Order Code RL32770
CRS Report for Congress
Received through the CRS Web
Andean-U.S. Free-Trade
Agreement Negotiations
Updated September 30, 2005
M. Angeles Villarreal
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service ˜ The Library of Congress
Andean-U.S. Free-Trade Agreement Negotiations
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.
Twelve rounds have been held thus far. The latest round was held in Cartagena,
Colombia on September 19-23, 2005. Reports suggest that progress was made and
that negotiators expect to conclude the agreement by the end of 2005. The next
round, scheduled in mid-October in Washington, D.C., is expected to be the final
round of negotiations and the final agreement is expected to be concluded in
November. The Cartagena talks drew an estimated 7,000 protestors while Ecuador
and Peru also faced strong protests. Of note, after the negotiations Ecuador
announced that its entry into the agreement would be delayed. 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. The trade
negotiators have stated that the main obstacles to concluding an agreement are in
agriculture and intellectual property rights. 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 American-
Dominican Republic FTA (CAFTA-DR) was enacted on August 2, 2005 (P.L. 109-
53). Given that CAFTA-DR passed only by a small margin, it is unclear how much
support the U.S.-Andean FTA will have.
Contents
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
U.S.-Andean Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Selected Issues in the Negotiations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Investor/State Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Intellectual Property Rights (IPR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Worker Protections and Human Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Textiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Visas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
List of Tables
Table 1. U.S. Trade with the ATPA Countries, 2004 . . . . . . . . . . . . . . . . . . . . . . 7
Andean-U.S. Free-Trade Agreement
Negotiations
Background
At a meeting with President George W. Bush on April 28, 2003, in Washington,
Colombian President Alvaro Uribe sought a free-trade agreement (FTA) with the
United States as a means to improve Colombia’s economy, provide employment, and
offer an attractive alternative to drug activity in his country. President Bush was
reluctant to agree to free-trade talks, however, because he wanted to achieve broader
market opening through the hemispheric Free Trade Agreement of the Americas
(FTAA).1 Because the FTAA talks appeared to be stalled though, President Bush
reportedly offered at the meeting to send then-U.S. Trade Representative (USTR)
Robert Zoellick to Colombia to discuss bilateral trade between the two countries.
At the time, some Members of Congress supported free-trade talks with
Colombia. On June 11, 2003, Senator Max Baucus, Ranking Member of the Senate
Finance Committee, and three Democratic Members on the House Ways and Means
Committee urged USTR Zoellick to give “significant weight” to market size in
selecting countries for FTAs and included Colombia in a list of possible FTA
partners.2 On August 1, 2003, Senator Charles Grassley, Chairman of the Finance
Committee, and a bipartisan group of four other Senators on the Senate Finance
Committee sent the USTR a letter asking for “serious consideration of initiating
[FTA] negotiations with Colombia....”3
The USTR traveled to Bogota and met with Colombia’s President and others on
August 8, 2003. The purpose of his trip, according to the USTR, was “...to clearly
lay out the scope and depth of such a possible negotiation, what it would involve, and
to listen and learn from Colombians about their goals and expectations.”4 Peru and
Ecuador also expressed interest in FTA negotiations with the United States.
On November 18, 2003, USTR Zoellick formally notified Congress of the
Administration’s intent to begin FTA negotiations with Colombia, Peru, Ecuador,
and Bolivia. A press release that accompanied the notification said that the
1 “Bush Plays Down Prospects for Colombia Trade Pact.” Reuters. April 30, 2003.
2 Brevetti, Rossella. “Pro-Trade Democrats Urge Zoellick to Consider Market Size in FTA
Choices.” The Bureau of National Affairs, Inc. International Trade Reporter. June 19,
2003.
3 Letter reprinted at website of Inside U.S. Trade, [http://www.insidetrade.com].
4 Office of the USTR. “Zoellick to Visit Colombia, Meet with President Uribe on August
8.” Press Release. August 7, 2003. Available at [http://www.ustr.gov].
