Click to edit Master subtitle style World Economy: Free Trade and Free Trade Agreements Daniele S. Longo Vice President, Business Growth, Healthcare Solutions, International Affairs Northern Kentucky Chamber of Commerce Northern Kentucky International Trade Association

3/14/11 Agenda Customs and Duties – Background The Importance of Free Trade U.S. Free Trade Agreements – Facts and Figures Resources

3/14/11 Customs and Duties - Background

3/14/11 Customs and Duties - Background - After declaring its independence in 1776, the U.S, almost in bankruptcy, needed revenues. - President George Washington, with the Tariff Act of July 4, 1789, authorized the collection of duties on imported goods. - The Act was called "the second Declaration of Independence". - Four weeks later, on July 31, the fifth act of Congress established Customs and its ports of entry. - For nearly 125 years, Customs funded virtually the entire government, and paid for the nation's early growth and infrastructure. - By 1835, Customs revenues alone had reduced the national debt to zero!

3/14/11 Examples: Purchase of Louisiana, Oregon, Florida and Alaska; National Road from Cumberland, Maryland, to Wheeling, West Virginia; Transcontinental Railroad; Lighthouses; U.S. military and naval academies; City of Washington. Examples: Purchase of Louisiana, Oregon, Florida and Alaska; National Road from Cumberland, Maryland, to Wheeling, West Virginia; Transcontinental Railroad; Lighthouses; U.S. military and naval academies; City of Washington.

3/14/11 Most of the rates of the revenue tariff were between 5 and 10 percent, depending on the value of the item. Secretary of Treasury Alexander Hamilton was anxious to establish the tariff as a regular source of government revenue and to encourage the growth of domestic manufacturing to lessen America's then-heavy dependence on foreign-made products. Still a source of revenue (over $16.00 return) to the taxpayer for every dollar appropriated by Congress. U.S. Customs Service was the parent or forerunner to many other agencies Administration of military pensions (Department of Veterans Affairs); Collection of import and export statistics (Bureau of Census); Supervised revenue cutters (U.S. Coast Guard); Collected hospital dues to help sick and disabled seamen (Public Health Service); Established standard weights and measures (National Bureau of Standards). U.S. Customs Service - More Than 200 Years of History (09/08/2010) After declaring its independence in 1776, the struggling young nation found itself on the brink of bankruptcy. Responding to the urgent need for revenue, the First Congress passed and President George Washington signed the Tariff Act of July 4, 1789, which authorized the collection of duties on imported goods. It was called "the second Declaration of Independence" by the news media of that era. Four weeks later, on July 31, the fifth act of Congress established Customs and its ports of entry. Most of the rates of the revenue tariff were between 5 and 10 percent, depending on the value of the item. Secretary of Treasury Alexander Hamilton was anxious to establish the tariff as a regular source of government revenue and to encourage the growth of domestic manufacturing to lessen America's then-heavy dependence on foreign-made products. Still a source of revenue (over $16.00 return) to the taxpayer for every dollar appropriated by Congress. U.S. Customs Service was the parent or forerunner to many other agencies Administration of military pensions (Department of Veterans Affairs); Collection of import and export statistics (Bureau of Census); Supervised revenue cutters (U.S. Coast Guard); Collected hospital dues to help sick and disabled seamen (Public Health Service); Established standard weights and measures (National Bureau of Standards).

3/14/11 When shipments of goods arrive at a border crossing or port, customs officers: Inspect the contents; Charge a tax according to the tariff formula. Since the goods cannot continue on their way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small. When shipments of goods arrive at a border crossing or port, customs officers: Inspect the contents; Charge a tax according to the tariff formula. Since the goods cannot continue on their way until the duty is paid, it is the easiest duty to collect, and the cost of collection is small.

3/14/11 The Importance of Free Trade

3/14/11 The Importance of Free Trade Definition: Unilateral or bilateral treaty between two or more countries allowing commerce in goods and services without tariffs. Examples: NAFTA CAFTA EU

3/14/11 The Importance of Free Trade Free Trade Agreements – Unite States

3/14/11 The Importance of Free Trade Free Trade Agreements – European Union

3/14/11 The Importance of Free Trade United States European Union

3/14/11 Example : Turkey Population: 77M Age 15-65: 66% PPP: $12,300 Imports: billion (2010) Machinery, Chemicals, Semi-finished goods, fuels, transport equipment FTAs: EU, Macedonia, Croatia, Bosnia-Herzegovina, Tunisia, Morocco, the Palestinian Authority, Syria, Egypt, Georgia and Albania Example : Turkey Population: 77M Age 15-65: 66% PPP: $12,300 Imports: billion (2010) Machinery, Chemicals, Semi-finished goods, fuels, transport equipment FTAs: EU, Macedonia, Croatia, Bosnia-Herzegovina, Tunisia, Morocco, the Palestinian Authority, Syria, Egypt, Georgia and Albania

3/14/11 Importance of Free Trade Price=Sale Price +Tariff Price=Sale Price

3/14/11 U.S. free trade Agreements Facts and Figures

3/14/11 U.S. FTAs – Facts and Figures Trade agreements Help open markets. Expand opportunities for American workers and businesses. Help companies enter and compete more easily in the global marketplace. Promote fair competition May include Intellectual property right protection Labor rights Government procurement Service sectors Environmental standards

Click to edit the outline text format Second Outline Level  Third Outline Level Fourth Outline Level  Fifth Outline Level  Sixth Outline Level  Seventh Outline Level  Eighth Outline Level Ninth Outline LevelClick to edit Master text styles Second level Third level Fourth level Fifth level 3/14/11 U.S. FTAs – Facts and Figures Current FTAs Country2007 MMUSD2008 MMUSDPercent Change NAFTA384, , % Canada213,118222, % Mexico119,381131, % CAFTA-DR21,27423, % Costa Rica4,2245, % Dominican Rep5,7936, % Guatemala3,8724, % Honduras4,3274, % Nicaragua8461, % El Salvador2,2092, % Australia17,91620, % Bahrain % Chile7,61011, % Israel9,94010, % Jordan % Morocco1,3331, % Oman1,0341, % Peru3,7645, % Singapore23,57625, % Total420,348456, %

3/14/11 U.S. FTAs – Facts and Figures Pending FTAs: Colombia; Panama; South Korea; Current Negotiations: Malaysia; Thailand; United Arab Emirates; Southern African Customs Union (SACU) which includes Botswana, Lesotho, Namibia, South Africa, and Swaziland.

3/14/11 U.S. FTAs – Facts and Figures Exports from Kentucky to FTA countries have increased since the year of the FTA implementation: North American Free Trade Agreement 247% increase since 1994 U.S.-Singapore Free Trade Agreement76% increase since 2004 U.S.-Australia Free Trade Agreement12% increase since 2005U.S. Dominican Republic-Central America FTA114% increase since 2006

3/14/11 U.S. FTAs – Facts and Figures Trade Benefits for Kentucky: In 2008, Kentucky exported $19.1 billion in manufactured goods, which supported over 154,000 manufacturing jobs. In 2008, Kentucky exported $1.6 billion in agricultural products, which supported over 18,500 agricultural jobs. 77% of the 3,101 Kentucky companies that exported goods in 2007 were small and medium-sized enterprises with fewer than 500 employees.

3/14/11 Resources