Andean Trade Preference Act Up for Renewal

 
The Andean Trade Preference Act (ATPA) is due to expire in December 2001. If this occurs, the enhancement of benefits under the Caribbean Basin Trade Partnership Act (CBTPA) last year could draw companies out of the ATPA countries-Colombia, Peru, Bolivia and Ecuador. A bill pending before Congress would extend the ATPA for four years, through 2005. This legislation is strongly backed by Florida Senator Bob Graham and others in the Senate concerned with Latin American issues. It would require that the ATPA countries meet seven new criteria for eligibility, the same as those demanded of the CBTPA countries.

The ATPA would grant the following benefits to the Andean countries covered by the legislation:

• Duty-free, quota-free treatment of clothing knit, assembled or cut in ATPA countries of US fabric, yarn and thread.
    

• Duty-free and quota-free access for apparel made from llama or alpaca.
    

• Duty-free and quota-free access for a quantity of knit apparel made from regional fabric.
    

• Duty-free and quota-free access for certified handloomed, handmade and handcrafted articles.
    

• Duty-free and quota-free access for textile luggage cut and assembled from US fabric.
    

• Reduced duties (phased out) for some items exempt from the original ATPA.
    

• Other provisions, including: special rules for trimmings and certain nylon filament yarn, de minimis rules, penalties for transshipment, customs procedures, and emergency actions.

Of primary concern is the effect on Colombia if ATPA benefits are allowed to expire. Colombia has a sluggish economy that is coming out of a deep recession, in a context of guerrilla- and narcotics-inspired violence and human and capital flight. At the same time, the US is pressuring Colombia to step up coca eradication. The loss of additional jobs-100,000, according to some press reports-would add a severe burden at this critical time. Bolivia also is carrying out a successful coca eradication program, as has Peru.

With regard to the four ATPA countries' compliance with eligibility criteria, the US Trade Representative has said that "it appears that ATPA tariff preferences are giving additional impetus to these countries' efforts to address the eligibility factors�.They are working cooperatively with the United States on these issues in part as a result of their status as ATPA beneficiaries."

The aim of the ATPA is to increase nontraditional exports and generate employment and income. Export diversification has already begun, although not at the pace some observers had expected; economic recession and high oil prices have distorted the picture somewhat. From 1995 to 1999, exports covered by ATPA grew at twice the rate of other exports from the region, according to the USTR. At the end of 1999, ATPA-eligible exports accounted for 17.8% of total exports from the four countries. Some products that have been quite successful under the program so far are: cut flowers (by far the biggest beneficiary), copper cathodes, pigments, processed tuna, zinc plates, asparagus, mangoes and wood products. Proponents of the act's extension hope that it will attract more attention and investment to nontraditional export possibilities.

Observations
If the FTAA were to come into effect while the ATPA is in force, then the larger hemispheric agreement would supersede the preferences granted to the Andean countries. This scenario is unlikely, however, as President Bush has not yet defined when or how he will seek Trade Promotion Authority (the latest Washington euphemism for fast track).

The ATPA will likely be extended in spite of opposition by some textile and agriculture interests. Making the act more effective will be harder, as long as foreign investment is held back by the unsettled conditions in the Andean region.

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