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Administration planned negotiations to begin the second quarter of 2004, initially
with Colombia and Peru, and that the United States would work with Ecuador and
Bolivia “with a view to including them in the agreement as well.”5
The USTR’s letter of notification to Congress identified economic reasons for
the negotiations. It said that an FTA would help U.S. interests “...by reducing and
eliminating barriers to trade and investment between the Andean countries and the
United States. The FTA will also enable us to address impediments to trade and
investment in the Andean countries....” The combined markets for the four Andean
countries, according to the USTR, have a gross domestic product (on a purchasing
power parity basis) of $463 billion and a combined population of 93 million people.6
The letter of notification also stated that an Andean FTA would add momentum to
the broader negotiations on an FTAA. Those negotiations were still stalled, primarily
because of differences between the United States and Brazil.
The notification identified political reasons for the talks as well. It said that an
FTA “...will also enhance our efforts to strengthen democracy and support for
fundamental values in the region.” It said that one reason for negotiating with all
four countries was that a regional strategy would help in combating narcotrafficking.7
It also pointed out several issues of concern to the United States: protection of
worker rights in Ecuador; disputes involving U.S. investors in Peru; violence against
trade unionists and disputes with U.S. investors in Colombia; and the need to work
with Bolivia and the other Andean countries on capacity building.
In the United States, the business community supports an Andean FTA. The
National Association of Manufacturers (NAM), for example, states in its trade
agenda that one of its key objectives is the congressional approval of the Andean
FTA and other FTAs now being negotiated. The NAM has written comments on its
position in various aspects of the negotiations some of which include the removal of
tariff and non-tariff barriers, transparency and accountability in technical regulations,
enforcement of national customs laws, protection of U.S. investment abroad, and
strengthening and enforcement of intellectual property rights laws. 8 NAM’s trade
5 Office of the USTR. “USTR Notifies Congress of Intent to Initiate Free Trade Talks with
Andean Countries.” Press Release. November 18, 2003.
6 Ibid.
7 On a regional approach to combating illegal drug activity, the letter of notification stated:
“Narcotrafficking is a regional scourge that respects no borders. Experience has shown that
to combat it effectively requires coordination and effective strategies among all four Andean
countries.” For more information on Andean countries and issues of interest to Congress,
see CRS Report RL32250, Colombia: Issues for Congress, by Connie Veillette; CRS Report
RL32580, Bolivia: Political and Economic Developments and Implications for U.S. Policy,
by Connie Veillette; CRS Report RS21687, Ecuador: Political and Economic Situation and
U.S. Relations, by Clare Ribando; and CRS Report RL32733, Latin America and the
Caribbean: Issues for the 109th Congress, coordinated by Mark P. Sullivan.
8 National Association of Manufacturers website at [http://www.nam.org]. See “NAM
Written Comments on the Proposed United States-Andean Free Trade Agreement”, March
30, 2004.
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agenda states, “The NAM supports FTAs because U.S. manufacturers face much
higher barriers in foreign markets than foreign producers face here.”
A number of other groups, however, oppose an Andean FTA. A coalition of 51
labor, religious, and environmental groups wrote to the USTR on September 9, 2004,
urging him to suspend the negotiations. They argued that the negotiations have been
conducted in secret, there has been no meaningful dialogue with the public, and the
Andean negotiations are modeled on failed trade agreements.9 Among the signatories
were the AFL-CIO, American Friends Service Committee, and Public Citizen.
The Andean governments are pursuing an FTA with the United States to assure
access to the immense U.S. market. They have preferential access now under
unilateral U.S. programs (see following section), but that access is scheduled to
expire at the end of December 2006. An FTA would lock-in those preferences and
additional duty-free treatment. The Andean governments also want to attract foreign
investment and see an FTA with the United States as a way to establish a more secure
economic environment and increase foreign investment.
Within the Andean countries, however, there is broad grass-roots opposition to
an FTA. Opponents argue that any economic benefits from increased trade under an
FTA will be realized by only a small segment of the economy, worsening the
separation of the classes. They also argue that a large part of the Andean population
is poor farmers, who are especially vulnerable and cannot compete against increased
agricultural imports from the United States, which some Andean officials claim are
heavily subsidized. The Development Group for Alternative Policies states that one
of the few remaining mechanisms protecting family farmers in the Andean region is
the Andean Community’s “price band” system which, they argue, has served to
cushion farmers from the vagaries of international commodity prices.10 A further
argument is that an FTA would mean reduced revenues for the Andean governments,
and some opponents state that revenue losses will have to be replaced with regressive
domestic taxes.11
On March 23, 2004, the USTR issued a press release announcing that the United
States and Colombia would begin FTA negotiations between the two countries, and
possibly other Andean countries, on May 18-19, 2004.12 The naming of only
Colombia made it clear that there were still concerns with Peru and Ecuador that had
not been addressed. The press release mentioned outstanding disputes between U.S.
investors and the Peruvian government and concerns about protection of worker
rights and investor disputes in Ecuador. According to the press release, “We [the
9 Alliance for Responsible Trade website at [http://www.art-us.org].
10 Hansen-Kuhn, Karen, The Development Gap, Andean FTA: Threats to Development, July
2004.
