremism and unsettle those Islamic governments with links to western governments.76

On the trade front, on February 13, the deputy chief of mission in the U.S. embassy in Wellington, Philip Wall, stated that the United States was not cur- rently prepared to commit to bilateral trade negotia- tions with New Zealand.77 He blamed this on a variety of issues but singled out the New Zealand Nuclear Free Zone legislation of 1987, which prohibited entry into New Zealand’s territorial waters of any nuclear armed or powered vessel. He closed by stating that the United States had a full plate of bilateral trade negotiations at that time and that the possibility of an agreement would be further examined at a later date.78

Prime Minister Clark stepped up her criticism of U.S. policy as war seemed increasingly likely. On March 17, she stated that U.S. military action in Iraq without another Security Council resolution would be a viola- tion of international law.79 She again expressed her con- cern about the precedent set by such action. The next day, Prime Minister Clark stated that the international community agreed that Iraq must be disarmed.80 The disagreement between the United States and New Zea- land was over the means and timetable of disarmament. In her words, “For the majority of nations on the [Secu- rity] Council, the threshold for the use of force had not been reached. Our government supports and endorses that judgment.”81

Despite these remarks, there were those in the U.S. government who continued to support an FTA with New Zealand. For instance, on March 28, nineteen U.S. senators signed an open letter to President Bush asking him to open negotiations with New Zealand on a free trade agreement, citing the strong economic ties between the two nations and New Zealand’s support in Operation Enduring Freedom and the global war on ter- ror.82

New Zealand did not support Operation Iraqi Free- dom, though it eventually deployed forces trained in mine clearing to Iraq to assist UN efforts there. The

New Zealand press linked Prime Minister Clark’s stand on Operation Iraqi Freedom to postponement of a U.S.- New Zealand free trade agreement.83 Clark responded on March 30, “I cannot think it is a credible or tenable position to say that we should do something that we deeply believe is wrong for some material pay-off and I wouldn’t be party to it.” Going further, she stated, “I don’t think that September 11 under a Gore presidency would have had this consequence for Iraq. But I think in this administration there were forces that always wanted to go after Iraq and September 11 tipped the balance.”84 The next day, Prime Minister Clark stated that the war in Iraq did not appear to be going accord- ing to plan.85

On April 1, U.S. embassy public affairs officer Bill Millman stated that Prime Minister Clark’s comments were regrettable.86 On April 5, Prime Minister Clark publicly offered an apology to the Bush administration and asked that her ambassador to the United States con- vey it.87 Continuing this discussion on April 26, U.S. Ambassador to New Zealand Charles Swindells stated that he did not think anyone should be surprised at Aus- tralia’s priority over New Zealand for a free trade agree- ment, because Australia was an “ally.”88 This view was reinforced five days later, when USTR Zoellick said that the United States continued to work with New Zealand on multilateral trade issues, but that Australia was the primary bilateral trade focus at that time and that the Australian negotiations provided an opportunity to test the waters with New Zealand, nothing more.89

Throughout the rest of spring 2003, New Zealand officials remained critical of the war in Iraq and the precedent that it set for future action. In congressional testimony on May 21, USTR Zoellick said that New Zealand remained an important multilateral partner but noted that the primary exports from New Zealand were protected U.S. agricultural products, especially meat and dairy, and that this represented a serious complica- tion in reaching a free trade agreement with New Zea- land.90 In more vague terms, he alluded to “some things done recently that I think made [an FTA] a little bit harder for us to carry.”91 On May 23, the U.S. embassy in New Zealand was compelled to release the following statement to combat press statements that an anony- mous U.S. official said Prime Minister Clark’s actions and statements had cost New Zealand a free trade agreement.

It’s Not Just the Economy, Stupid 13

The United States is not prepared to enter into FTA negotiations with New Zealand at this time, though we have not ruled out the possibility of an FTA with New Zealand at some point in the future. The United States takes into account a wide range of factors when examin- ing the merits of potential FTAs. These factors include trade, political, security, and other elements of the bilateral relationship. Contrary to recent suggestions in the press here, U.S. decisions on free trade agreements are not based solely on any one factor.92

As the spring turned into summer, New Zealand took a series of guarded conciliatory actions toward the United States. On June 9, Prime Minister Clark announced that another sixty troops were being sent to Iraq to help with rebuilding efforts in southern Iraq and would be under British command.93 The U.S. State Department welcomed this move. Moreover, in Sep- tember, the New Zealand Defense Force took com- mand of the Provincial Reconstruction Team in Bamian Province, Afghanistan.94

These moves appeared to improve relations some- what between the two trading partners, though they did not lead to an FTA. On September 24, New Zealand Foreign Minister Philip Goff met with U.S. Deputy Sec- retary of State Richard Armitage and discussed global trade and security issues.95 In early October, U.S. Ambassador Swindells distributed a statement that the long-term prospects for U.S.-New Zealand relations were good but that the United States was not prepared to open bilateral talks at that time.96 He went on to note that New Zealand’s antinuclear legislation was a compli- cation for the United States, but it was not the only one. Friends and allies, said the ambassador, are not the same thing, and New Zealand qualified as a friendly nation, not an ally, as evidenced by its choice not to take part in Operation Iraqi Freedom, the first such refusal in the history of U.S.-New Zealand relations.97

