ECAT Comments: Welcomes Market-Opening U.S.-Colombia Trade Promotion Agreement

October 16, 2006

The Honorable Marilyn R. Abbott PUBLIC DOCUMENT

Secretary

United States International Trade Commission

500 E Street, S.W.

Washington, D.C. 20436

Re: U.S.-Colombia Trade Promotion Agreement: Potential Economy-Wide and Selected Sectoral Effects; TA-2104-023 – Written Submission

Dear Madam Secretary:

In accordance with the September 19, 2006, notice in the Federal Register of the U.S. International Trade Commission, please find attached the original and fourteen (14) copies of the written submission of the Emergency Committee for American Trade (ECAT) with respect to the above-captioned investigation.

Thank you for your consideration of our views.

Sincerely,

[Signed in the original]

Calman J. Cohen

President

Written Submission of the Emergency Committee for American Trade

Regarding U.S.-Colombia Trade Promotion Agreement:

Potential Economy-Wide and Selected Sectoral Effects

Investigation No. TA-2104-023

October 16, 2006

These comments are submitted on behalf of the Emergency Committee for American Trade – ECAT – an association of the chief executives of leading U.S. business enterprises with global operations. ECAT was founded more than three decades ago to promote economic growth through expansionary trade and investment policies. Today, ECAT’s members represent all the principal sectors of the U.S. economy – agriculture, financial, high technology, manufacturing, merchandising, processing, publishing and services. The combined exports of ECAT companies run into the tens of billions of dollars. The jobs they provide for American men and women – including the jobs accounted for by suppliers, dealers, and subcontractors – are located in every state and cover skills of all levels. Their collective annual worldwide sales total nearly $2.4 trillion, and they employ more than five and one-half million persons. ECAT companies are strong supporters of negotiations to eliminate tariffs, remove non-tariff barriers and promote trade liberalization and investment worldwide.

ECAT and ECAT members have actively followed the negotiation of the U.S.-Colombia Trade Promotion Agreement (Colombia TPA). Having reviewed the text of the agreement reached, we believe that the Colombia TPA is a strong and high-standard agreement that will promote new economic opportunities in many sectors for both the United States and Colombia. Several attributes of the Colombia TPA are very important, including its comprehensiveness, its broad and fast market liberalization in all major sectors, and its strong rules promoting transparency, protection of property and non-discrimination.

Before reviewing the specific provisions of the Colombia TPA, the U.S.-Colombia economic and broader relationship are important to emphasize. With a population of 43.6 million, Colombia represents a growing market for U.S. goods, farm products and services. Already, Colombia is the United States’ 31^st largest trading partner. Agricultural and manufactured goods exports have increased more than 50 percent since 2002 and are expect to have even greater opportunities when this agreement enters into force, given the major market liberalization it requires.

Perhaps even more significant is the broader relationship. The United States and Colombia are neighbors and longstanding allies in a region that is vitally important, given its strategic proximity and increasing threats to the rule of law within the region. The Colombia TPA will help expand that relationship and bolster democracy and the rule of law in Colombia. It will help promote economic growth and development within Colombia and, by promoting closer relationships and strengthened cooperative activities, as well as economic alternatives, the Colombia TPA will also function as a key tool in the United States’ and Colombia’s efforts to combat the movement of illegal narcotics through the region.

Colombia TPA Promotes Comprehensive Market Liberalization

The Colombia TPA is a comprehensive agreement, including market opening for all major sectors of the economy, including agriculture, manufactured goods and services, with most sectors and sub-sectors achieving full liberalization. The elimination of tariff and non-tariff barriers and other liberalization measures in both countries will promote new economic opportunities and new relationships that will be beneficial to both the United States and Colombia.

While, as discussed below, ECAT is disappointed that greater liberalization of the U.S. sugar and textile and apparel sub-sectors was not ultimately included, we welcome the fact that all sectors will undergo liberalization both in the United States and in Colombia. While notable, these two areas are exceptions to an otherwise strong, comprehensive agreement.

Colombia TPA Front-Loads Liberalization in Consumer and Industrial Goods

The Colombia TPA requires Colombia to provide duty-free treatment immediately upon entry-into-force for over 80 percent of U.S. exports of consumer and industrial goods, 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 manufactured products within 10 years. Colombia agreed to join the WTO Information Technology Agreement, meaning that Colombia will eliminate duties on all high-tech products (e.g., servers, personal computers, printers) covered by the TPA 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. Colombia has also agreed to liberalize trade in remanufactured goods.

The elimination of industrial tariffs required by the Colombia TPA will promote significant new opportunities for U.S. manufacturers. Consider the representative tariffs that Colombia currently maintains on the following sample of U.S. exports:

§ Agricultural equipment: 5-to-10 percent

§ Automobiles and parts: 5-to-35 percent

§ Chemicals: 0-to-20 percent

§ Construction equipment: 5-to-15 percent

§ Consumer goods: 5-to-20 percent

§ Electronics equipment: 5-to-20 percent

§ Information technology: 5-to-15 percent

§ Medical equipment: 5-to-15 percent

The Colombia TPA will also eliminate non-tariff barriers, including technical barriers to trade, and facilitate the movement of goods. As discussed below, the Colombia TPA requires the elimination of distribution barriers as well that will benefit both goods and services from the United States.