11 Several arguments against the Andean FTA are presented in: Hansen-Kuhn, Karen.
“Andean FTA: Threats to Development,” available on The Development Group for
Alternative Policies (The Development Gap) website at [http://www.developmentgap.org].
12 Office of the USTR. “U.S. and Colombia to Begin FTA Negotiations on May 18.” Press
Release. March 23, 2004.
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U.S. government] hope that in the coming weeks these countries will take the follow-
on steps that will enable us to include them at the negotiating table, along with
Colombia, at the start of the negotiations. We look forward to including Bolivia at
a later stage, and are working with them to increase their readiness.” On May 3,
2004, the USTR announced that issues with respect to Peru and Ecuador had been
addressed, and those two countries would join with Colombia in the first round of the
negotiations.13
The first round of FTA negotiations was held in Cartagena, Colombia on May
18-19, 2004. Fourteen working groups were established. The negotiators agreed on
a schedule that, according to chief U.S. negotiator Regina Vargo, would probably
involve seven rounds by early 2005 — one round every five to seven weeks.14 On
the day that negotiations began, students, union members, farmers, and others in
Cartagena held a one-day protest against the negotiations because of feared job loss
in the agriculture sector.15
Bolivia has attended the negotiating sessions as an observer, but is not expected
to be a party to an agreement. The USTR said, “We want to maintain the door being
open....but we also have to recognize realities,” and noted that Bolivia’s government
had “‘some basic stability issues.’”16 In mid-June 2005, the Bolivian president
resigned amid widespread opposition to foreign participation in the natural resource
sectors and other policies, and an interim president took office.
Political change has occurred recently in Ecuador as well. On April 20, 2005,
during the ninth round of FTA negotiations, the Congress in Ecuador impeached
Ecuador’s president Lucio Gutierrez and replaced him with the vice president,
Alfredo Palacio. The new president appointed the country’s trade minister as head
of a new negotiating team. Ecuador has been active in the negotiations, but in the
most recent round (September 18-23 2005), Ecuador’s new trade minister Jorge
Illinworth confirmed that his country will not be ready to complete the free trade
agreement in October 2005 because it decided to opt out of additional discussions on
intellectual property.17
Twelve rounds of negotiations have been held so far: Cartagena (May 18-19,
2004); Atlanta (June 18, 2004); Lima, Peru (July 26-30, 2004); San Juan (September
13 Office of the USTR. “Peru and Ecuador to Join With Colombia in May 18-19 Launch of
FTA negotiations with the United States.” Press Release. May 3, 2004.
14 Mozzo, Javier. “U.S. Toasts Strong Start to Andean Trade Talks.” Reuters. May 19,
2004.
15 Toro, Juan Pablo. “U.S., South American Nations Complete First Round of Free Trade
Talks, Meet Next in Atlanta.” The Associated Press. Associated Press Newswires. May
19, 2004.
16 Brevetti, Rossella. “Zoellick Hopes Progress in Global Round Will Help Lagging
Hemispheric Trade Talks.” Daily Report for Executives. Bureau of National Affairs, Inc.
September 10, 2004.
17 Jones, Kate. “Minister Confirms Delay to Ecuador’s Entry in Andean Trade Deal.”
Global Insight Daily Analysis. Global Insight Limited. September 22, 2005.
