Andean Trade Preference Act: Background and Issues for Reauthorization

Publication Date: August 2002

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Social conditions; Trade

Type:

Abstract:

Following passage by the 102nd Congress, President George Bush signed into law the Andean Trade Preference Act (ATPA) on December 4, 1991(P.L. 102-182, title II), making it part of a multifaceted strategy to counter illicit drug production and trade in Latin America. For ten years, it provided preferential, mostly duty-free, treatment to selected U.S. imports from Bolivia, Colombia, Ecuador, and Peru. ATPA's goal was to encourage growth of a more diversified Andean export base, thereby promoting development and providing an incentive for Andean farmers and other workers to pursue economic alternatives to the drug trade.

On December 4, 2001, ATPA expired and U.S. tariffs were reimposed on affected Andean exports. On February 15, 2002, the Bush Administration deferred collection of these tariffs for 90 days in expectation that the 107th Congress would either reauthorize ATPA or provide a short-term extension of its trade preferences. In part because the ATPA legislation was eventually linked to the larger debate on trade promotion authority (TPA), Congress was unable to complete work on the bill before the deferral expired. The ATPA was eventually reauthorized as the Andean Trade Promotion and Drug Eradication Act (ATPDEA), Title XXXI of the Trade Act of 2002 (H.R. 3009), which was signed into law by President Bush on August 6, 2002 (P.L. 107-210). All duty reductions that were in place prior to ATPA's expiration were made retroactive to December 4, 2001 and presumably all those duties collected are reimbursable.

In evaluating the ATPA program, its trade effects were shown to have been relatively small, although there was some indication that the composition of trade changed and that, with a few products, a case could be made that ATPA supported this change. It is possible that the slightly altered composition of U.S. imports from ATPA countries reflected broader change in what Andean countries were producing and that this in turn pointed to some indirect evidence that resources once used for drug-related activity were being redirected toward ATPA-eligible products. Isolating ATPA's role from other counternarcotics and economic diversification programs, however, has been a difficult challenge, producing imprecise estimates.

Supporters of ATPA argued that its effects were evident and proposed that it be reauthorized to reinforce the U.S. commitment to the "alternative development" counternarcotics strategy and that preferential treatment be extended to other Andean exports to broaden the program's effects. In general, the 107th Congress appeared to accept this position. To enhance the effects of ATPA, the reauthorization legislation provides for an extension of trade preferences through December 31, 2006, extending them to cover exports previously excluded, including certain textile and apparel articles, canned tuna, watches and parts, petroleum, footwear, and selected leather bags and goods. Congress was also careful to consider, and in many cases preserve, the interests of domestic producers. ATPA may be only a small part of a large and long-term counternarcotics effort, but Congress reasoned that expanding duty-free provisions of ATPA to include more exports in growth industries may have a positive effect on the region.