Given the increase in U.S. manufactured exports to Colombia since 2003, (from $3.1 billion in 2003 to $4.7 billion in 2005), the front-loaded elimination of tariff and non-tariff barriers by the Colombia TPA will promote continued growth and economic opportunities for the United States in the consumer and manufactured goods sectors and provide U.S. products with a strong competitive advantage over products from many other parts of the world.

As noted above, ECAT is disappointed about the limited extent of liberalization in the apparel market in the United States. The Colombia TPA does provide immediate duty-free treatment for apparel, but only if it meets certain restrictive rules of origin, similar to what currently exists under the Andean Trade Promotion and Drug Eradication Act (ATPDEA). ECAT is concerned, however, that without significant flexibility and liberalization in the rules of origin, the Colombia TPA will provide little, if any, new opportunities for the growth in U.S.-Colombia textile and apparel trade. ECAT is also very concerned by the expected gap in coverage for such products, with the expiration of the ATPDEA at the end of 2006 and full entry-into-force of the Colombia FTA not likely until later in 2007. This gap is also compounded by the fact that neither the Colombia TPA nor the Peru TPA provides for a cumulation mechanism (as is currently provided under the ATPDEA) for products produced with inputs from Peru and Colombia, in addition to the United States. The failure to provide greater flexibility in the rules of origin, fully retroactive treatment (back to the expiry of the ATPDEA) and cumulation represents a lost opportunity for textile and apparel producers, which may, given other global competitive pressures in the apparel industry, result in lowered, not enhanced, economic relationships between the United States and Colombia in this sub-sector.

Given that most of Colombia’s goods already enter the United States duty-free under the ATPDEA, the Colombia TPA is very important for Colombia to provide a more stable and long-term environment for Colombia’s manufacturers to participate in the U.S. market.

Colombia TPA Requires Major Liberalization of Colombia’s Services Markets

The Colombia TPA also requires liberalization of all service sectors on a negative list basis, with limited exceptions. This liberalization, like that for goods trade, is largely immediate, with the exception of a few areas where Colombia required additional time for liberalization. Key commitments in the agreement include the elimination of many cross-border and investment restrictions in the service sectors, as well as the elimination and/or reduction of many other barriers, such as local hiring and local content requirements. Key sectors for which U.S. service providers will see new growth opportunities as a result of the dismantling of barriers include audio visual, construction and engineering, energy, financial (including banking and insurance), information technology and telecommunications.

The Colombia Agreement also includes important provisions on distribution services that will require the substantial elimination of central-government-level barriers to distribution created through dealer protection laws. In particular, Colombia will be required to change existing requirements (such as mandatory termination payments, indemnity payments and exclusivity requirements) that have impeded efficient and market-based distribution in Colombia. In their place, Colombia will allow manufacturers and service providers to contract with local distributors, based largely on the general principles of contract law. As a result, U.S. exporters and service providers will be able to contract more effectively, promoting thereby more efficient and improved distribution of U.S. goods and services in Colombia.

Colombia TPA Requires Major Liberalization of Colombia’s Agricultural Markets

The Colombia TPA will also ensure the liberalization of Colombia’s agricultural markets in a manner that will strongly benefit U.S. agricultural producers. In particular, the Colombia TPA provides immediate duty-free treatment for key U.S. agricultural exports to Colombia, including such important U.S. exports as high-quality beef, cotton, wheat, soybeans, soybean meal, crude soybean oil, key fruits and vegetables, and many processed food products. The immediate duty-elimination covers over half of current U.S. agricultural exports to Colombia. In addition, the agreement opens markets for U.S. poultry, rice, pork, beef, corn, fruits and vegetables, and dairy products, with most remaining tariffs removed within 15 years and many tariffs eliminated within just five years. The Colombia TPA also incorporates important commitments on science-based sanitary and phytosanitary measures, which Colombia has begun to operationalize with its renewed commitment to recognize the U.S. meat inspection system and open markets for U.S. poultry and beef products.

Given the increase in U.S. agricultural exports to Colombia since 2000 (from $301 million in 2000 to $482 million in 2005), the significant initial elimination of tariff barriers, as well as the phased-in elimination of other tariff and non-tariff barriers, will provide important new opportunities for market expansion by U.S. agricultural producers.

As noted above, one exception to the improvements in economic opportunities that the Colombia TPA provides is with respect to sugar barriers that exist in the United States. ECAT welcomes the additional 50,000 tons of sugar that will be allowed to enter duty-free annually into the United States. This increased access to sugar in the U.S. market is important for producers of sugar-containing products that already face major competitive disadvantages, given U.S. market restrictions on sugar imports. Yet, ECAT remains disappointed, however, that greater liberalization of this sector was not achieved.