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13-17, 2004); Guayaquil, Ecuador (October 25-29, 2004); Tucson (November 20-
December 4, 2004); Cartegena (February 7-11, 2005); Washington (March 14-18,
2005); Lima (April 18-22, 2005); Guayaquil (June 6-10, 2005); Miami (July 18-22,
2005); and Cartagena (September 19-23, 2005). In the latest round, negotiators
discussed rules of origin, market access, institutional questions, cross-border
services, intellectual property, sanitary and phytosanitary measures, textiles, financial
services, and dispute settlement. After the meetings, negotiators announced that a
treaty may be signed by mid-November despite disagreements over agriculture and
intellectual property rights. Peru’s chief negotiator stated that the negotiating parties
sorted out many difficulties in the negotiations and had entered the final phase “of
this obstacle course.”18 One of the major setbacks in the meetings was the
Ecuadorian team’s decision to abandon the negotiations on intellectual property
issues, consequently delaying their country’s entry into the agreement. Despite this
setback, Ecuador’s chief negotiator reaffirmed his country’s commitment to the
process.19
The Cartagena meetings drew thousands of Colombian citizens protesting the
trade agreement with the United States. News accounts reported that an estimated
7,000 anti-free trade activists gathered in Cartagena and Bogota, while protesters in
Peru erected roadblocks.20 Ecuador also faced strong public protests to the trade
negotiations. Around 120 protestors temporarily occupied the Ministry of Energy in
Ecuador on September 20, 2005, demanding the annulment of a U.S. company’s
contract in Ecuador and protesting the proposed trade deal with the United States.21
The protests in Ecuador may have influenced the government to delay entry into the
agreement.22
Trade negotiators announced that they expect to conclude the negotiations in
October but that they will have until mid-November to refine the details. They said
that the meetings were successful on some issues, such as financial issues, which
have already been settled. Although the talks on agriculture resumed (agriculture was
not addressed in the prior round), they will likely require an extra bilateral round of
negotiations between the United States and Colombia.23 There is a possibility of
having separate accords on agriculture. The final round of talks is expected to take
place October 19-21 in Washington, D.C.
18 Reuters News. “Andeans see U.S. Trade Pact by Mid November”. September 23, 2005.
19 Delgado, Diana. “DJ Columbia: US-Andean Free Trade Talks Could Wrap Up By Nov.”
Dow Jones Commodities Service. Comtex News Network. September 23, 2005.
20 Joynes, Kate. “Protests Overshadow Andean FTA Talks”. Global Insight Daily Analysis,
Global Insight Limited. September 23, 2005.
21 Joynes, Kate. “Protesters Occupy Ecuador’s Energy and Mining Ministry,” Global
Insight Daily Analysis, Global Insight Limited. September 21, 2005.
22 Joynes, Kate. “Protests Overshadow Andean FTA Talks.” September 23, 2005.
23 Delgado, Diana. “DJ Colombia: US-Andean Free Trade Talks Could Wrap Up By Nov.”
September 23, 2005.
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U.S.-Andean Trade
The United States extends special duty treatment to imports from Bolivia,
Colombia, Ecuador, and Peru under a regional trade preference program. This
program accounted for about half of all U.S. imports from the four countries in 2003.
The program began under the Andean Trade Preference Act (ATPA; title II of
P.L. 102-182), enacted on December 4, 1991. ATPA authorized the President to
grant duty-free treatment to certain products from the four Andean countries that met
domestic content and other requirements. It was intended 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 was originally
authorized for 10 years and lapsed on December 4, 2001.
After ATPA had lapsed for months, the Andean Trade Promotion and Drug
Eradication Act (ATPDEA; title XXXI of P.L. 107-210), was enacted on August 6,
2002. ATPDEA reauthorized the ATPA preference program and expanded trade
preferences to include additional products that were excluded under ATPA. The
additional products under ATPDEA included petroleum and petroleum products,
certain footwear, tuna in flexible containers, and certain watches and leather
products. ATPDEA also authorized the President to grant duty-free treatment to U.S.
imports of certain apparel articles, if the articles met domestic content rules. Duty-
free benefits under ATPDEA end on December 31, 2006.
In 2004, a major share (42%) of all U.S. imports from the four Andean countries
entered duty-free under ATPDEA, and a smaller share (12%) entered duty-free under
ATPA.24 A very small share (2%) entered duty-free under the U.S. Generalized
System of Preferences, which applies to most developing countries throughout the
world. Of the remaining 44% of imports, most entered duty-free under normal trade
relations, which applies on a nondiscriminatory basis to almost all U.S. trading
partners. Only 10% of the value of U.S. imports from the four countries was dutiable
in 2004. Thus, compared to the status quo, only a relatively small share of U.S.
imports would become duty-free under an FTA. That small share, however, might
include products that are relatively import-sensitive in the United States or
disproportionately important to the Andean countries.
