Can Guam negotiate free trade agreements on its own?
Exclusion from US trade pacts beams light on another legal gray area of the territory's confusing status
Guam is excluded from the United States’ free trade agreements with Japan and South Korea because the island’s port falls outside of the U.S. Customs’ jurisdiction, Congressman Michael San Nicolas said Monday.
“As a result, Guam-originating exports into either of these markets or any other markets in which we are not included in the U.S. free trade agreements do not enjoy the lower negotiated tariffs between these two countries and the United States, resulting in our exports being tariffed at higher world markets rates,” San Nicolas said in his congressional address before the 36th Guam Legislature.
San Nicolas said he has discovered that Guam has been left out of the trade pacts while making inquiries about the facilitation of product exports from local manufacturers.
“We found this to be unacceptable,” San Nicolas said. “Our findings have so far been a paradoxical blend of disappointment, hope and intrigue.”
San Nicolas said he was informed by U.S. trade officials that it would be “surprisingly impractical” to amend the free trade agreements on an itemized basis, specifically the inclusion of Guam, which in the whole picture is considered an “inconsequential” market.
According to the Guam Bureau of Statistics and Plans, the island’s export market was valued at $8 million in 2019. Its main export destinations include Japan, Federated States of Micronesia, Marshall Islands, Palau and Hong Kong.
The U.S. trade agreements with Korea and Japan were sealed in March 2012.
Guam’s exclusion from the decade-old trade pacts has once again beamed light on another legal gray area in the status of the U.S. territory that controls its own commercial port.
The government of Guam was granted autonomy over the island's commercial port in 1951 as part of a larger transfer of authority that came with the establishment of the territory's civil government with the passage of the Organic Act. Prior to this, the port was under the U.S. Navy’s control.
Can Guam then negotiate its own bilateral trade agreements with any foreign country?
This question, San Nicolas said, “caused a flurry of excitements” among officials of the U.S. International Trade Authority and the U.S. Department of Commerce’s legal division.
Initial legal assessments, San Nicolas said, revealed that there is no existing law that prohibits Guam from initiating bilateral trade agreements with foreign markets.
“This has never been explored or tested before,” San Nicolas said. “One senior trade official said he is so excited he feels like he is back in graduate school.”
San Nicola said the need to include Guam in future trade agreement language of the United States should be self-evident.
"Our circumstances have already been elevated to the Secretary and Trade Representative levels and the Biden administration said any movement towards the Trans-Pacific Partnership, or any similar bilateral or multilateral trade regime would not exclude our territory, inadvertently, or otherwise,” San Nicolas said.
The legal curiosity has cropped up amid Guam's exploration of its potential as a transshipment hub in the Asia-Pacific to facilitate the transport of goods between the United States and manufacturing hubs in the region.
The Transshipment Task Force, created by Public Law 36-23 authored by Vice Speaker Tina Muna Barnes, held its inaugural meeting last week.
Chirag M. Bhojwani, policy and communications director at the vice speaker's office, said legal questions pertaining to Guam's transshipment plans have been brought up with the White House.
He said the Transshipment Task Force has asked for follow-up dialogues with the National Economic Council and the National Tariff Commission.
"Under subcommittees of the TSTF, there are groups assigned to look at this specifically,” Bhojwani said.