Friday, October 19, 2018
Subscribers Section User ID Password
Andean trade pact stalled
Jessica Marcy
Send a comment Print this page

Preferential trade measure for drug-producing countries was high on the agenda during Bush´s visit.

Amid the preparations for US President George W. Bush’s March 23 visit to Peru, many Andean officials and business leaders were disheartened to learn that after months of lobbying for the renewal and expansion of the Andean Trade Preferences Act (ATPA), Bush would arrive in Lima empty-handed.

ATPA, a preferential trade pact benefiting Bolivia, Colombia, Ecuador and Peru, was meant to increase US trade with drug-producing countries, stimulating the creation of jobs to provide an alternative to growing drug crops. Bolivian Foreign Minister Gustavo Fernández said, "This is not just a matter of trade. It involves social issues, drugs, democracy and regional security."

The Dec. 4 expiration of ATPA, which began in 1991, has been threatening jobs. The economic strain comes amid increasing regional tension, including the termination of Colombia’s peace process (LP, March 11, 2002), protests by coca cultivators in Bolivia (LP, Feb. 11, 2002), and fears of increased terrorist activity in Peru, where a car bomb exploded outside the US Embassy in Lima just three days before Bush’s visit.

"Frankly, we believe the United States is in debt to our countries. ... We’re talking about access to markets, not foreign aid," Fernández said.

ATPA eliminated tariffs on 6,000 products from the four Andean countries. Total two-way trade doubled between 1991 and 2000, and Andean exports to the United States increased by 124 percent.

The pact, originally proposed by Bush’s father, former President George Bush (1989-93), has expanded private investment in such non-traditional items as rare fruits and vegetables, jewelry, certain electronic products and cut flowers.

In 1998, Peru accounted for 49 percent or US$432 million worth of total ATPA duty-free imports to the United States. Colombia followed, with 39 percent or $347 million, Ecuador with 12 percent or $108 million, and Bolivia with less than 0.2 percent or $270,000.

The industries most affected by renewal and expansion of ATPA would include asparagus, cotton and textiles in Peru; canned tuna in Ecuador; and fresh flowers in Ecuador and Colombia, which supply 70 percent of the US fresh flower market.

Alfredo Ferrero, Peruvian vice minister of integration and international trade negotiations, said of the ATPA renewal, "Although it is of marginal importance for the United States, it is a matter of life or death for Peru and the entire Andean Community."

The United States is both the leading source of Andean imports and the leading foreign market for the four countries, which exported a combined $2 billion in ATPA products to the United States last year. While Andean products constitute a mere 0.9 percent of US imports, 29 percent of Peru’s exports and 48.5 percent of Colombia’s go to the United States.

Although it was passed by the lower house of the US Congress, ATPA renewal stalled in the Senate for several reasons, including legislation introduced in the wake of the Sept. 11 terrorist attacks, debate over campaign finance reform, discussion of the inclusion of Chile in the North American Free Trade Agreement, and the possible reshaping of ATPA as a bridge to the Free Trade Area of the Americas, which is scheduled to take effect in 2005 (LP, April 30, 2001).

"For an administration that has touted free trade and has underscored the importance of US counter-narcotics policy to let this initiative expire sent a very chilling message to the Andean countries about their importance in Washington," said Coletta Youngers, of the Washington Office on Latin America (WOLA), a US-based think tank.

Officials say they expect ATPA to be renewed, probably retroactively, by late May.

Peruvian officials have been lobbying seriously for inclusion of high-end knitted garments, which would significantly affect cotton production and the textile industry in Peru. The officials say that renewal of ATPA would expand the area dedicated to cotton and asparagus crops from 50,000 to 250,000 hectares and create 1.5 million jobs.

Although Peruvian garments were excluded from the expired ATPA because of pressure from the US textile industry, the Peruvian garment trade has increased by 144 percent since 1995. Exports totaled $505.7 million in 2000, and industry insiders say that with the elimination of the 21-percent duty under an expanded ATPA, the industry would top $1 billion by 2005.

"If we get the preferential tariff, we’ll immediately increase Peruvian exports to the United States by $300 million," Peruvian President Alejandro Toledo said.

Youngers cautioned, however, that ATPA "is not going to solve the very serious problems of poverty and unemployment in the region, and the [Bush] administration needs to be looking more carefully at possibilities for increased assistance and other measures that would address poverty and inequality."

According to the World Bank, 48.7 percent of households in Colombia, 54 percent in Peru and Bolivia, and 58 percent in Ecuador live below the poverty line. The figures are even higher in rural areas, where drug crops are grown. The rural poverty rate is 75.6 percent in Bolivia and 55.8 percent in Colombia.

Income disparity in Latin America, the most unequal region in the world, has risen during the last decade. Critics say that trade liberalization often benefits the wealthy, further widening the income gap (LP, Aug. 2, 1999).

According to the Economic Commission for Latin America and the Caribbean, the average income of the wealthiest 10 percent of Latin American households exceeds that of the poorest by a factor of 19.

Despite disappointment over ATPA’s expiration, observers have praised the vigorous lobbying efforts by government officials and private industry in the four Andean countries as a sign of the increasing strength of the Andean community.

Some analysts have said that only as a united bloc can the countries tackle such pressing issues as anti-drug policy, a negotiated settlement in Colombia and the fight against poverty and unemployment.


ATPA renewal would boost Peruv
Related News
Latinamerica Press / Noticias Aliadas
Reproduction of our information is permitted if the source is cited.
Contact us: (511) 460 5517
Address: Comandante Gustavo Jiménez 480, Magdalena del Mar, Lima 17, Perú

Internal Mail:
This website is updated every week.