In 2004, the United States imported $15.5 billion, or 1% of total U.S. imports,
from the four countries. The same year, the United States exported $7.7 billion, or
1% of all U.S. exports, to the four countries. Colombia accounted for almost half of
those U.S. imports and over half of the U.S. exports (see Table 1). Peru and Ecuador
split nearly all of the other half of imports and exports, and Bolivia accounted for a
very small share.
24 Data from USITC Interactive Tariff and Trade DataWeb at [http://dataweb.usitc.gov]. For
more information on U.S. imports under ATPDEA and ATPA, see, U.S. International Trade
Commission (USITC). The Impact of the Andean Trade Preference Act. USITC Publication
3725. September 2004; and USITC. “The Expanded Andean Trade Preferences Act and
a U.S. Free Trade Agreement with its Beneficiaries.” International Economic Review.
USITC Publication 3742. November/December 2004. P. 14.
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The leading U.S. import from the region in 2004 (35% of imports) was
petroleum oil, principally crude oil from Ecuador and Colombia. Other leading U.S.
imports were gold, coal, cut flowers, coffee, articles of copper, and bananas. Leading
U.S. exports to the region were mining equipment, wheat, broadcasting equipment,
and maize.
Table 1. U.S. Trade with the ATPA Countries, 2004
U.S. Imports
U.S. Exports
Country
Region
Region
Share
Leading Items
Share
Leading Items
(%)
(%)
Bolivia
2
jewelry, tin
2
jewelry, mining machinery
Colombia
48
crude oil, coal
54
maize, vinyl chloride
Ecuador
27
crude oil, bananas
19
mining machinery, kraft
paper
Peru
24
gold, refined
24
wheat, gasoline
copper
Source: USITC Interactive Tariff and Trade DataWeb at [http://dataweb.usitc.gov]. Data are for
U.S. imports for consumption (Customs value) and domestic exports (Fas value). Regional
shares may not add to 100% due to rounding.
Selected Issues in the Negotiations
The following highlights some of the more difficult issues in the negotiations.
In addition to the following, the negotiations also cover other issues such as services
trade, electronic commerce, and government procurement. Trade negotiators from
the Andean countries have stated that despite the recent political crises in Bolivia and
Ecuador, the parties have reached important agreements in many areas. They identify
the difficulties in agriculture and intellectual property rights as the main obstacles in
reaching agreement and that the United States needs to be more flexible in these
areas. U.S. trade officials have said that the United States is very interested in
reaching agreement in these areas and concluding the negotiations. U.S. trade
officials have also pointed out that the United States had laid out its expectations
before the negotiations began.25
Investor/State Disputes
One of the most important issues in the negotiations is unresolved disputes
involving U.S. investments in Andean countries. On October 6, 2004, the House
25 See Brevetti, Rossella, “Andean Officials Stress Importance of Finishing FTA Talks in
October, International Trade Reporter, September 15, 2005; and National Association of
Manufacturers (NAM), “Andean FTA,” in the NAM website [http://www.nam.org].
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Committee on International Relations, Subcommittee on the Western Hemisphere,
held a hearing on U.S. investment disputes in Peru and Ecuador. At the hearing, E.
Anthony Wayne, Assistant Secretary of State for Economic and Business Affairs,
testified, “Nearly every U.S. company doing business in Ecuador has faced problems
with Ecuadorian government entities, from regulatory bodies to the courts and the
customs agency.” He said that the situation in Peru was “...considerably better,”
although there still were problems. He stated that both countries had been cautioned
that, “...left unresolved, these disputes are a stumbling block to achieving an FTA.”
A few months later in October 2004, Deputy USTR Peter Allgeier warned that Peru
and Ecuador could be dropped from the FTA, if outstanding investor disputes were
seen as endangering congressional approval of an FTA with Colombia.26
On April 13, 2005, the House Committee on International Relations,
Subcommittee on the Western Hemisphere, held a hearing on U.S. trade agreements
with Latin America. At the hearing, John Murphy, Vice President for Western
Hemisphere Affairs of the U.S. Chamber of Commerce, said that the situation
regarding investment disputes with Peru and Ecuador was difficult and that persistent
disputes could “...stand as a substantial obstacle that could block the participation of
these countries [in an FTA].” These disputes have been discussed at the negotiations.