On October 16, President Bush attempted to mollify New Zealand by stating that New Zealand should read nothing into the U.S. decision not to pursue a free trade agreement at that time other than that the United States just had not had a chance to focus on those negotia- tions.98

In February 2004, New Zealand Ambassador to the United States John Wood stated that New Zealand would restart its lobbying efforts for a free trade agree- ment.99 Trade Negotiations Minister Sutton confirmed

that he would discuss a free trade agreement with USTR Zoellick on his next visit to Washington.100 And on March 8, Prime Minister Clark announced that fifty New Zealand troops were heading back to Afghanistan for long-range reconnaissance and assistance with coali- tion efforts.101 In addition, a frigate and a naval patrol aircraft would be redeployed to the Persian Gulf. Yet as of early 2005, New Zealand still did not have a free trade agreement with the United States.

Singapore

As mentioned earlier, negotiations on an FTA began in November 2000. Following the attacks on September 11, Prime Minister Goh expressed sympathy and strong support for any U.S. retaliation in Afghanistan.102 Sin- gapore also allowed U.S. aircraft to use its airfields in Southeast Asia, arrested thirteen Al-Qaeda suspects in December 2001 (which led to additional arrests in Malaysia and the Philippines), increased patrols of the Straits of Malacca, outlawed Al-Qaeda and similar groups, and froze suspected terrorist assets.103 At the end of July 2002, Secretary of State Colin Powell visited Singapore and met with Prime Minister Goh.104 The pending free trade agreement and the continuing war on terror were two of the subjects covered by their dis- cussions.105 Thus, by the end of 2002, Singapore was within striking distance of signing a free trade agree- ment with the United States and was a strong ally in the war on terror, having contributed military assistance and intelligence and having begun to eradicate regional Al-Qaeda strongholds.

Singapore also was a staunch supporter of U.S. action in Iraq. That support coincided with the January 15, 2003, initialing of the free trade agreement between Singapore and the United States. All that was left was the necessary legal review of the treaty and the formal signing ceremony. In contrast to Chile, Singapore con- tinued its strong support of U.S. security policy during the winter of 2002–03. For instance, on March 27, 2003, Singapore’s representative to the United Nations, Kishore Mahbubani, stated that Singapore would have preferred a peaceful resolution to the Iraq situation but that a lack of unity within the UN Security Council was not sufficient excuse for continued inaction in Iraq.106

Speaking in late April, Minister for Trade George Yeo noted that Singapore supported the United States in

14 Dr. David Auerswald and Ms. Caroline Shaver

Operation Iraqi Freedom because U.S. leadership was indispensable.107

On May 6, President Bush and Prime Minister Goh signed the free trade agreement at the White House.108

The text of the agreement was passed by the House and Senate in late July, and President Bush signed the implementing legislation on September 3.109 On Octo- ber 21, President Bush made an official visit to Singa- pore, where he discussed Southeast Asian security issues.110 A week later, Singapore announced that a landing ship and a transport aircraft would be deployed to the Middle East to take part in the Iraq reconstruc- tion effort and that the government had donated 1.4 bil- lion Singapore dollars (about $250,000) to the Red Cross for Iraq.111 The FTA entered into force on Janu- ary 1, 2004.

RESULTING TRADE AGREEMENTS

Australia

The free trade agreement reached between the United States and Australia is a comprehensive U.S. bilateral free trade agreement. Upon entry into force, more than 99 percent of all U.S. exports to Australia will enter duty free, a reduction that the U.S. Trade Representative’s office stated will provide a $2 billion benefit to U.S. industry. In agriculture, Australian exports of meat will still face tariffs, but those will be slowly phased out over the subsequent eighteen years. The current import quota will remain in place. The U.S. sugar and dairy industries are specifically protected, with no change in the current tariffs and only slight increases in Australia’s import quotas. Australia will also allow unprecedented access to its telecommunications industry, including satellite and cable services. As with most recent free trade agreements, chapters (provisions) protect direct foreign investment, intellectual property rights, and international copyrights. U.S. industries also gained the right to bid on Australian government contracts.

While all current, bilateral free trade agreements contain provisions governing deregulation of industry, workers’ rights, environmental protection, and agricul- tural exceptions, the Australian agreement is different because of the level of deregulation that was negotiated and the reductions in market protections that were ini-

tiated, thus greatly increasing the value of the agree- ment to both countries.

