Emergency Committee For American Trade

Peru and Colombia Trade Promotion Agreements

EXCERPT FROM ECAT 2006 AGENDA

Peru and Colombia Trade Promotion Agreements

The United States launched FTA negotiations with Colombia, Ecuador and Peru in May 2004, seeking to conclude a U.S.-Andean FTA. Negotiations with Peru were completed on December 7, 2005, and negotiations with Colombia were completed on February 27, 2006. Negotiations with Ecuador remain ongoing and negotiations with Bolivia have not been launched.

While the Peru agreement may be sent to Congress initially as a separate agreement, ECAT expects and strongly supports that the two agreements will be joined together as quickly as possible to ensure integrated liberalization between the United States and both countries. If Ecuador concludes its negotiation in a timely manner, Ecuador may also be included in an integrated Andean FTA.

Major Provisions of U.S.-Peru Trade Promotion Agreement

The primary provisions of the U.S.-Peru Trade Promotion Agreement include the following:

§ Agriculture: Provides immediate duty-free treatment for more than two-thirds of U.S. agricultural exports to Peru, including important U.S. exports such as high quality beef, cotton, wheat, soybeans, soybean meal, crude soybean oil, key fruits and vegetables, and many processed foods products. Tariffs on most remaining products will be phased out within 15 years, with all tariffs eliminated within 17 years, providing improved access for pork, beef, corn, poultry, rice, fruits and vegetables, processed food and dairy products. The FTA also includes provisions to eliminate sanitary and phytosanitary barriers.

§ Manufactured Goods: Eighty percent of U.S. consumer and industrial exports will receive immediate duty-free treatment, including key U.S. exports of auto parts, construction equipment, forest products, information technology products and medical and scientific equipment. Remaining tariffs will be eliminated on all products within ten years. Peru has agreed to allow trade in remanufactured products.

§ Information Technology: Provides, via a side letter, that Peru will join and become a full participant in the WTO ITA. As a result, Peru will eliminate duties on all high-tech products (e.g., servers, personal computers, printers) covered by the Agreement and allow worldwide exports to enter their markets duty-free. In addition, Peru committed to non-discrimination and national treatment of e-commerce and digital products, and agreed not to impose customs duties on products delivered electronically.

§ Textiles and Apparel: Expands access to the U.S. market through duty-free treatment for apparel made with U.S. and/or Peruvian fabric and, for a temporary period, a limited amount of apparel made with fabric from third countries. ECAT supported greater access for textile and apparel goods to promote co-production among U.S. and other regional suppliers.

§ Services: Liberalizes services trade and investment in Peru through a negative list approach with few exceptions.

§ Investment: Expands investment opportunities and incorporates generally strong protections, including an investor-state mechanism, for U.S. investment.

§ Intellectual Property Rights: Includes strong protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity.

§ Government procurement: Includes important new anti-corruption, transparency and non-discrimination rules for government contracting.

§ Transparency: Includes state-of-the-art transparency standards, including in such areas as customs and regulatory rulemaking (i.e., providing, for example, Internet publication of laws and regulations, expedited release procedures, and provisions for express shipments).

§ Labor and environment: Includes commitments by Peru to enforce effectively its domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.

§ Dispute settlement: Provides that obligations in commercial, labor and environment areas are enforceable through a strong and innovative dispute settlement system allowing for monetary fines and other penalties for the failure to meet commitments.

Major Provisions of U.S.-Colombia Free Trade Agreement

While the final text is currently undergoing a legal scrub, the primary provisions of the U.S.-Colombia FTA, based on U.S. government summaries, include the following:

§ Agriculture: Provides immediate duty-free treatment for key U.S. agricultural exports to Colombia, including important U.S. exports such as high quality beef, cotton, wheat, soybeans, soybean meal, crude soybean oil, key fruits and vegetables, and many processed food products. The FTA includes provisions to allow imports of sugar into the U.S. market, but at lower thresholds than ECAT had sought. The FTA also includes provisions to eliminate sanitary and phytosanitary barriers.