Since the beginning of 2005, Peru has been making progress in resolving
disputes with U.S. companies. A nine-year dispute involving California Northrop
Grumman Corporation was recently settled, but the Peruvian Administration is still
working to resolve two others that may be more politically difficult. Ecuador is
further behind in addressing issues on investment disputes raised by U.S.
negotiators.27
Agriculture
U.S. negotiators have refused to talk about rules for agricultural subsidies,
saying that subsidies should be dealt with in the on-going multilateral trade
negotiations in the World Trade Organization. Nevertheless, an important goal for
the United States in the FTA talks has been elimination of a practice called the
“price-band mechanism.” Under this mechanism, a fluctuating tariff is imposed on
an import for the purpose of keeping the import’s price within a specific range. The
band addresses changes in world commodity prices. Colombia and Ecuador have
these variable duties on over 150 items, including corn, rice, soybeans, and powdered
milk.28 Andean negotiators have said that the price-band mechanism is necessary to
protect their farmers, especially small farmers, against subsidized imports. A
spokesperson for small farmers in Colombia said that there is a large rural population
26 Brevetti, Rossella. “Allgeier Says Peru, Ecuador Face Omission From FTA Unless
Investor Disputes Resolved.” The Bureau of National Affairs, Inc. Daily Report for
Executives. October 4, 2004.
27 Chauvin, Lucien O. “Peru Will Go It Alone in Free Trade Talks with U.S. if Andean
Partners Fall Behind.” Bureau of national Affairs. Daily Report for Executives. July 13,
2005.
28 USTR. 2004 National Trade Estimate Report on Foreign Trade Barriers. Pgs. 96 and
117.
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and high unemployment in Colombia, and without protected alternative crops, the
people will produce drugs.29
Some specific products are especially important to the trading partners. For
example, access to the U.S. market is critical for Andean producers of cut flowers
(Colombia and Ecuador) and asparagus (Peru). These products, however, had the
largest potential displacement effects on U.S. producers under ATPDEA30, so they
are worrisome to U.S. growers. Also, U.S. sugar producers are concerned about
increased imports from the Andean countries. Conversely, Andean farmers see some
U.S. products, such as corn and chicken parts, as threatening.
Intellectual Property Rights (IPR)
A major area of disagreement is so-called “data exclusivity.” This term refers
to an additional period of patent protection that is given to test data, especially data
on pharmaceuticals and agricultural chemicals. The United States wants rules on
data exclusivity in an FTA to protect the results of research by pharmaceutical
companies for five years.31 In related action, the Pharmaceutical Research and
Manufacturers of America (PhRMA) has petitioned the U.S. government to withdraw
ATPDEA benefits for Peru and Ecuador because they have no data exclusivity laws.32
Oxfam has argued, “Guaranteeing exclusive rights over pharmaceutical data will
result in delays and limit generic competition in cases where the patent has expired
or a compulsory license has been granted.”33 The Andean countries had opposed
rules on data exclusivity, arguing that the additional period keeps generic
pharmaceuticals from entering the market and thus hurts poor people. Most recently,
however, there have been reports that some Andean countries might be considering
a three-year period of protection for test data.
Another IPR issue is so-called “bio-piracy.” Andean negotiators want IPR
provisions to go beyond those contained in the WTO. They want protection against
the use of “traditional knowledge” and “genetic resources” without fair
compensation. The United States wants “second use” protection, where a product
29 Otis, John. “Tree Oil Plan Tries to Bear Fruit; Growing Palm Extract Instead of Lucrative
Coca is a Hard Sell for Colombia Farmers.” Houston Chronicle. February 6, 2005.
30 USITC. The Impact of the Andean Trade Preference Act. P. 3-11.
31 The United States negotiated rules on data exclusivity in the Central American-
Dominican Republic FTA. Guatemala subsequently approved a law that the USTR claims
is inconsistent with the data exclusivity provisions of the FTA. A bill to repeal that law was
introduced in the Guatemalan congress on January 28, 2005. See, Brevetti, Rosella.
“Guatemala Takes Steps Toward Repeal of Data Law USTR Claims Violates CAFTA.”
Bureau of National Affairs, Inc. Daily Report for Executives. February 1, 2005.
