RL32770
Andean-U.S. Free-Trade Agreement Negotiations
June 29, 2005
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Summary
In November 2003, the Administration notified Congress that it intended to begin negotiations on a free-trade agreement (FTA) with Colombia, Peru, Ecuador, and Bolivia. The notification said that an FTA would reduce and eliminate foreign barriers to trade and investment and would support democracy and fight drug activity in the Andean region. The Andean governments wanted to ensure access to the U.S. market, especially since their current trade preferences will terminate at the end of 2006. In the United States, the business community strongly supports the trade agreement, labor opposes it, and agriculture is split. The first round of negotiations was held with Colombia, Peru, and Ecuador (with Bolivia participating as an observer) in Cartagena, Colombia, in May 2004. Ten rounds have been held thus far. The latest round was held in Guayaquil, Ecuador, on June 6-10, 2005; reports suggest that little progress was made. The next round is scheduled for mid-July in Miami, and at least one more round is expected after that. There is no scheduled deadline for the talks. Of note, in the last few months, Ecuador and Bolivia have had sudden changes in their presidencies. The United States currently extends duty-free treatment to imports from the four Andean countries under a regional preference program. The Andean Trade Preference Act (ATPA) authorized the President to grant duty-free treatment to certain products, and the Andean Trade Promotion and Drug Eradication Act (ATPDEA) reauthorized the ATPA program and added products that had been previously excluded. Over half of all U.S. imports in 2004 from the Andean countries entered under these preferences. In 2004, the United States imported $15.5 billion from the four Andean countries and exported $7.7 billion. Colombia accounted for about half of U.S. trade with the region. Peru and Ecuador almost evenly split the other half, and Bolivia represented a very small share. The leading U.S. import from the region in 2004 was crude petroleum oil, which accounted for 37% of imports. Leading U.S. exports to the region were mining equipment, wheat, broadcasting equipment, and maize. There are several important issues in the FTA negotiations. One issue is unresolved disputes involving U.S. investments in Andean countries. Another issue is a practice called a "price-band mechanism," where an agricultural tariff fluctuates so that the import price falls within a specified range. A third issue involves patent protection for test data. Another major concern is the treatment of trade unionists, especially in Colombia, where union leaders are targeted by death squads. If an FTA is concluded, it is uncertain when an implementing bill might be considered in Congress. Legislation to implement the U.S.-Central AmericanDominican Republic FTA is now being considered in Congress, and any congressional decision on that legislation would have implications for a U.S.-Andean FTA.