Chile

The free trade agreement between the United States and Chile was almost exactly a decade in the making. In the final accounting, the agreement protects those U.S. and Chilean industries that were particularly sensitive during the negotiation process while immediately reducing tariffs on less contentious goods. Specifically, the automobile and agricultural industries received par- ticular attention in the agreement. Chile already has free trade agreements with both the European Union and Canada. The agricultural provisions of the U.S. agreement allow for U.S. agricultural goods like soy- beans, pork, and animal feed to enter the Chilean mar- ket on terms equal to or frequently better than those of European or Canadian goods. Chile also eliminated its luxury tax on cars, which will reduce the price of U.S. automobiles immediately. As with Singapore and Aus- tralia, the lucrative trade in services also received exten- sive attention in the agreement. Ownership and investment rights and protections were improved for foreign nationals and corporations in both countries, and deregulation of key technological sectors of the Chilean market should lead to increased opportunities for U.S. telecommunications and investment busi- nesses. Intellectual property rights were strengthened as another enticement to U.S. business. And, as with Australia and Singapore, chapters of the agreement dealt specifically with labor and environmental con- cerns that the United States had raised.

New Zealand

At this time, New Zealand is the only country of the four studied here that does not have a free trade agree- ment with the United States. There is little hope of such an agreement in the near future, at least with the cur- rent Bush administration.

Singapore

The negotiations for the free trade agreement between the United States and Singapore began in December 2000 and concluded twenty-five months later. The final agreement allowed greater market access for both

It’s Not Just the Economy, Stupid 15

countries through a variety of channels. Singapore immediately eliminated all tariffs on U.S. goods. The United States reciprocated in most industries, but cer- tain sensitive industries should slowly phase out their tariffs over the course of the next three to ten years. Moving beyond the market in tangible goods, the agree- ment also completely restructured Singapore’s business regulations for foreign firms, allowing U.S. telecommu- nications and banking firms the same investment and ownership opportunities that had previously been avail- able only to Singapore’s domestic firms. These new rules should greatly increase the trade in services between the United States and Singapore, which was responsible for roughly a quarter of the total value of trade between the two in 2003. In order to pacify the U.S. labor and environmental lobbies, the agreement also contained chapters on the rights of workers and the need to actively protect each country’s natural resources and environment.

CONCLUSIONS

FTAs are providing the increase in U.S. export trade expected by negotiators and touted by supporters. The U.S. government has published country-specific num- bers indicating the economic success of agreements with Australia, Chile, and Singapore. U.S.-Australia trade under the first year of the FTA was worth $21.8 billion, for Chile $8.4 billion, and for Singapore $34.9 billion according to the U.S. Trade Representative.112

Since coming into affect, the FTA between the United States and Australia has resulted in the U.S. trade sur- plus increasing to over $2 billion, up 31 percent in the FTA’s first three months in effect.113 Agricultural exports to Australia in particular increased 20 percent, including a particularly stark 885 percent increase in the amount of exported pork. U.S. exports to Australia, in aggregate, increased 11.7 percent in the first quarter of 2005. U.S. exports to Chile increased by nearly $1 bil- lion, to $3.6 billion during the first year of the U.S.- Chile FTA. In particular, exports of sophisticated machinery and vehicles and parts grew by over a third to $1.1 billion annually. U.S. exports to Singapore rose to $19.6 billion in the first year of that bilateral FTA, despite Singapore’s low tariff rates before the agree- ment, increasing 18.4 percent over the previous year. Exports of minerals and fuel, furniture, and vehicles

and parts increased over 80% from the previous year. Despite these gains, the picture is not an entirely

positive one for the U.S. economy. FTAs cannot single- handedly overcome underlying structural weaknesses in any economy. Rising oil prices have widened the U.S. trade gap.114 The cost to the U.S. government of the global war on terror as of September 30, 2006, was $437 billion, with the price tag expected to exceed $500 bil- lion in fiscal year 2007.115 In addition, despite the increased number of free trade agreements, the U.S. economy shed 1.1 million jobs between 2001 and 2004.116 When asked about this seeming paradox, USTR Zoellick stated that the United States is not exporting enough to other countries and is facing much steeper barriers to trade than other countries face when exporting to the United States.117 Before leaving office, Zoellick responded to critics of the U.S.-Australia FTA in particular, and of free trade in general, defending FTAs as opening otherwise closed markets and creating a level playing field for international trade.118

Indeed, the U.S. negotiation of free trade agree- ments with Australia, Chile, and Singapore, in hind- sight, was the first sign of a now common and widely acknowledged trend toward bilateral free trade agree- ments. Some commentators argue that this increase is due to the quantifiable success of existing agreements and the validation of the free trade model as a way to promote political values. However, others point to the failure of the two most recent rounds of the World Trade Organization talks, in Cancun and Doha, as the death of large, multinational, free trade initiatives. With this, smaller bilateral or regional negotiations became more attractive almost overnight. Since 2004, the United States has pursued FTAs with Oman, Bahrain, and Peru; Australia has inked a deal with China; Chile with the European Union; and Singapore with India. The proliferation of smaller, bilateral agreements will likely lead to greater openness in uncontested sectors but fail to address the underlying difficulties that split the negotiators at Cancun and Doha, including subsi- dized agriculture and access to developing economies. The Wall Street Journal reports that some experts believe the United States has “spent too much time negotiating pacts will small nations like Morocco, Bah- rain, and Peru that add next to nothing to the U.S. econ- omy.”119 U.S. negotiators are also facing the end of President Bush’s TPA in summer 2007, perhaps acceler-