32 The Colombian government issued decrees in 2002 and in 2003 that gave protection of
data for drugs and for agricultural chemicals respectively. See, USTR. 2004 National
Trade Estimate Report on Foreign Trade Barriers. P. 98.
33 Oxfam. “Make Trade Fair for the Americas; Agriculture, Investment and Intellectual
Property: Three Reasons to Say No to the FTAA.” Oxfam Briefing Paper 37. Available at
the Oxfam website a [http://www.oxfam.org].
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gets additional protection if it is found to serve a use other than the original one under
the patent. It also wants protection against parallel imports, which are products
legitimately made in one foreign country, but imported into another country without
the approval of the IPR holder. The Andean countries oppose these U.S. positions.
Worker Protections and Human Rights
Some unions and labor rights groups have protested against trade negotiations
with Ecuador and Colombia, because they claim that these countries have
unacceptable records on worker rights and permit violence against trade unionists.
For example, an official with the International Confederation of Free Trade Unionists
(ICFTU) criticized Colombia’s president for negotiating with paramilitary forces,
who are the killers of trade unionists according to the ICFTU official, and said that
the more a union protests the president’s economic policy, the more the union is
persecuted.34 The Colombian government responds that through several programs
it has instituted, it “...has clearly demonstrated its commitment to the protection of
human rights and has given special priority to the protection of union members.”35
The U.S. State Department country report on human rights for Colombia identifies
many legal rights for unions, but recognizes problems with protecting those rights.36
For example, the report states that in Colombia, the Constitution provides a right for
most workers to organize unions, but in practice, “...violence against union members
and anti-union discrimination were obstacles to joining unions and engaging in trade
union activities....”
Ecuador’s record on human rights is also controversial. On February 1, 2005,
38 House Members (37 Democrats, 1 Independent) wrote to the foreign trade
minister of Ecuador, expressing concern with “...serious workers’ rights violations
in Ecuador and Ecuador’s failure to live up to commitments made to the U.S.
government in October 2002, as part of a review of Ecuador’s benefits under the
[ATPDEA].”37 They said that they would recommend the gradual withdrawal of
Ecuador’s ATPDEA benefits and that Ecuador’s continued failure to observe the
ATPDEA commitments “...casts doubt on whether Ecuador will be able to follow
through with obligations...” under an FTA.38 (As mentioned earlier, Ecuador’s
president was replaced on April 20, 2005.)
34 Interview on ICFTU web page [http://www.icftu.org].
35 Written Comments by the Government of Colombia Regarding Its Commitment to Human
Rights and Labor Rights. Before the Trade Policy Staff Committee. April 2, 2004.
36 U.S. Department of State web page at [http://www.state.gov].
37 Letter from World Trade Online at [http://www.insidetrade.com].
38 On December 17, 2004, Human Rights Watch reported that in a special session of
Ecuador’s congress called the preceding week by the president, “...52 members of the 100-
seat congress voted to replace 27 of the 31 justices with their own political allies.” Human
Rights Watch saw this action as a violation of judicial independence. Available at
[http://hrw.org].
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Textiles
A small but significant share of U.S. apparel imports from Andean countries
still pay full duty under ATPDEA. The Andean region is not considered a major
supplier, but there could be some increase in imports. In addition, the rule of origin
for textiles and apparel has been an important issue in the negotiations.
Visas
Andean countries, especially Colombia, wanted to have visa and immigration
issues in the talks. They said that heightened U.S. security has made it hard for their
business representatives to enter the United States. U.S. negotiators have insisted
that immigration issues are not negotiable.
Environment
An important environmental issue concerns investment provisions. In a letter
dated September 13, 2004, a number of environmental groups, including Friends of
the Earth, Natural Resources Defense Council, and Sierra Club, expressed concern
about the possible inclusion in an Andean FTA of an investment chapter similar to
Chapter 11 of the North American Free-Trade Agreement.39 That chapter allowed
private investors from one signatory country to seek binding arbitration against the
government of another signatory. Such provisions, environmental groups argue in
their letter, could allow “... foreign companies to completely bypass domestic courts
to challenge public interest safeguards.” On the other hand, U.S. negotiators have
sought such provisions in trade agreements, since U.S. companies want such
protections for their foreign investments.
