ATPA Renewal: Background and Issues
M. Angeles Villarreal
Specialist in International Trade and Finance
August 7, 2009
Congressional Research Service
7-5700
www.crs.gov
RS22548
CRS Report for Congress
P
repared for Members and Committees of Congress
ATPA Renewal: Background and Issues
Summary
The Andean Trade Preference Act (ATPA) extends special duty 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. The countries originally designated to qualify for trade preferences under ATPA were
Bolivia, Colombia, Ecuador, and Peru. 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 favored short-term extensions of ATPA. In the
110th Congress, legislation was enacted on October 16, 2008 to extend ATPA trade preferences for
Colombia and Peru until December 31, 2009, and until June 30, 2009 for Bolivia and Ecuador,
with a possible additional six-month extension for Bolivia and Ecuador under certain conditions
(P.L. 110-436). Under the previous extension of ATPA (P.L. 110-191), the trade preference
program was scheduled to expire for all four countries on December 31, 2008.
The current legislation has allowed trade preferences for Ecuador to be in effect until December
31, 2009. On June 30, 2009 President Obama issued a report to Congress continuing Ecuador’s
eligibility for ATPA benefits for six months, stating that the Administration would monitor
Ecuador’s investment policies during that time. For Bolivia, trade preferences under ATPA could
be extended only if the President determined that Bolivia met the program’s eligibility criteria.
On November 25, 2008, the Bush Administration stated that Bolivia failed to meet ATPA
eligibility criteria because of its lack of cooperation with the United States on counter-narcotics
efforts and that the country would no longer be designated as a beneficiary. The suspension of
trade preferences for Bolivia was effective as of December 15, 2008. In his June 2009 report to
Congress, President Obama extended the previous Administration’s determination that Bolivia
failed to meet eligibility criteria. The President has the option to issue a proclamation
redesignating Bolivia as a beneficiary country if it improves on efforts to work with the United
States on counter-narcotics efforts.
In the 111th Congress, policymakers may consider renewing ATPA trade preferences for Colombia
and Ecuador, and also may re-evaluate the issue of whether to include Bolivia as a designated
ATPA country. The Congress may also be considering a reform of all U.S. trade preference
programs before the end of 2009 when the Generalized System of Preferences and ATPA expire.
Regarding Colombia, the Congress may consider whether or not to renew ATPA trade preferences
if the pending U.S.-Colombia free trade agreement (FTA) is not approved by the U.S. Congress.
Implementing legislation for the U.S.-Colombia FTA was introduced on April 8, 2008, but it is
unclear whether the 111th Congress will consider implementing legislation for the agreement. For
more information, see CRS Report RL34470, The Proposed U.S.-Colombia Free Trade
Agreement: Economic and Political Implications, by M. Angeles Villarreal. In the case of Peru,
trade preferences will become permanent upon full implementation of the U.S.-Peru FTA (P.L.
110-138). On January 16, 2009, President Bush issued a proclamation to implement the U.S.-
Peru FTA as of February 1, 2009.
