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US-Jordanian Free Trade Agreement: Precedent for the FTAA?

On October 24, 2000, President Clinton and King Abdullah of Jordan signed a free trade agreement between their two countries. This is the first FTA the US has signed with an Arab country; the only countries with which it has similar agreements are Mexico, Canada and Israel. The new FTA:

Eliminates virtually all tariffs on industrial goods and farm products within 10 years.
Provides for immediate free trade in services, giving US and Jordanian providers full access to services sectors of the other country's market. Importers are also granted access to the services of the other partner; in the case of the US, financial, education, audio-visual and courier services are important.
Provides for modern intellectual property rights commitments, particularly important for technology- and copyright-based industries and pharmaceutical companies. Jordan will ratify and implement the World Intellectual Property Organization's treaties on copyright, performances and phonograms within two years.
Creates a joint commitment to promoting a liberalized trade environment for e-commerce that should encourage investment in new technologies and avoid the imposition of customs duties on electronic transmissions.
Provides for additional commitments by both countries to transparency and appropriate public participation in the operation of the agreement and dispute settlement procedures. A dispute settlement panel will issue legal interpretations of the agreement if the countries have first consulted and failed to resolve the dispute.

The most important aspect of the FTA, and one that may set a precedent for future agreements, is the inclusion in the body of the agreement of provisions that refer to labor and the environment.

With respect to the environment, the agreement emphasizes sustainable development, environmental protection and improved environmental laws. It makes a commitment not to relax environmental laws to encourage trade, and to enforce domestic environmental laws. Other provisions address technical cooperation on environmental issues; increased market access for environmental goods, technologies, and services; and environmental exceptions.

The agreement also ensures full enforcement of national labor laws and affirms the existing commitment of both sides to the International Labor Organization's core labor standards, embodied in its 1998 Declaration on Fundamental Principles and Rights at Work.

Just one day before signing the FTA, the two governments agreed to create two new Qualifying Industrial Zones. These are areas under joint Israeli-Jordanian customs control whose exports are eligible for duty-free treatment in the United States. Their creation follows Jordan's membership in the World Trade Organization in April 2000 and the signing of a Trade and Investment Framework Agreement in 1999.

For the moment, trade between the US and Jordan is modest, although it is expected to grow substantially. In 1999, US exports to Jordan totaled $276 million and were made up mostly of grain and aircraft parts. Jordanian exports to the US, mainly gold jewelry, totaled $11 million.

Regardless of its impact on trade flows, this agreement will be remembered for its labor and environmental provisions. In it, the two countries have committed themselves to oppose the lowering of labor and environmental standards to gain trade advantage. The example may serve as a precedent for future trade agreements, including the FTAA, the only major agreement now being negotiated in the hemisphere. The majority of the nations involved oppose the inclusion of such provisions; Chile and the Caribbean countries would probably accept it without much difficulty, and eventually perhaps Costa Rica might come on board. But there remains in most South American countries a deep suspicion of protectionist policies in a different guise. Mexico has agreed to similar provisions in a side agreement to NAFTA but for now opposes putting them in the main agreement.

All in all, the FTA with Jordan is a groundbreaking agreement that will be used as a yardstick by many officials in Congress and future US administrations to measure the domestic political acceptability of proposed trade agreements. Pressure will grow to apply these same criteria in the WTO. Indeed, the labor and environmental provisions are not radical and could be enforced without disrupting international trade. The problem is that once on the books, there will be irresistible pressure to use the rules for political purposes. Already, the EU talks about the special nature of farmers and the need to give them protection (this must come as a surprise to European workers in other walks of life). The best answer to these arguments will be experience with existing agreements such as the one now in force with Jordan.