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Monday, August 5, 2013

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 Ecuador. There were four countries originally designated to qualify for trade preferences under ATPA, including Bolivia, Colombia, Ecuador, and Peru. Colombia and Peru are no longer designated beneficiary countries because both countries have free trade agreements with the United States that have entered into force. 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 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 on October 12, 2011, when the 112
th Congress enacted implementing legislation for the U.S.-Colombia Trade Promotion Agreement (P.L. 112-42). As part of the free trade agreement (FTA) implementing legislation, ATPA was renewed for Colombia and Ecuador until July 31, 2013. The implementing legislation directed the President to terminate Colombia’s status as a designated beneficiary country once the agreement entered into force. The U.S.-Colombia FTA entered into force on May 15, 2012.

The impact of the ATPA on coca production in Andean countries has been small and mostly indirect, according to a 2012 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 187,000 in 2010. 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). Over 80% of U.S. imports from ATPA countries enter duty-free under various trade preference programs or through normal trade relations.

The 113
th Congress may consider whether or not to continue renewing ATPA for Ecuador. Policymakers may also consider broader reform of U.S. trade preference programs, including the Generalized System of Preferences (GSP). Some Members of Congress maintain that ATPA has been responsible for helping the Andean region progress economically over the 18-year life of the program. Critics of ATPA argue that unilateral trade programs are ineffective and that trade preferences should not be extended to countries that do not support U.S. foreign and trade policies. The Ecuadorian government’s announcement that it no longer wanted to receive ATPA preferences may have overshadowed the debate for Congress on whether or not to renew ATPA. On June 27, 2013, top Ecuadorian government officials announced that the country was renouncing trade preferences from the United States under ATPA.

Date of Report: July 16, 2013
Number of Pages: 14
Order Number: RS22548
Price: $29.95

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