How Long Does It Take to Conclude a Trade Agreement With the US?

Will the Trans-Pacific Partnership (TPP) pass this year? If not, when? With Brexit on the horizon, how long would a US-UK free trade agreement (FTA) really take? With these questions percolating, and thus far with only speculation and punditry out there, it becomes useful to examine data from previous US agreements for potential insights.

Negotiations for the TPP began in 2008. The agreement was signed earlier this year, but the ratification process remains uncertain. The FTA with Panama currently holds the top spot in terms of a lengthy gestation period. Negotiated by former President George W. Bush and concluded by President Barack Obama, the FTA took 8½ years from launch to implementation. The delay was driven by concerns over Panama’s labor practices and tax transparency.

In contrast, the most rapid was the FTA with Jordan, the first Arab nation to have an FTA with the United States. The negotiation lasted only four months, and the agreement was implemented in a year and a half.

A look at the negotiation period for 20 US trade agreements reveals interesting details about the actual process. On average it takes 1½ years to negotiate an FTA with the United States but over 3½ years to reach the implementation stage, though there is a lot of variation (table 1).

The small number of observations makes it difficult to say much about the determinants, but most economic variables do not appear to significantly affect the delays before signing. Neither partner size nor stage of development is significantly correlated with delays. Countries that depend more on the United States for trade do not have significantly longer or shorter delays. Variables that might affect ease of negotiations, such as language or openness to trade, are also not significantly correlated with delays. 

Despite the small sample, two variables are significant in explaining the delay between launch and signing. 

1. A king. Having a monarch reduces the length of negotiation by about half. Only four agreements took less than a year, and three were with Bahrain, Jordan, and Oman. A king surely has more leeway to carry out reforms he deems reasonable. (The fourth was the Dominican Republic’s negotiation to join the Central American Free Trade Agreement or CAFTA, though it benefited from joining late, which may suggest that late entrants to an already negotiated TPP could also face shorter delays.)
2. An election year. Agreements that are signed in a US presidential election year end up taking about 40 percent less time than agreements signed in other years. This makes sense: Negotiating presidents want to close agreements that they started, which will be part of their legacy. The urge to close is real: More than half of the US agreements were signed in election years and of course the TPP, if implemented, will add to that group.   

The determinants of the more extended period—from launch to implementation—offer additional insights. This period has become longer over time and countries with high US trade shares have longer implementation delays. One explanation is that as rules have become more complex, agreements are taking longer to ratify and implement, especially when a lot of trade is at stake. In addition, there does not appear to be learning by doing on implementation, and in recent years, as trade has become more controversial, agreements are subject to more scrutiny. The data do not, however, show a relationship with congressional control.

Related research by Christoph Moser and Andrew Rose looks at the duration of negotiations for 88 regional trade agreements around the world. Even on this much broader set of negotiations, the authors find an average of about two years. They find that negotiations among a larger number of countries and more distant countries are more protracted, while negotiations with richer and more open economies are shorter. 

So what insights do these results offer for existing or potential negotiations? The large number of countries and variation in incomes in the TPP would make for a difficult negotiation, according to Moser and Rose, which has proven accurate: The TPP took longer to negotiate than other US FTAs. From an American perspective the election cycle matters, meaning signing the TPP this year was an important first step. Still, ratification and implementation will take more time. And for those more interested in an Anglo union with a US-UK FTA: Even if the UK could jump to the front of the queue, the easiest way to ensure swift negotiations would be to let the Queen actually rule. 

Caroline Freund is a senior fellow at the Peterson Institute for International Economics. Previously, she was chief economist for Middle East and North Africa at the World Bank.

Christine McDaniel is a senior economist at Sidley Austin. Previously, she was deputy assistant secretary of the Treasury.  The views are those of the author(s) and not necessarily those of Sidley Austin.