Andean Trade Preference Act: Impact on U.S. Industries and Consumers, Thirteenth Report 2007

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Andean Trade Preference Act: Impact on U.S. Industries and Consumers, Thirteenth Report 2007 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 Investigation No. 332-352 USITC Publication 4037 September 2008 U.S. International Trade Commission COMMISSIONERS Shara L. Aranoff, Chairman Daniel R. Pearson, Vice Chairman Deanna Tanner Okun Charlotte R. Lane Irving A. Williamson Dean A. Pinkert Robert A. Rogowsky Director of Operations Robert B. Koopman Director of Economics Address all communications to Secretary to the Commission United States International Trade Commission Washington, DC 20436 U.S. International Trade Commission Washington, DC 20436 www.usitc.gov Andean Trade Preference Act: Impact on U.S. Industries and Consumers and on Drug Crop Eradication and Crop Substitution, 2007 Thirteenth Report Investigation No. 332-352 Publication 4037 September 2008 This report was prepared principally by the Office of Economics Project Leaders Nannette Christ and James Stamps Office of Economics Nick Grossman, Joanne Guth, Walker Pollard, and Edward C. Wilson Office of Industries Joanna Bonarriva, Tim McCarty, and Laura Rodriguez Primary Reviewer John Fry Administrative Support Terri Anderson and Patricia M. Thomas Office of Publishing Under the direction of Arona Butcher, Chief, Country and Regional Analysis Division NOTE TO THE READER Shortly after the Commission delivered this report to the Congress and to the President on September 30, 2008, Congress passed and the President signed legislation that extends the President’s authority to provide preferential treatment under the Andean Trade Preference Act (ATPA) by 1 year, through December 31, 2009, subject to certain country-specific exceptions for Bolivia and Ecuador. The legislation, which was contained in H.R. 7222, “To Extend the Andean Trade Preference Act, and for Other Purposes,” passed the Senate and House in final form on October 2 and 3 , 2008, respectively, and was signed into law by the President on October 16, 2008. The legislation amended section 208 of ATPA (19 U.S.C. 3206). PREFACE The submission of this study to Congress continues a series of reports by the U.S. International Trade Commission (“the Commission” or “USITC”) on the impact of the Andean Trade Preference Act (ATPA) on U.S. industries and consumers. The current study fulfills the Commission’s reporting requirement for calendar year 2007 and represents the 13th in the series. ATPA, enacted on December 4, 1991, authorized the President to proclaim duty-free treatment for eligible articles from Bolivia, Colombia, Ecuador, and Peru. ATPA has been amended and the authority to provide preferential treatment has been extended several times, most recently by the Trade Preference Extension Act of 2008. The authority to provide preferential treatment is scheduled to expire on December 31, 2008. Section 206 of ATPA requires the Commission to assess the economic impact of the Act “on United States industries and consumers, and in conjunction with other agencies, the effectiveness of this Act in promoting drug-related crop eradication and crop substitution efforts of beneficiary countries.” The Commission is required to submit its report to Congress biennially by September 30 of the year following the period covered in each report. i TABLE OF CONTENTS Page Preface .......................................................................... i List of frequently used abbreviations and acronyms .................................... vii Executive summary .............................................................. ix Chapter 1. Introduction .......................................................... 1-1 Overview of ATPA-related legislation.............................................. 1-1 Summary of the ATPA program .................................................. 1-4 Beneficiaries................................................................ 1-4 Eligible articles.............................................................. 1-5 Qualifying rules............................................................. 1-6 Annual reviews .............................................................. 1-7 ATPA and GSP ............................................................. 1-9 Analytical approach ............................................................ 1-10 Organization of the report........................................................ 1-12 Data sources .................................................................. 1-13 Chapter 2. U.S. trade with the Andean region ........................................ 2-1 Introduction ................................................................... 2-1 Trade overview.............................................................. 2-1 U.S. imports from the Andean countries ............................................. 2-2 Duty treatment.............................................................. 2-5 Imports under ATPA ......................................................... 2-5 Product composition and leading import categories ............................... 2-8 Imports under ATPA by country .............................................. 2-11 Ecuador............................................................... 2-12 Colombia ............................................................. 2-15 Peru.................................................................. 2-16 Bolivia ............................................................... 2-16 U.S. exports to the Andean countries ............................................... 2-17 Chapter 3. Economic impact of ATPA on the United States and probable future effects ..... 3-1 Impact of ATPA on the United States in 2007 ........................................ 3-1 Products that benefited exclusively from ATPA in 2007 .............................. 3-2 Welfare and displacement effects of ATPA on U.S. industries and consumers in 2007 ...... 3-4 Items analyzed............................................................ 3-6 Estimated effects on consumers and producers................................... 3-7 Effects on U.S. consumers................................................ 3-7 Effects on U.S. producers................................................. 3-11 iii TABLE OF CONTENTS–Continued Page Chapter 3. Economic impact of ATPA on the United States and probable future effects—Continued Highlights of U.S. industries most affected by ATPA ................................ 3-11 Fresh or chilled asparagus ................................................... 3-11 Fresh-cut flowers.......................................................... 3-14 Fresh-cut roses......................................................... 3-17 Fresh-cut chrysanthemums................................................ 3-18 Probable future effects of ATPA................................................... 3-18 Foreign direct investment in the Andean countries .................................. 3-21 Bolivia .................................................................... 3-22 Textile and apparel sector ................................................... 3-24 Colombia .................................................................. 3-25 Textile and apparel sector ................................................... 3-27 Ecuador ................................................................... 3-30 Textile and apparel sector ................................................... 3-32 Peru. .................................................................... 3-33 Textile and apparel sector ................................................... 3-34 Chapter 4. Impact of ATPA on drug-related crop eradication and crop substitution in 2007 .4-1 Overview..................................................................... 4-1 Role of ATPA in counternarcotics efforts ............................................ 4-2 Regional cultivation and eradication trends during 2007 ................................ 4-3 Country profiles on eradication and alternative development during 2007 .................. 4-7 Bolivia .................................................................... 4-7 Alternative development.................................................... 4-9 Colombia .................................................................. 4-11 Alternative development.................................................... 4-11 Ecuador ................................................................... 4-12 Alternative development.................................................... 4-13 Peru ..................................................................... 4-15 Alternative development.................................................... 4-16 Chapter 5. Positions of interested parties ............................................ 5-1 Impact of ATPA: Overview of hearing and written submissions .......................... 5-1 ATPA has had a minimal effect on the overall U.S. economy, but mixed effects on specific U.S. sectors ..................................................... 5-1 ATPA has had a positive effect on beneficiary countries ............................. 5-3 ATPA has had a positive effect on drug crop eradication and crop substitution ............ 5-5 Uncertainties regarding ATPA extension and implementation of U.S. bilateral FTAs with Colombia and Peru have adversely affected investment and trade................ 5-6 Summaries of positions of interested parties.......................................... 5-7 Government of Bolivia.......................................................
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