Do Free Trade Agreements Benefit Developing Countries? An Examination of U.S. Agreements

The United States has 14 free trade agreements (FTAs) in force across 20 countries—the majority of which are lower- or middle-income countries—what the authors of this report consider to be developing countries. FTAs are generally described as beneficial to a country as they generally lower prices; however, countries might be hesitant to enter into an agreement with a more economically developed country such as the United States. This report uses trend analysis to see whether movements in trade, production, and gross domestic product (GDP) data are consistent with the notion that FTAs produce beneficial effects for developing countries—focusing on FTA agreements between developing countries and the United States. Agricultural trade for U.S. imports and exports generally increased in the FTAs analyzed for this report. Given that many U.S. FTA partners have similar production profiles, data indicate that specialization occurs when a country switches production (and trade) to products where the countries own a comparative advantage in production (e.g., Colombia coffee). An increase in agricultural imports from the United States and a switch to specialization might impact individual commodities, but the data indicate that developing countries largely improved agricultural trade after implementing an FTA with the United States.