16 Dr. David Auerswald and Ms. Caroline Shaver

ating the pace of negotiations to avoid congressional line-item editing.120

Regardless of how they are negotiated or the secu- rity concerns that dictate the environment in which they come about, free trade agreements are almost always rhetorically justified in economic, not political or security terms. In all four cases discussed here, how- ever, it was clear that security concerns and domestic politics played a role in the FTA negotiation process (or lack thereof ). Yet it is difficult to judge whether they brought about the desired secondary effects in security or government policy. It is unclear whether the increase in trade has stabilized Chile’s democratic course; but then, such progress is difficult to quantify. Australia’s government, however, continues to point to its FTAs with the United States and China as indicative of its ability to positively engage both the world’s most pow- erful country and its most prosperous regional neigh- bor to ensure economic growth and security.121

Notwithstanding FTAs’ noneconomic effects, U.S. negotiators since 2005 have focused on concluding FTAs with friendly Middle Eastern countries in order to solidify bilateral relationships and extend U.S. eco- nomic, security, and political influence in the region. With the United States engaged in a global war on terror of indefinite duration and needing help from possibly reluctant partners, it is likely that further bilateral FTAs will be motivated by a combination of security, politi- cal, and economic concerns.

QUESTIONS FOR DISCUSSION

Section One: Conceptual Issues

The first section reviews the process by which a free trade agreement is negotiated and ratified in the United States and goes on to describe the economic and secu- rity rationale for FTAs in the abstract. Section one raises the following questions:

• What is the process by which trade agreements are negotiated within the United States?

• What has to occur before a trade agreement can enter into force? What is the procedure associated with that requirement? When did that procedure change?

• What is trade promotion authority, and why is it so important for the successful negotiation of

agreements?

• Who benefits economically from free trade agree- ments within the United States? Who suffers?

• How might security concerns influence negotia- tions over a free trade agreement?

• What is the relevant weight a negotiator should give to economic and security concerns when negotiating a free trade agreement?

Section Two: Economic Rationale

The second section traces the economic rationale for a bilateral FTA between the United States and each of the four prospective trading partners. There is a wealth of data on each country’s trade relationship with the United States and how an FTA might affect that rela- tionship. Complete the following chart on the eco- nomic rationale for each negotiation, and then answer the related questions.

• An FTA with which country represented the greatest immediate economic benefits to the United States?

• Trade with which country held the greatest long- term economic prospects for the United States?

• Based on a purely economic rationale, prioritize the order in which the United States should have negotiated an FTA with the four countries in the case study.

Section Three: Security Rationale

The third section details the bilateral security interac- tions between the United States and each country dur- ing consideration of each potential trade agreement. The table below should be used to summarize the key points from this section.

• How would you rank the countries based on their support for U.S. policies after the 9-11 attacks on the United States?

• To what extent did each country’s behavior change when considering intervention in Iraq?

• How would you rank the countries based on their support of Operation Iraqi Freedom related poli- cies?

If each FTA negotiation were based solely on secu- rity relations, which countries would receive an agree- ment?

It’s Not Just the Economy, Stupid 17

Section Four: Overall Results

The concluding section briefly reviews the outcome of each negotiation and the contents of each successful FTA. Combined with the data from the previous sec-

tions, what is your overall assessment of each negotia- tion?

• How do the economic and security rationales for an agreement with each country compare to the actual results?

Security Rationale

Australia Chile New Zealand Singapore

Reaction to 9-11

Attitude toward pos- sible Iraqi interven- tion

Strategic impor- tance of each coun- try

Overall assessment

Economic Rationale

Australia Chile New Zealand Singapore

Overall bilateral trade volume

Size and character of target economy

Economic growth potential

Domestic attitude toward an agree- ment

Overall assessment

18 Dr. David Auerswald and Ms. Caroline Shaver

• Would you have come to the same result? • How useful for security relations is the promise or

withholding of a trade agreement? How useful is a trade agreement as a reward for security coopera- tion?

• Which is more important for trade negotiations in the abstract—security or economic consider- ations?

• What are some possible alternative explanations for the behavior described in this case study?

NOTES

Disclaimer: The views expressed in this article are those of the authors and not of the National War College, the National Defense University, or any other entity of the U.S. govern- ment.

1. Scholars have found that unilateral trade restrictions have little actual worth outside of their symbolic value. Many scholars have written that the frequent use of economic sanc- tions has diminished their effectiveness. President Bill Clin- ton said that the United States had become “sanctions happy,” and former UN Secretary General Kofi Annan referred to the 1990s as the decade of the sanction. Robert Pape, professor of political science at the University of Chicago studied 110 uses of sanctions in the past one hundred years and determined that they have only brought about the desired outcome in five cases. According to Pape, sanctions must be multilateral and backed by military force in order to produce any true eco- nomic pressure. In 1998, Gary Hufbauer of the Institute of International Economics wrote that the United States had sanctions against twenty-six nations, totaling 53 percent of the world’s population.