Congressional Research Service
ATPA Renewal: Background and Issues
Contents
ATPA Overview .......................................................................................................................... 1
U.S. Trade with Andean Countries............................................................................................... 2
ATPA Impact............................................................................................................................... 4
Effects on Andean Countries ................................................................................................. 4
Possible Sectoral Effects ....................................................................................................... 5
Policy Implications ..................................................................................................................... 6
Tables
Table 1. U.S. Trade with ATPA Countries, 2008........................................................................... 3
Table 2. U.S. Imports from Andean Countries: 2001 and 2008..................................................... 4
Contacts
Author Contact Information ........................................................................................................ 8
Congressional Research Service
ATPA Renewal: Background and Issues
ATPA Overview
The United States extends special duty treatment to imports from Bolivia, Colombia, Ecuador,
and Peru under a regional trade preference program that began under the Andean Trade
Preference Act (ATPA). ATPA was enacted on December 4, 1991 (Title II of P.L. 102-182) and
was originally authorized for ten years. It lapsed on December 4, 2001 and was not renewed until
eight months later. On August 6, 2002, it was renewed and modified under the Andean Trade
Promotion and Drug Eradication Act (ATPDEA; Title XXXI of P.L. 107-210). ATPDEA renewed
ATPA trade preferences until December 31, 2006, with a retroactive date of December 4, 2001,
and also expanded trade preferences to include additional products that were previously excluded
under ATPA. These products include certain items in the following categories: petroleum and
petroleum products, textiles and apparel products, footwear, tuna in flexible containers, and
others. Since ATPDEA was enacted, Congress has favored short-term extensions of ATPA. In the
110th Congress, legislation was enacted on October 16, 2008 to extend ATPA trade preferences for
Colombia and Peru until December 31, 2009, and until June 30, 2009 for Bolivia and Ecuador
(P.L. 110-436). An additional six-month extension would be possible for Bolivia and Ecuador
under certain conditions. Under the previous extension of ATPA (P.L. 110-191), the trade
preference program was scheduled to expire for all four countries on December 31, 2008.
The current legislation has allowed trade preferences for Ecuador to be in effect until December
31, 2009. Preferences were to be automatically renewed unless the President found that Ecuador
was in violation of the eligibility criteria. On June 30, 2009, President Obama issued a report to
Congress continuing Ecuador’s eligibility for ATPA benefits for six months and stated that the
Administration would monitor Ecuador’s investment policies during that time. For Bolivia,
ATPA trade preferences were to be extended only if the President determined that Bolivia had met
program eligibility criteria. However, President Bush suspended Bolivia’s designation as a
beneficiary country in November 2008, stating that Bolivia failed to meet ATPA eligibility criteria
because of its lack of cooperation with the United States on counter-narcotics efforts. A statement
by the White House at the time said that if Bolivia improved on efforts to work with the United
States on counter-narcotics efforts, the President would have the option to issue a proclamation
redesignating Bolivia as a beneficiary country. The suspension was effective as of December 15,
2008.1 President Obama extended the Bush Administration’s determination that Bolivia failed to
meet eligibility criteria. 2 The President’s June 2009 report to Congress states that his decision
was based on the United States Trade Representative’s (USTR) April 2009 report to Congress.
This report contains a section on Bolivia’s narcotics and counter-terrorism cooperation which
states that challenges in Bolivia include “explicit acceptance and encouragement of coca
production from the highest levels of the Bolivian government; the tolerance and attractive
economic income from increased and unconstrained growth of coca cultivation in both the
Yungas and the Chapare regions; and the increased and uncontrolled sale of coca to drug
traffickers.”3
1 Bureau of National Affairs, International Trade Reporter, “Bush Suspends Bolivia’s ATPA Participation Because of
Failure to Cooperate on Narcotics,” December 4, 2008.
2 Bureau of National Affairs, International Trade Reporter, “Obama Continues ATPA Benefits for Ecuador, Does Not
Reinstate Bolivia,” July 9, 2009.
3 The Office of the United States Trade Representative, Fourth Report to the Congress on the Operation of the Andean
Trade Preference Act as Amended, April 30, 2009, pp. 22-23.
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ATPA Renewal: Background and Issues
ATPA, as amended by ATPDEA, is part of a broader U.S. initiative with Andean countries to
address the drug trade problem with Latin America. It authorized the President to grant duty-free
treatment or reduced tariffs to certain products from Bolivia, Colombia, Ecuador, or Peru that met
domestic content and other requirements. The act (as a complement to crop eradication,
interdiction, and other counter-narcotics efforts) 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. Increased access to the U.S. market was expected to help create
jobs and expand legitimate opportunities for workers in the Andean countries in alternative export
sectors.
U.S. Trade with Andean Countries
In 2008, the United States imported $28.5 billion (1.4% of total U.S. imports) from the four ATPA
countries (Bolivia, Colombia, Ecuador, and Peru). U.S. exports to ATPA countries in 2008 totaled
$19.8 billion (1.7% of total U.S. exports). The four countries collectively were the 17th leading
supplier of U.S. imports. The United States is a leading export market for all four countries.
