Text: Executive Summary of Report on Andean Trade Preference Act

06 February 2001

Text: Executive Summary of Report on Andean Trade Preference Act

ATPA provides incentives to eradicate illicit drug production

A new report on the Andean Trade Preference Act (ATPA) outlines the legislation's continuing benefits to the Andean countries of Bolivia, Colombia, Ecuador and Peru, while also stressing that the United States profits by offering those countries economic incentives to curb illicit drug production and trafficking.

The 50-page report, submitted by President Bush to Congress on February 6, states that "by strengthening the legitimate economies in these Andean countries and creating viable alternatives to the profitable drug trade, the ATPA is proving an important component of efforts to contain the spread of these illicit activities." It describes "significant job opportunities" in a variety of sectors generated by the ATPA tariff preferences -- and explains that the Andean countries' rising prosperity, in turn, enables them to absorb more U.S. exports.

Launched in 1991, the ATPA is scheduled to expire 10 years after the date of enactment, on December 4, 2001. As a measure of the ATPA's effectiveness, the report indicates that "each of the ATPA countries strongly recommends renewal of the program and its expansion to cover currently excluded products."

The ATPA requires the president to submit a report to Congress on the operation of the program on the third, sixth and ninth anniversaries of its implementation. This latest report is the third and final one mandated by the terms of the ATPA.

The full text of the report is available on the U.S. Trade Representative's web site at: http://192.239.92.165/regions/whemisphere/atpa.shtml.

Following is the text of the report's executive summary:

[Note: In the text, "billion" equals "thousand million."]

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EXECUTIVE SUMMARY

As virtually all cocaine sold in the United States originates in the Andean Trade Preference Act (ATPA) countries, the ATPA functions as a U.S. trade policy tool that contributes to our fight against drug production and trafficking. By strengthening the legitimate economies in these Andean countries and creating viable alternatives to the profitable drug trade, the ATPA is proving an important component of efforts to contain the spread of these illicit activities. The ATPA has generated significant job opportunities in a variety of sectors, including cut flowers, non-traditional fruits and vegetables, jewelry and certain electronics inputs.

ATPA countries have been making important gains in the fight against drugs. In 1999, Bolivia, Colombia and Peru achieved record levels of coca eradication and as a result, net coca cultivation continued to decline slightly across the region. Alternative development programs in each of these countries have successfully provided former drug-crop producers with viable income alternatives.

Since the ATPA was enacted in 1991, it has had a positive impact on U.S. trade with the four ATPA beneficiary countries -- Bolivia, Colombia, Ecuador and Peru. Between 1991 and 1999, total two-way trade nearly doubled. During this time period, U.S. exports grew 65 percent and U.S. imports increased 98 percent. The United States is the leading source of imports and the leading export market for each of the ATPA countries.

In 1999, serious economic problems plagued each of the beneficiary countries and adversely affected U.S. exports to the region. In 1999, U.S. exports to ATPA countries declined 28 percent, resulting in an uncharacteristically large U.S. trade deficit with the region of $3.6 billion. This followed two years of modest trade surpluses and was the third trade deficit with the region since 1991. In January-August 2000, U.S. exports began to rebound, and U.S. imports grew 19.5 percent.

Over the past five years, U.S. imports under the ATPA have grown more than twice the rate of total U.S. imports from the region. Accordingly, the portion of U.S. imports from ATPA countries entering under ATPA provisions has been rising gradually since the program began, to 19.7 percent in 1998. In 1999, the portion declined to 17.8 percent, primarily reflecting the surge in oil prices that inflated the value of petroleum imports outside the ATPA program.

The ATPA became fully effective for all beneficiary countries at the end of 1993. During the relatively short time since then, during a period in which ATPA countries also experienced serious economic and political difficulties, the ATPA has begun to show important success in meeting one of its major goals: contributing to export diversification in beneficiary countries.

This has particularly been the case in Colombia and Peru. Although traditional exports (such as raw materials and derivatives, including petroleum, and agricultural products, such as coffee and bananas) remain an important component of each country's overall export mix, exports of non-traditional products have grown. Cut flowers remains the dominant import under the ATPA, but its relative importance in the program has been declining in recent years as imports in other categories have increased, such as copper cathodes, pigments, processed tuna, and zinc plates. Imports of non-traditional agricultural products, such as asparagus, mangoes and wood products, have also grown considerably under the ATPA.

In reviewing the four countries' compliance with the criteria of the ATPA, it appears that ATPA tariff preferences are giving additional impetus to these countries' efforts to address the eligibility factors contained in the statute. They are working cooperatively with the United States on these issues, in part as a result of their status as ATPA beneficiaries.

Each of the ATPA countries strongly recommends renewal of the program and its expansion to cover currently excluded products. Public comment on the program was generally supportive, although U.S. producers of certain agricultural products expressed some concerns. The Caribbean Basin Economic Recovery Act of 1983, commonly known as the Caribbean Basin Initiative or CBI, allows the president to grant duty-free access to the U.S. market for certain eligible articles from beneficiary countries. The Caribbean Basin Economic Recovery Act of 1990, commonly known as CBI II, modified the CBI program. CBI II called for the consideration of extending trade benefits to the Andean region. The United States-Caribbean Basin Trade Partnership Act (CBTPA), enacted in 2000, amended the CBI program to provide additional trade benefits to designated countries. The enhanced trade preferences made available under the CBTPA go beyond those available under the ATPA.

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