2. William Cooper, Free Trade Agreements: CRS RL31356 (Washington, DC: Congressional Research Service, June 24, 2005), p. 3.

3. Ian Fergusson and Lenore Sek, Trade Negotiations in the 108th Congress: CRS IB10123 (Washington, DC: Congres- sional Research Service, July 17, 2003), p. 3.

4. Fergusson and Sek, Trade Negotiations, p. 10. 5. Ibid. 6. Fergusson and Sek, Trade Negotiations, p. 10. 7. There is no concrete evidence linking this increase to

the 1996 “mad cow” outbreak in Europe, which ended meat exports from the United Kingdom and western Europe.

8. Domestic U.S. meat production held relatively steady during this period. Meat imports from other countries increased.

9. James Jackson, Trade Agreements: Impact on the U.S. Economy: CRS RL31932 (Washington, DC: Congressional Research Service, April 20, 2005), p. 13.

10. Fergusson and Sek, Trade Negotiations, p. 10. 11. Fergusson and Sek, Trade Negotiations, p. 9; J.F. Horn-

beck, The U.S.-Chile Free Trade Agreement: CRS RL31144 (Washington, DC: Congressional Research Service, July 25, 2003), p. 3.

12. Hornbeck, The U.S.-Chile Free Trade Agreement, p. 5. 13. Chile’s economy grew at an astounding 8 percent real

annual rate from the mid-1980s through 1998. Mark Sullivan,

Chile: Political and Economic Conditions and U.S. Relations: CRS RL30035 (Washington, DC: Congressional Research Ser- vice, August 5, 2003), p. 4.

14. Fergusson and Sek, Trade Negotiations, p. 9. 15. U.S. fisheries’ production declined steadily through-

out the 1990s, with a slight increase in 2000; imports sur- passed domestic production in 1999 and have yet to recover. Domestic production of fruit and nuts was inconsistent; while this is expected, due to the nature of agriculture, there is no indication of large-scale growth or decline in U.S. production capacity. Lumber and other U.S. wood products were unable to keep pace with fast-growing consumption in the 1990s and faced increasing competition from imports.

16. Sullivan, Chile: Political and Economic Conditions, p. 7; Hornbeck, The U.S.-Chile Free Trade Agreement, p. 3.

17. Ibid. 18. Sullivan, Chile: Political and Economic Conditions, p. 8,

quoting from an International Trade Commission report pub- lished in 2003. See also Hornbeck, The U.S.-Chile Free Trade Agreement, p. 3.

19. Fergusson and Sek, Trade Negotiations, p. 9. 20. Jackson, Trade Agreements, p. 13. 21. Fergusson and Sek, Trade Negotiations, p. 9; Horn-

beck, The U.S.-Chile Free Trade Agreement, p. 10. 22. Cooper, Free Trade Agreements, p. 3; Sullivan, Chile:

Political and Economic Conditions, p. 5: Hornbeck, The U.S.- Chile Free Trade Agreement, p. 6 and 9.

23. Fergusson and Sek, Trade Negotiations, p. 13. 24. Ibid., p. 9. 25. Fergusson and Sek, Trade Negotiations, p. 10. 26. Jackson, Trade Agreements, p. 5. 27. Idid., pp. 5 and 13. 28. U.S. Trade Representative Robert Zoellick had pub-

licly expressed an interest in a free trade agreement with Aus- tralia as early as 1992. In his own explanation, that proposal became caught up in Australian party politics of the time and was not pursued any further. In his second attempt at an FTA in March 2001, Zoellick warned the Australian leaders in con- gressional testimony that the effort in Australia must be bipar- tisan in order to avoid election-year politicking.

29. Robert Zoellick, Notification Letter to Senator Robert C. Byrd, at <http://www.ustr.gov/Document_Library/ Letters_to_Congress/2002/USTR_Zoellick_Notifies_Congress_ of_Intent_To_Initiate_Free_Trade_Negotiations_With_Australia _-_Senate_Letter.html>.

30. John Howard, Application of ANZUS Treaty to Terror-

It’s Not Just the Economy, Stupid 19

ist Attacks on the United States, at <http://www.pm. gov.au/ news/media_releases/2001/media_release1241.htm>.

31. Peter Reith, HMAS ANZAC Deployment Extended/ CDF Visit, at <http://www.minister.defence.gov.au/Reith- tpl.cfm?CurrentId=1036>. John Howard, Australian Finan- cial Controls on Terrorists and Their Sponsors, at <http:// www.pm.gov.au/news/media_releases/2001/ media_release1259.htm>.