Ecuador and Colombia have the highest market share of exports going to the United States, with
45% of Ecuador’s exports and 37% of Colombia’s exports headed to the United States. For the
United States, Colombia is the leading trading partner in the region, accounting for 45.9% of U.S.
imports from ATPA countries and 53.5% of U.S. exports to ATPA countries (see Table 1).
Leading U.S. imports from all ATPA countries in 2008 were petroleum oils (principally crude),
coal, cut flowers, and gold. Leading U.S. exports to ATPA countries were petroleum products
(other than crude), machinery parts, corn (maize), polymers of ethylene, and wheat.
In 2008, a considerable share of all U.S. imports from the four Andean countries entered duty-free
under ATPA (9.5% of total imports) and ATPDEA (51.1% of total imports) (see Table 2).4 A very
small share (2.1%) entered duty-free under the U.S. Generalized System of Preferences (GSP),
which applies to most developing countries throughout the world. Of the remaining 37.3% of
imports, most entered duty-free under normal trade relations, which applies on a
nondiscriminatory basis to almost all U.S. trading partners. Only 9.1% of the value of U.S.
imports from the four countries was dutiable in 2008. Thus, only a relatively small share of U.S.
imports from ATPA countries is dutiable. These imports might include products that are relatively
import-sensitive in the United States.
The year 2008 marked the sixth full year that ATPA provisions were in effect after its renewal
under ATPDEA. Between 2001 and 2008, U.S. imports from the region receiving ATPA and
ATPDEA preferential duty treatment increased from $1.7 billion (17% of total U.S. imports from
ATPA countries) to $12.3 billion (58% of total U.S. imports from ATPA countries). Leading U.S.
ATPA imports are crude petroleum oils, refined copper, other petroleum oils, fresh roses, and
sweaters and other knitted or crocheted apparel.
4 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.
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ATPA Renewal: Background and Issues
Table 1. U.S. Trade with ATPA Countries, 2008
U.S. Exportsa U.S.
Importsb
Country
US
Region
Leading U.S.
US
Region
Leading U.S.
Billions
Share
Export Items
Billions
Share
Import Items
Boliviac
$0.4 1.8%
Jewelry,
$0.5 1.9%
Petroleum
oils
Machinery parts,
(other than
Motor cars and
crude), Tin,
vehicles
Jewelry
Colombia
$10.6 53.5%
Petroleum
oils $13.1 45.9%
Crude
petroleum
(other than
oil, Coal, Coffee
crude), Corn,
Machinery parts
Ecuador
$3.2 15.9%
Petroleum
oils
$9.0 31.8%
Crude
petroleum
(other than
oil, Crustaceans,
crude), Polymers
Bananas and
of ethylene,
plantains
Machinery parts
Peru
$5.7 28.8%
Petroleum
oils
$5.8 20.5%
Copper,
(other than
Petroleum oils
crude), Machinery
(other than
parts, Polymers of
crude), Silver
ethylene
Total
$19.8 --
$28.5 --
Source: U.S. International Trade Commission, Interactive Tariff and Trade DataWeb at http://dataweb.usitc.gov.
Compiled by CRS.
Notes:
a. Exports at the HTS 4-digit level.
b. Imports at the HTS 4-digit level.
c. Bolivia’s designation as an ATPA beneficiary country was suspended on December 15, 2008.
