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Thursday, April 21, 2011

ATPA Renewal: Background and Issues

M. Angeles Villarreal
Specialist in International Trade and Finance

The Andean Trade Preference Act (ATPA) extends duty-free treatment to certain U.S. imports that meet domestic content and other requirements from designated countries in the Andean region. The purpose of ATPA is to promote economic growth in the Andean region and to encourage a shift away from dependence on illegal drugs by supporting legitimate economic activities. ATPA (Title II of P.L. 102-182) was enacted on December 4, 1991. It was renewed and modified under the Andean Trade Promotion and Drug Eradication Act (ATPDEA; Title XXXI of P.L. 107-210) on August 6, 2002, extending trade preferences until December 31, 2006. Since that time, Congress has provided several short-term extensions of ATPA. The most recent extension took place late in December 2010 when the 111th Congress enacted legislation for a six-week extension of ATPA for Colombia and Ecuador until February 12, 2011 (P.L. 111-344). The 112th Congress has not renewed ATPA.

The countries originally designated to qualify for trade preferences under ATPA were Bolivia, Colombia, Ecuador, and Peru. Trade preferences for Peru were not renewed in 2010 because Peru has a free trade agreement with the United States, which entered into force in February 2009. In the case of Bolivia, trade preferences were suspended in December 2008 because Bolivia failed to meet ATPA eligibility criteria related to counter-narcotics cooperation. Bolivia may only be reinstated as a beneficiary country under ATPA if Congress approves legislation to do so.

The impact of the ATPA on coca production in Andean countries has been small and mostly indirect, according to a 2010 study by the U.S. International Trade Commission. The study reports that illegal coca cultivation fell substantially in Andean countries from a 20-year peak of 232,500 hectares in 2007 to 192,000 in 2008. The study also reports that the ATPA, in combination with other alternative development programs, may indirectly have helped support job growth in certain exports from Andean countries, such as fresh-cut flowers, asparagus, bananas, and pineapples.

The trade effects of ATPA on the U.S. economy have been minimal because the amount of U.S. trade with the Andean region is low. The value of duty-free U.S. imports under ATPA accounts for about 0.8% of total U.S. imports, or 0.1% of the U.S. gross domestic product (GDP). Approximately 90% of U.S. imports from ATPA countries enter duty-free under various trade preference programs or through normal trade relations. Duty-free imports under ATPA account for 49.9% of total U.S. imports from ATPA countries. Leading U.S. ATPA imports in 2010 were crude petroleum oil, cut flowers, petroleum-oil products (other than crude), refined copper, tshirts and similar apparel, and fish and caviar products.

The 112
th Congress may reevaluate the extension of ATPA trade preferences for one or more of the beneficiary countries. Policymakers may also consider broader reform of U.S. trade preference programs, including the Generalized System of Preferences. Some Members of Congress maintain that if ATPA trade preferences are not extended, the United States and the Andean countries risk losing some of the economic progress that has been achieved over the 18- year life of the program. Supporters of ATPA argue that the program should continue to reinforce the U.S. commitment to the “alternative development” counternarcotics strategy. Critics of ATPA argue that unilateral trade programs are ineffective; that the ATPA has forced U.S. producers to compete with lower-cost Andean imports; and that, in cases such as Bolivia and Ecuador, trade preferences should not be extended to countries that do not support U.S. foreign and trade policies.

Date of Report: April 14, 2011
Number of Pages: 14
Order Number: RS22548
Price: $29.95

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