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The Future of Andean Trade Preferences

As U.S. trade policy has returned to the headlines in 2011, much of the discussion is focused on  packaging the three pending pacts (Colombia, Panama and South Korea) into one large bill or sequencing the consideration of each individual free-trade agreement (FTA). And more recently talk is centered on the impasse over Trade Adjustment Assistance (TAA).  But less attention is on other components of the broader trade agenda awaiting congressional action, namely extension of trade preference programs.

Back in February, Republicans scrapped a House of Representatives vote on extension of the Andean Trade Preferences Act (ATPA) to protest the lack of a firm timetable for moving the Colombia and Panama FTAs.  The result: duty-free treatment expired for Colombian and Ecuadorian imports.  Since then, the Obama administration has pressed for renewal, even as the future of this 20-year-old program remains in doubt.  Could the next renewal of ATPA be its last?

Initial ATPA participants included Colombia, Peru, Bolivia, and Ecuador.  The goal was a noble one: to encourage a shift away from illegal drug production by expanding alternative export sectors and promoting economic growth.  In 2008, Bolivia was suspended from the program when the Bush Administration deemed it incompliant with eligibility criteria related to counter-narcotics cooperation, and in 2010, Peru was dropped from the list of beneficiaries following approval of its FTA with the United States.

Now, only Colombia and Ecuador are left.  In Colombia’s case, the argument for one more renewal is sound.  Exporters are counting on a retroactive extension that will cover tariff costs since February, and they’ll continue to need the preferences until the FTA enters into force, assuming all goes well in Congress this summer.  The bigger picture is that Colombia is a key U.S. ally that deserves better than the uncertainty created by short-term extensions.  The most recent ATPA renewal, in December 2010, lasted only six weeks. 

Looking ahead, the overdue ratification of the U.S.-Colombia FTA would leave Ecuador as the sole beneficiary of the regional preference program.  But congressional support is quite low for renewing Ecuador’s ATPA status.  Some business groups have long called for a review of Ecuador’s fulfillment of ATPA eligibility requirements, and the recent expulsion of the U.S. ambassador in Quito hasn’t helped Ecuador’s case.

Even with the restoration of diplomatic relations with Ecuador, a one-country preference program is not likely to endure.  Legislation to add Paraguay as a beneficiary country was introduced in the last Congress but hasn’t gained any traction, while Bolivia’s reinstatement would require an act of Congress—not on the table as long as bilateral relations remain at a standstill.

Nevertheless, ATPA should be viewed as a bipartisan success story.  The program became an important tool of commercial interchange between the United States and the Andean region, spurring job creation and investment in alternative industries.  From a foreign policy perspective, it helped institutionalize engagement with a set of countries whose long-term stability is crucial for U.S. interests. 

These benefits are no less relevant for Bolivia and Ecuador, and a strong case could be made for maintaining trade preferences despite the deterioration of diplomatic ties.  For one thing, U.S. policymakers should be interested in discouraging drug production while sustaining legitimate economic sectors that face stiff competition in the absence of duty-free market access. 

Yet Capitol Hill is unlikely to allow trade preferences to become automatic privileges for countries hostile to U.S. foreign policy.  Instead, developing countries in the region may be better served by a comprehensive reform of U.S. preference programs—an initiative that has gained congressional champions but has yet to advance in any serious way. 

In the 20 years since Congress first passed ATPA, the Andean region has changed dramatically.  It’s no surprise that an effective trade policy would also change based on new realities. 

*Kezia McKeague is a guest blogger to AQ Online. She is director of government relations at the Council of the Americas in Washington DC.

Any opinions expressed in this piece do not necessarily reflect those of Americas Quarterly or its publishers.
Tags: Free Trade Agreement, Colombia, Panama, South Korea

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