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ATPA Renewal: Background and Issues
Table 2. U.S. Imports from Andean Countries: 2001 and 2008
($ in millions)
Bolivia
Colombia
Ecuador
Peru
Total
% of Total
2001
Total
Imports
165.1 5,622.6 1,975.4 1,805.5 9,568.7
Duty-Free
Imports
137.3 3,281.0 1,038.1 1,221.0 5,677.3
59.3%
ATPA
53.2 696.6 216.1 686.3
1,652.2 17.3%
GSP
9.5 68.2 33.0 73.4 184.2 1.9%
Other
duty-free
74.5 2,516.1
789.0
461.3 3,840.9
40.1%
2008 Total Imports
540.4
13,058.8
9,043.8
5,839.9
28,483.0
Duty-Free Imports
471.2
12,001.2
7,915.4
5,507.9
25,895.7
90.9%
Total ATPA (including
140.0 7,339.2 6,594.8 3,168.7 17,242.7
60.5%
ATPDEA)
ATPDEA
57.0 6,527.8 6,311.1 1,648.6 14,544.4
51.1%
ATPA
83.0
811.5
283.7 1,520.1 2,698.2
9.5%
GSP
47.6 235.8 57.1 271.0 611.6 2.1%
Other
duty-free
283.6 4,426.2 1,263.5 2,068.1 8,041.4
28.2%
Source: United States International Trade Commission, Interactive Tariff and Trade Data Web
http://dataweb.usitc.gov. Compiled by CRS.
ATPA Impact
The trade effects of ATPA on the U.S. economy are minimal because the amount of U.S. trade
with the region is low. The value of duty-free U.S. imports under ATPA accounts for about 0.7%
of total U.S. imports, or 0.1% of the U.S. gross domestic product (GDP). A 2008 U.S.
International Trade Commission (USITC) study on the ATPA states that the overall effect of
ATPA-eligible imports on the U.S. economy continued to be negligible in 2007. The study also
states that imports under ATPA of knitted cotton tops and fresh or chilled asparagus provided the
most significant impact on U.S. consumers through lower prices. In addition, imports of certain
products entered under ATPA in 2007 may have displaced 5% or more of the value of U.S.
production in certain industries, including asparagus, fresh-cut roses, and chrysanthemums.5
Effects on Andean Countries
The overall effects of the ATPA on the economies of the Bolivia, Colombia, Ecuador, and Peru
are difficult to measure precisely because of the challenges involved in isolating the effects of
5 United States International Trade Commission, Andean Trade Preference Act: Impact on U.S. Industries and
Consumers and on Drug Crop Eradication and Crop Substitution, 2007: Thirteenth Report, USITC Publication 4037,
September 2008, pp. ix – xi. (Hereinafter USITC Publication 4037).
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ATPA Renewal: Background and Issues
ATPA from other variables that affect the economy. National economic policies in the region and
investor confidence may have a larger effect on economic trends. The program’s effect also
depends on the U.S. market share of a country’s exports. Ecuador and Colombia have the highest
market share of exports to the United States and, thus, may experience more significant effects.
The impact of the ATPA on coca production in Andean countries is not clear. The ATPA,
combined with U.S. economic assistance through alternative development programs,6 may have
contributed to the U.S. counter-narcotics effort. The USITC study mentioned previously in this
report states that, in 2007, ATPA continued to have a small, indirect effect in support of illicit coca
eradication and crop substitution efforts in the Andean region. The study states that, according to
U.S. government data, net land area under coca cultivation increased in Bolivia, Colombia, and
Peru in 2005 and 2006 (the most recent years for which data are available). However, growth in
the flower and asparagus industries expanded job opportunities to individuals who otherwise
might have engaged in illicit drug crop production and related activities.7
The rapid rise in the value of imports from ATPA countries in recent years was primarily due to
an increase in the value of imports of petroleum-related products which resulted from higher oil
prices. Imports of crude petroleum oils accounted for nearly 70% of U.S. imports under ATPA in
2008. U.S. ATPA-eligible imports, such as asparagus and cut flowers, may have helped support
job growth and expanded alternatives to workers who may have otherwise engaged in drug-crop
production.