32. John Howard, Force Deployment, at <http:// www.pm.gov.au/news/media_releases/2001/media_release- 1342.htm>.

33. John Howard, Address to Joint Meeting of the US Con- gress, at <http://www.pm.gov.au/news/speeches/2002 speech1703.htm>.

34. Robert Zoellick, So What Is There to Cover? Globaliza- tion, Politics, and the US Trade Strategy, at <http:// www.ustr.gov/assets/Document_Library/USTR_Speeches/ 2002/asset_upload_file718_4245.pdf>. Robert Zoellick, A Pacific Partnership: Australia and America in a Globalizing World, at <http://www.ustr.gov/assets/Document_Library/ USTR_Speeches/2002/asset_upload_file132_4235.pdf>. Robert Zoellick, Globalization, Trade and Economic Security, at <http://www.ustr.gov/assets/Document_Library/ USTR_Speeches/2002/asset_upload_file910_4237.pdf>.

35. Robert Zoellick, Notification Letter to Senator Robert C. Byrd, at <http://www.ustr.gov/Document_Library/ Letters_to_Congress/2002/USTR_Zoellick_Notifies_Congress_ of_Intent_To_Initiate_Free_Trade_Negotiations_With_Australia _-_Senate_Letter.html>.

36. John Howard, Press Conference, Parliament House, Canberra, at <http://www.pm.gov.au/news/interviews/ interview163.html>.

37. Ibid. 38. Robert Hill, Forward Deployment of ADF Elements, at

<http://www.minister.defence.gov.au/Hilltpl.cfm?Curren- tId=2257>.

39. Robert Hill, Final Forward Deployment of ADF Elements, at <http://www.minister.defence.gov.au/Hill- tpl.cfm?CurrentId=2304>.

40. President Bush Meets with Prime Minister Howard of Australia, at <http://www.whitehouse.gov/news/releases/ 2003/02/20030210-10.html>. John Howard, Press Conference, Washington, at <http://www.pm.gov.au/news/interviews/ interview220.html>.

41. Ibid. 42. President Bush Meets with Prime Minister Howard of

Australia, at <http://www.whitehouse.gov/news/releases/ 2003/02/20030210-10.html>. John Howard, Press Conference, Washington, at <http://www.pm.gov.au/news/interviews/ interview220.html>.

43. John Howard, Press Conference, Parliament House, Canberra, at <http://www.pm.gov.au/news/interviews/ interview252.html>.

44. John Howard, Joint Press Conference, Wellington, New Zealand, at <http://www.pm.gov.au/news/interviews/ interview270.html>.

45. John Howard, Press Conference, Parliament House, Canberra, at <http://www.pm.gov.au/news/interviews/ interview286.html>.

46. Ibid. 47. Robert Zoellick, Remarks and the Launch of the Ameri-

can-Australian Free Trade Agreement Coalition, at <http:// www.austa.net/pdf/Zoellickspeech.pdf>.

48. Alexander Downer, Visit to the United States, at <http://www.foreignminister.gov.au/releases/2003/ fa036_03.html>.

49. President Bush, P.M. Howard Discuss Operation Iraqi Freedom, at <http://www.whitehouse.gov/news/releases/ 2003/05/20030503-1.html>.

50. Ibid. 51. John Howard, Remarks by President Bush and Prime

Minister Howard of Australia in a Photo Opportunity, Parlia- ment House, Canberra, Australia, at <http://www.white- house.gov/news/releases/2003/10/20031022-11.html>.

52. Mark Vaile, Vaile Underlines Australia’s Commitment to Iraq, at <http://www.trademinister.gov.au/releases/2003/ mvt092_03.html>.

53. Alexander Downer, Australia Welcomes Agreement on Afghanistan’s New Constitution, at <http://www.foreignminis- ter.gov.au/releases/2004/fa001_04.html>.

54. Robert Zoellick, U.S. and Australia Complete Free Trade Agreement, at <http://www.ustr.gov/Document_- Library/Press_Releases/2004/February/ US_Australia_Complete_Free_Trade_Agreement.html>.

55. Cadena nacional por actos terroristas en los Estados Unidos, at <http://www.gobiernodechile.cl/discursos/ discurso_ministrosd.asp>.

56. Quoted in Sullivan, Chile: Political and Economic Con- ditions, p. 6.

57. Robert Zoellick, U.S. and Chile Conclude Historic Free Trade Agreement, at <http://www.ustr.gov/ Document_Library/Press_Releases/2002/December/US_ Chile_Conclude_Historic_Free_Trade_Agreement.html>.

58. Sullivan, Chile: Political and Economic Conditions, p. 6. 59. Soledad Alvear, Chile y el caso Irak: Una ultima opor-

tunidad para la paz, at <http://www.gobiernodechile.cl/dis- cursos/discurso_ministrosd.asp>.

60. Ricardo Lagos, Presidente Lagos formula llamado a la tranquilidad de los chilenos, at <http://www.presidencia.cl/ view/viewArticulo.asp?idArticulo=901&tipo=Discur- sos&seccion=Discursos>.