§ Manufactured Goods: Over 80 percent of U.S. exports of consumer and industrial tariffs will receive immediately duty-free treatment, including key U.S. exports of auto parts, agricultural and construction equipment, information technology products, medical and scientific equipment and wood. Remaining tariffs will be eliminated on all products within ten years. Colombia has also agreed to allow trade in remanufactured goods.

§ Services: Liberalizes services trade and investment in Colombia through a negative list approach with few exceptions.

§ Information Technology: Colombia agreed to join the WTO ITA. As a result, Colombia will eliminate duties on all high-tech products (e.g., servers, personal computers, printers) covered by the FTA and allow worldwide exports to enter their markets duty-free. In addition, Colombia committed to non-discrimination and national treatment of e-commerce and digital products, and agreed not to impose customs duties on products delivered electronically.

§ Textiles and Apparel: Expands access to the U.S. market through duty-free treatment for apparel made with U.S. and/or Colombia fabric and, for a temporary period, a limited amount of apparel made with fabric from third countries. ECAT supported greater access for textile and apparel goods to promote co-production among U.S. and other regional suppliers.

§ Investment: Expands investment opportunities and incorporates generally strong protections, including an investor-state mechanism, for U.S. investment.

§ Intellectual Property Rights: Includes strong protections for trademarks, patents, copyrights, and trade secrets, including stronger penalties, patent term restoration and data exclusivity. ECAT expects that the patent harmonization provisions of the agreement will be enforced fully and effectively.

§ Government procurement: Includes important new anti-corruption, transparency and non-discrimination rules for government contracting.

§ Labor and environment: Includes commitments by Colombia to enforce effectively its domestic labor and environmental laws. The parties reaffirmed their commitment to International Labor Organization principles and that it is inappropriate to weaken or reduce labor or environmental protections to encourage trade or investment. The parties also agreed to ensure that their environmental laws provide for high levels of environmental protection.

Opportunities Created

U.S. trade with Peru and Colombia equaled $21.8 billion in 2005, with exports to Peru and Colombia accounting for $7.8 billion. U.S. exports to Peru equaled $2.3 billion in 2005, with significant exports of machinery, fuel, plastics and processed foods. U.S. imports from Peru totaled $5.1 billion in 2005, with major imports of precious stones, fuel, apparel and copper. U.S. exports to Colombia equaled $5.5 billion in 2005, with significant exports of machinery, chemicals and processed foods. U.S. imports from Colombia totaled $8.9 billion in 2005, with major imports of fuel, coffee, plants, precious stones and apparel. U.S. foreign direct investment in the Peru equaled $3.934 billion and in Colombia equaled $2.987 billion in 2004.

Most imports from Peru and Colombia (as well as the Andean Pact countries of Ecuador and Bolivia) already receive duty-free treatment under the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which was enacted as part of the Trade Act of 2002. (Background on the ATPDEA and its predecessor legislation, the Andean Trade Preference Act, is found in section IV.3.) The Peru-Colombia agreements expand this duty-free treatment and make it permanent.

The U.S.-Peru-Colombia trade agreements will expand opportunities for U.S. producers by opening markets and eliminating key barriers. It will also make important improvements to investment protections, intellectual property rights, and transparency that will promote the rule of law. For Peru and Colombia, the trade agreement will expand opportunities and promote economic growth.

Given existing concerns over rule of law issues, including the enforcement of existing commitments, in Ecuador, ECAT strongly urges the Administration to continue to seek an FTA of the highest-possible standard with Ecuador and to incorporate each of the key investment provisions that guarantee protections to U.S. investors, including with respect to investor-state arbitration for breaches of investment agreements.

ECAT Position: ECAT supports Congressional approval and implementation of the U.S. Peru and U.S.-Colombia trade agreements as quickly as possible. ECAT also urges the Administration to ensure that existing Ecuadorian government commitments are upheld, particularly regarding investment, so that negotiations with Ecuador produce an enforceable and commercially meaningful FTA.

Attached Document(s): Peru-Colombia Trade Promotion Agreements.pdf