Possible Sectoral Effects
The USITC study identified the asparagus and cut flower industries as two U.S. sectors that had
estimated displacements of five percent or more due to the ATPA. U.S. imports of all fresh or
chilled asparagus increased significantly between 2001 and 2007, from $116.9 million to $275.3
million. Peru is the leading exporter of asparagus in the world and, by far, the major Andean
supplier of fresh asparagus to the U.S. market. In 2007, Peru supplied nearly all U.S. asparagus
imports under ATPA and 57% of all U.S. fresh-asparagus imports. Asparagus imports from ATPA
countries in 2007 totaled $159.4 million in 2007, an increase of 26% from 2006. After a decrease
of 9% in 2006, U.S. production of fresh-market asparagus increased in 2007 by 12%, from $81.0
million in 2006 to $91 million in 2007.8 Although most asparagus imports from the Andean
region enter the U.S. market when overall U.S. production is low, U.S. producers have been
affected by lower prices and some growers went out of business as a result.9 On the other hand,
U.S. consumers have benefitted from a greater availability of fresh asparagus throughout the year
and from lower retail prices. The Peruvian Asparagus Importers Association states that U.S.
consumers have benefited from asparagus imports from Peru because there is now greater
availability of fresh asparagus throughout the year. The Association also states that most imports
from Peru are destined predominantly in the Eastern United States in areas where local
production is minimal.10 The Peruvian asparagus industry provides jobs for an estimated 60,000
6 The Alternative Development program is a program funded under the U.S. Agency for International Development’s
Andean Counterdrug Initiative (ACI).
7 USITC Publication 4037, pp. xi.
8 USITC Publication 4037, pp. 3-11 through 3-13.
9 USITC, The Impact of the Andean Trade Preference Act, Twelfth Report, 2005, Publication 3888, September 2006, p.
3-12.
10 USITC Publication 4037, p. 3-13.
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ATPA Renewal: Background and Issues
workers and is considered to be an important part of overall economic development in Peru. The
Peruvian Asparagus and Vegetables Institute (IPEH) estimates that nearly 40% of the workers in
the asparagus industry come from areas that formerly supplied workers to illegal coca
cultivation.11
Another sector in which U.S. producers have been affected is fresh-cut flowers. ATPA countries
supplied 96% of the total value of U.S. imports of fresh-cut roses and 96% of U.S. imports of
chrysanthemums in 2007. Almost all imports in these two categories enter the United States duty-
free under ATPA. The major supplier from the region is Colombia, followed by Ecuador. The
United States is an important fresh-cut flower export market for ATPA countries, accounting for
61% of the total value of Colombian exports ($832 million) and 28% of Ecuadorian exports
($524 million) in 2007. The USITC reports that U.S. companies have invested more than $250
million in the Colombian flower industry and own approximately 17% of total Colombian cut-
flower production.12 Colombia’s association of flower exporters estimates that the industry
provides for 83,300 direct jobs and 75,000 indirect jobs, and that it has the highest concentration
of employees per hectare in Colombia’s agriculture sector.13
Since the ATPDEA was implemented, investment in the textiles and apparel industries has
increased in the Andean region. Textiles and apparel production has been a leading source of
economic activity, particularly in Peru and Colombia. Peru has been the leading Andean textile
and apparel supplier to the United States for the past several years. Peru has more than 1,700
companies that export textile and apparel articles. The sector accounts for about 20% of the
country’s manufacturing jobs, employing about 500,000 workers directly and indirectly. Since
the U.S.-Peru free trade agreement (FTA) was approved by the U.S. Congress, Peruvian apparel
producers reportedly have been increasing production capacity to meet expected greater U.S.
demand for Peruvian textile and apparel products. Some industry analysts anticipate that the FTA
will encourage long-term capital investments in the industry.14 In Bolivia, Colombia, and
Ecuador, the textile and apparel sectors also are a significant source of economic activity and
employment. Industry representatives from the region have been concerned about losing
ATPDEA preferences because of the importance of the United States as an export market. The
USITC study reports that knitted cotton tops provided the largest estimated gain in U.S. consumer
surplus resulting exclusively from ATPA tariff preferences in 2007. Without ATPA, the study
reports, the price that U.S. consumers would have paid for imports of knitted cotton tops from
ATPA countries would have been up to 15.7% higher.15
Policy Implications
Supporters of ATPA argue that the program should continue to reinforce the U.S. commitment to
the “alternative development” counternarcotics strategy, while critics argue that unilateral trade
programs are ineffective and that trade preferences should not be extended to countries that do not
11 Peruvian Asparagus Importers Association, Written Statement for the House Committee on Ways and Means, July
12, 2006.