61. Fergusson and Sek, Trade Negotiations, p. 9. 62. Sullivan, Chile: Political and Economic Conditions, p. 7. 63. Ibid., p. 8. The required implementing legislation

passed the Congress and was signed by President Bush on September 3, 2003.

64. Colin Powell, Press Briefing After the OAS Meeting, at <http://www.state.gov/secretary/former/powell/remarks/ 2003/21348.htm>.

65. Ibid. 66. Helen Clark, PM Says Today’s Military Action is Inevi-

table, at <http://www.beehive.govt.nz/ViewDocument.

20 Dr. David Auerswald and Ms. Caroline Shaver

aspx?DocumentID=12001>. 67. Selwyn Manning, New Zealand SAS Await Call, at

<http://www.scoop.co.nz/stories/HL0109/S00186.htm>. 68. Patrick Goodenough, New Zealand Has Special Forces

in Afghanistan, at <http://www.cnsnews.com/ForeignBu- reaus/Archive/200112/FOR20011218b.html>.

69. U.S. Department of Defense, Fact Sheet: International Contributions to the War on Terror, at <http://www.defense- link.mil/news/Feb2002/d20020226icwt.pdf>.

70. United States Chamber of Commerce, U.S. Chamber Calls for New Zealand Free Trade Agreement—Prime Minister Helen Clark Speaks at Business Lunch, at <http:// www.uschamber.com/press/releases/2002/march/02- 54.htm>.

71. Helen Clark, NZ Navy and Air Force to Join Interna- tional Campaign Against Terrorism, at <http://www.bee- hive.govt.nz/ViewDocument.aspx?DocumentID=15423>.

72. Robert Zoellick, Notification Letter to Senator Robert C. Byrd, at <http://www.ustr.gov/Document_Library/ Letters_to_Congress/2002/ USTR_Zoellick_Notifies_Congress_of_Intent_To_Initiate_Fr ee_Trade_Negotiations_With_Australia_- _Senate_Letter.html>.

73. Helen Clark, President Bush’s State of the Union Address, at <http://www.beehive.govt.nz/ViewDocu- ment.aspx?DocumentID=15931>.

74. Ibid. 75. Gillian Bradford, New Zealand Unconvinced by U.S.

Iraq Drive, at <http://www.abc.net.au/worldtoday/stories/ s778282.htm>.

76. Ibid. 77. Nick Turner, Scoop Feature: A NZ-US Free Trade

Agreement? At <http://www.scoop.co.nz/stories/HL0305/ S00177.htm>.

78. Ibid. 79. “New Zealand PM stays US, UK will construct ‘edi-

fice of legal justification’.” BBC Monitoring Newsfile, March 18, 2003. ProQuest ANZ Newsstand. ProQuest. National Defense University Library, Washington, DC.

80. Helen Clark, Statement to Parliament on the Iraq Cri- sis, at <http://www.beehive.govt.nz/ViewDocument.aspx?Doc- umentID=16266>.

81. Ibid. 82. Chuck Grassley, Grassley Leads Effort to Urge a Trade

Agreement with New Zealand, at <http://grassley.senate.gov/ releases/2003/p03r03-31.htm>.

83. Espiner Guyon, US Fury Over NZ War Stance (March 30, 2003), at Factiva.

84. Ibid. 85. Audrey Young, US Ticks Off Clark Over War Remarks,

New Zealand Herald (Auckland), (April 2, 2003), from Fac- tiva.com.

86. Ibid. 87, Fran O’Sullivan, PM Makes Peace with Americans,

New Zealand Herald (April 5, 2003), retrieved on September 6, 2005 from Factiva.

88. Claire Harvey, Kiwi PM Seeks Peace in Her Time, The Australian (April 26, 2003), retrieved on September 6, 2005 from Factiva.com.

89. Robert Zoellick, Press Conference Transcript: U.S. Trade Representative Robert B. Zoellick: Organization for Eco- nomic Cooperation and Development: April 30, 2003: Paris, France, at <www1.oecd.org/subject/mcm/2003/mcmzoel- lick.pdf>.

90. Robert Zoellick, The Status of the World Trade Negoti- ations on Agriculture, Hearings before the Committee on Agriculture, House of Representatives, 108th Cong., 1st sess., May 21, 2003, at <http://agriculture.house.gov/hearings/ 108/1085.pdf>.

91. Ibid., p. 23. 92. Nick Turner, A NZ-US Free Trade Agreement? at

<http://www.scoop.co.nz/stories/HL0305/S00177.htm>. 93. Helen Clark, Government Assistance to Operation

Enduring Freedom and Iraq, at <http://www.bee- hive.govt.nz/ViewDocument.aspx?DocumentID=17015>.

94. Helen Clark, NZDF to Lead Afghanistan Provincial Reconstruction Team, at <http://www.beehive.govt.nz/View- Document.aspx?DocumentID=17910>.

95. J. Adam Ereli, U.S., New Zealand Officials Discuss Afghanistan, Iraq, Trade, at <http://usembassy.org.nz/about/ what/nz_usrelations/goff.pdf>.