Given that most of Colombia’s agricultural goods already enter the United States duty-free under the ATPDEA, the Colombia TPA is very important to Colombia to provide a more stable and long-term environment for Colombia’s agricultural producers to participate in the U.S. market.

Colombia TPA Sets in Place Critical Rules to Promote Greater Market Access and Improved Market Functioning

In addition to its many market-opening provisions for consumer and industrial goods, agricultural products and services, the Colombia TPA also incorporates rules in areas such as transparency, investment, government procurement and intellectual property that are critical to enhance and expand U.S. economic benefits under this agreement, as well as benefit Colombia’s own economic development and enhance its rule of law.

Transparency

The Colombia TPA includes important commitments on transparency that will promote major advances in the structure of government accountability and information flows that are critically important to trade and investment liberalization and the economic growth and poverty reduction that it supports. Among the key provisions included in the Colombia TPA are the prompt publication of laws, regulations, procedures and rulings; the opportunity for input by interested parties in certain rule-making exercises; prompt review and correction of administrative actions; and strong anti-corruption provisions. The transparency that this agreement promotes, both in the terms of the open flow of information and the accountability of government officials, is a vitally important component in eliminating fully barriers to trade and investment that this agreement seeks to achieve.

Investment

The investment chapter of the Colombia TPA is also critical to help promote a secure and predictable legal framework for U.S. investors in Colombia, as well as promote Colombia’s own economic development. The investment chapter contains the key protections needed for U.S. investors overseas and included in the Trade Promotion Authority legislation, enacted as part of the Trade Act of 2002. These include a broad definition of “investment;” guarantees of prompt, adequate and effective compensation for expropriation; fair and equitable treatment and full protection and security by local authorities and courts; a ban on performance requirements; commitments to provide national treatment and most-favored nation treatment; and the free transfer of capital. The Colombia TPA also includes the investor-state dispute settlement mechanism that is critical to provide U.S. investors the opportunity to ensure full protection of their investments against arbitrary, discriminatory and unfair government actions.

The investment chapter also eliminates major investment barriers to U.S. manufacturers and agricultural and service providers, providing new opportunities to expand investment. In particular, the Colombia TPA assures U.S. investors greater opportunities to establish, acquire and operate investments in Colombia in all sectors, except where Colombia has taken a reservation.

While a very strong chapter overall, ECAT remains disappointed by certain limitations in the investment chapter, particularly with respect to the ability to use the investor-state mechanism with respect to certain financial-service restrictions and short-term capital restrictions, as well as other non-conforming measures taken by Colombia. ECAT would hope that Colombia would forego any exercise of these provisions, which would undermine, rather than promote, the economic development and growth it seeks to promote with this agreement.

Government Procurement

The Colombia TPA also includes a government procurement chapter that will provide important new access to Colombia’s government procurement market by U.S. suppliers. Since Colombia is not currently a member of the plurilateral Government Procurement Agreement of the World Trade Organization (WTO), this chapter represents an extremely important commitment to open a key market for U.S. manufacturers and service providers.

In particular, the chapter commits Colombia to provide national treatment, non-discriminatory treatment, transparent notice and bidding procedures, non-discriminatory technical specifications, penalties for corrupt procurements, and objective domestic review of procurement decisions. These commitments apply to procurements by Colombia’s central government, first-tier sub-central agencies (similar to U.S. states) and a number of Colombia’s government enterprises, although Colombia has taken some reservations. These commitments apply to procurements over specified thresholds, depending on the level of government and type of procurement. These commitments are extremely important to many U.S. sectors, including information technology, construction and engineering and others.

These provisions provide U.S. producers new access to Colombia’s government procurement market and strong procedural guarantees to ensure greater fairness and objectivity in Colombia’s procurements. In turn, these provisions will help Colombia improve the efficiency of its government procurement system, promoting more cost-effective procurements in support of Colombia’s own economic and technological development.

Intellectual Property

The Colombia TPA includes strong provisions for the protection of intellectual property, including patents, trademarks, copyrights, trade secrets, and enforcement. Such provisions are critical to promote innovation and new research in the information technology, pharmaceutical and chemical sectors, to name just a few, and to stimulate a rich and diverse marketplace for the development and publishing of business information and literary, musical and other artistic and creative works. These provisions are vital to ensure that the market-access provisions guaranteed in other chapters are not undermined by piracy or by the lack of enforcement of intellectual property rights. The inclusion of these provisions will also help strengthen Colombia’s own intellectual-property-based industries, which can benefit greatly from the full enforcement of strong intellectual property rights within Colombia. As with other parts of the agreement, full implementation and effective enforcement of these provisions is critical.

Conclusion

The Colombia TPA is a strong, comprehensive agreement that will promote new market opportunities for producers across the wide spectrum of the U.S. economy, while also supporting Colombia’s own economic development. It also incorporates critical rules on transparency, investment, government procurement and intellectual property that will help ensure that the market liberalization required by the agreement can fully and openly be achieved.

Attached Document(s): 10-16-06 ECAT Submission to USITC on US-Colombia TPA.pdf