Prospects
The most recent (twelfth) round of negotiations was held September 19-23 in
Cartagena, Colombia. The chief negotiators from Colombia, Ecuador, and Peru
coordinated their positions prior to the twelfth round of negotiations. According to
Colombia’s chief negotiator, Hernando José Gómez, the three Andean countries
maintained a unity in the Cartagena negotiations “that totally exceeded” his
expectations.40 Trade negotiators from the different countries stated that the
negotiations were moving ahead smoothly. Discussions on agriculture were the ones
that made the least progress, with agreement in only 30% of the questions according
to Colombian Trade Minister Jorge Humberto Botero. The three Andean countries
plan to continue the agriculture discussions and possibly have agreements that would
39 The letter is available at [http://www.choike.org/documentos/ngos_us.pdf]. For further
information on Chapter 11, see CRS Report RL31638, Foreign Investor Protection Under
NAFTA Chapter 11, by Robert Meltz.
40 Vieira, Constanza. “Trade: Talks Between U.S., Andean Countries in Final Stretch.”
Inter Press Service. Global Information Network. September 22, 2005.
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be complementary to the U.S.-Andean free trade agreement.41 As stated earlier in
this report, Ecuador stepped out of the discussions on intellectual property rights and
has announced that it is firmly committed to the process but will delay its entry into
the agreement.
If a trade agreement with the United States is not concluded, Andean countries
face the possibility of losing their duty-free benefits under the ATPDEA after they
expire in December 2006. In September 2005, the House Ways and Means
Committee released a report on a bipartisan congressional trade mission to Colombia,
Ecuador, and Peru.42 The purpose of the trip was to focus on the ongoing
negotiations of the U.S.-Andean free trade agreement and to discuss investment and
security issues in the region. One of the conclusions of the report was that the current
unilateral trade preferences received by the Andean countries are set to expire in
December 2006, and that the only way that the countries can replicate their access to
the U.S. market after the current preferences expire is through a comprehensive
bilateral free trade agreement. The report states that a “reciprocal, mutually
beneficial arrangement must take the place of the unilateral access.”43
In September 2005, Peruvian President Alejandro Toledo was in Washington,
D.C. promoting the trade agreement. He stated that Peru would accept the inclusion
of language on core labor rights in the text of the accord. President Toledo is seeking
to broaden support within the U.S. Congress for an U.S.-Andean FTA. He
highlighted three reasons for entering into the agreement: 1) to support regional
stability; 2) to replace the ATPDEA which expires in December 2006; and 3) to
provide alternatives to narcotics trafficking. He also acknowledged that agriculture
market access issues remain difficult areas in the talks.44
Negotiators had originally intended to conclude an FTA in time to meet the
current deadlines under trade promotion authority (TPA). Under current TPA
deadlines, expedited legislative procedures apply to implementing bills for trade
agreements, if, among other requirements, the agreements are entered into by June
30, 2005, and the President gives notice of the signing at least 90 days before. The
Andean FTA talks did not meet the original TPA deadline, but a two-year extension
of TPA appears likely. As long as Congress did not pass an extension disapproval
resolution before July 1, 2005, negotiators would have another two years to conclude
an Andean FTA with an implementing bill considered under expedited legislative
procedures (deadlines for congressional action, no amendments). A possibly more
important, earlier deadline for negotiators, however, would be the year-end 2006
expiration of U.S. trade preferences for the Andean countries.
41 Vierira, Constanza, “Trade: Talks Between U.S., Andean Countries in Final Stretch,”
September 22, 2005.
42 Committee on Ways and Means, U.S. House of Representatives, Report on Trade Mission
to Colombia, Ecuador, and Peru, WMCP: 109-6, September 2005.
43 Ibid, p. 1.
44 Sparshott, Jeffrey, and Tom Carter. “Peru Promotes Free-Trade Pact.” The Washington
Times. September 17, 2005.
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It is uncertain if a U.S.-Andean FTA might be reached by the end of 2005 and
whether Congress might consider action on an implementing bill. Legislation to
implement the U.S.-Central America-Dominican Republic FTA (CAFTA-DR) was
passed by the House of Representatives on July 28, 2005, by a 217-215 vote, while
the Senate approved the agreement on June 30, 2005, by a 54-45 vote. The passage
of CAFTA-DR (P.L. 109-53) had been widely viewed as an indicator of how much
congressional support a U.S.-Andean FTA would have. Given that CAFTA-DR
passed by only a small margin, it is unclear how much support the U.S.-Andean FTA
will have.