96. Charles Swindells, Remarks by Amb. Charles J. Swind- ells to Victoria University Diplomat’s Series, at <http://usem- bassy.org.nz/about/what/nz_usrelations/AmbSpeech.pdf>.

97. Ibid. 98. Patrick Goodenough, Bush Praises Australia, Mollifies

New Zealand, at <http://www.cnsnews.com/ForeignBu- reaus/Archive/200310/FOR20031016g.html>.

99. Fran O’Sullivan, Lobbyist Prepares to Raise Profile, New Zealand Herald (February 12, 2004) at <http:// www.nzherald.co.nz/search/story.cfm?sto- ryid=%1C%FE%FF%C9%2A%B0%BA>.

100. Fran O’Sullivan, Sutton Takes NZ’s Trade Case into Zoellick’s Den, at <http://www.nzherald.co.nz/search/ story.cfm?storyid=%1C%FE%FE%C0%28%B4%BB>.

101. Helen Clark, Further NZ Contribution to Afghanistan, International Campaign Against Terrorism, at <http:// www.beehive.govt.nz/ViewDocument.aspx?Documen- tID=19099>.

102. Goh Chok Tong, Remarks by Prime Minister Goh Chok Tong at Memorial Service for Victims of the Terrorist Attacks in the US, at <http://stars.nhb.gov.sg/data/pdfdoc/ 2001092305.htm>.

103. Dana R. Dillon and Sara J. Fitzgerald, Why the United States Should Complete the Bilateral Free Trade Agreement with Singapore, at <http://www.heritage.org/Research/Tradeand- ForeignAid/EM810.cfm>.

104. Colin Powell, Remarks with Singaporean Prime Minis- ter Goh Chok Tong, at <http://www.state.gov/secretary/for- mer/powell/remarks/2002/12273.htm>.

105. Ibid. 106. Kishore Mahbubani, Statement by Mr. Kishore Mah-

It’s Not Just the Economy, Stupid 21

bubani, at <http://stars.nhb.gov.sg/data/pdfdoc/2003032704. htm>.

107. George Yeo, Speech by George Yeo, Minister for Trade and Industry, to the US Chamber in Washington DC, at <http:/ /www.mti.gov.sg/public/FTA/ frm_FTA_Default.asp?sid=36&cid=1608>.

108. George Bush, President Signed U.S.-Singapore Free Trade Agreement, at <http://www.whitehouse.gov/news/ releases/2003/05/20030506-11.html>.

109. George Bush, President Bush Signs Chile, Singapore Free Trade Agreement Bills, at <http://www.whitehouse.gov/ news/releases/2003/09/20030903-3.html>.

110. Goh Chok Tong, Joint Statement Between the Republic of Singapore and the United States of America, at <http:// stars.nhb.gov.sg/data/pdfdoc/2003102105.htm>.

111. Ministry of Defense, SAF Deploys LST and C-130 to Assist in Reconstruction of Iraq, at <http:// www.mindef.gov.sg/imindef/news_and_events/nr/2003/oct/ 27oct03_nr.html>.

112. John Lyons, “Costa Rica Balks at Free-Trade Pact; Misgivings Could Weaken Support in U.S Congress for Cen- tral America Deal,” Wall Street Journal, May 3, 2005.

113. Office of the United States Trade Representative, Free Trade Agreements Are Working for America (Washington, DC: USTR, May 26, 2005), p. 1. All of the following statistics are from the same source.

114. Frank McGuire, Michael Lucas, and Gregory Corco-

ran, “Year-End Review of Markets and Finance 2005; Iraq Elections, Hurricanes, & the Supreme Court,” Wall Street Journal, January 3, 2006.

115. Amy Belasco, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 2001: CRS RL33110 (Washington, DC: Congressional Research Service, Septem- ber 22, 2006), p. 3.

116. Gerald Seib, “Politics & Policy; CAPITAL JOUR- NAL; Push for Free Trade in These Times? Bush Answers Yes,” Wall Street Journal, August 25, 2004.

117. Ibid. 118. Robert Zoellick, “Don’t Get Bitter About Sugar,” Wall

Street Journal, February 24, 2005. Chile has also faced some difficulties following the conclusion of FTAs with the United States and the European Union; Chile’s success has bred dis- trust in its neighboring countries that believe globalization is the root cause of their economic problems. The Economist goes so far as to assert that Chile’s two FTAs might sink future multilateral agreements in South America. “You’re My Best Friends; Chile’s Foreign Policy,” The Economist 8766 (2004): p. 58.

119, Greg Hitt, “U.S. Turns Tough on Trade; Threat of Losing Sweetheart Deals May Bring Nations Back to Talks,” Wall Street Journal, August 19, 2006.

120. “Doha Is Dead...” Wall Street Journal, July 26, 2006. 121. “The Reluctant Deputy Sheriff,” The Economist 8425

(2005): p. 7.