12 USITC Publication 4037, pp. 3-14 through 3-15.
13 U.S. Department of Commerce, U.S. Commercial Service, Trade Never Smelled So Sweet: Colombian Flowers Make
Bouquet Bucks, see http://www.buyusa.gov.
14 Ibid, pp. 3-34 through 3-36.
15 USITC Publication 4037, p. 3-7.
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ATPA Renewal: Background and Issues
support U.S. foreign and trade policies. Some industry representatives in the United States believe
that the ATPA has lowered prices of certain products, forcing U.S. producers to compete with
lower-cost Andean imports. In the Andean countries, ATPA supporters state that the program has
had a positive impact in the region by increasing investor confidence, creating thousands of jobs
in alternative sectors, and preventing organized crime and reducing the production of drugs. They
believe that maintaining confidence in the trade relationship with the United States is key to the
long-term stability of the region.
In the 110th Congress, major policy issues were related to the question of whether to renew the
ATPA program, either on a short or long-term basis, or allow the program to expire for some or
all of the countries. In the 111th Congress, policymakers may consider renewing ATPA trade
preferences for Colombia and Ecuador, and also may re-evaluate the issue of continuing to
include Bolivia as a designated ATPA country. A key issue regarding Colombia is the pending
U.S.-Colombia FTA and whether or not to renew ATPA trade preferences for Colombia if a U.S.-
Colombia FTA is not approved by the U.S. Congress. Implementing legislation for a U.S.-
Colombia FTA was introduced on April 8, 2008, but it is unclear whether or how the 111th
Congress will consider implementing legislation for the agreement.16 In the case of Peru, trade
preferences will become permanent upon full implementation of the U.S.-Peru FTA (P.L. 110-
138). On January 16, 2009, President Bush issued a proclamation to implement the U.S.-Peru
FTA as of February 1, 2009.
The 111th Congress may be considering a reform of trade preference programs before the end of
2009 when the Generalized System of Preferences and ATPA expire. House Ways and Means
Trade Subcommittee Chairman Sander Levin stated in July 2009 that the subcommittee may
begin examining the possibility of an overhaul of U.S. trade preference programs before the end
of the year. He stated that there had been no decision on whether Congress will consider major
reforms or launch a debate while extending preferences again for the short term. This would be
something the Administration would decide.17 Some Members of Congress believe that there is
no reason to consider long-term extension of ATPA for countries such as Bolivia and Ecuador that
are not supportive of U.S. trade and foreign policies. Others believe that if the 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 sixteen-year life of the program. Some Members have
argued that renewing ATPA is a pragmatic means to urge President Morales of Bolivia and
President Correa of Ecuador to maintain open-market and democratic policies.18
16 For more information, see CRS Report RL34470, The Proposed U.S.-Colombia Free Trade Agreement: Economic
and Political Implications, by M. Angeles Villarreal.
17 World Trade Online, Daily News, “Levin Says Committee to Tackle Preference Reform After August Recess,” July
21, 2009.
18 For more information, see CRS Report RS21687, Ecuador: Political and Economic Situation and U.S. Relations, by
Clare Ribando Seelke, and CRS Report RL32580, Bolivia: Political and Economic Developments and Relations with
the United States, by Clare Ribando Seelke and June S. Beittel, Bolivia: Political and Economic Developments and
Relations with the United States, by Clare Ribando Seelke.
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Author Contact Information
M. Angeles Villarreal
Specialist in International Trade and Finance
avillarreal@crs.loc.gov, 7-0321
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