Andean-U.S. Free-Trade Agreement Negotiations

Publication Date: January 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Trade

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Abstract:

In November 2003, the Administration notified Congress that it intended to begin negotiations on a free-trade agreement (FTA) with Colombia, Peru, Ecuador, and Bolivia. The notification said that an FTA would reduce and eliminate foreign barriers to trade and investment and would support democracy and fight drug activity in the Andean region. The Andean governments wanted to ensure access to the U.S. market, especially since their current trade preferences will terminate at the end of 2006. In the United States, the business community strongly supports the trade agreement, labor opposes it, and agriculture is split.

The first round of negotiations was held with Colombia, Peru, and Ecuador (with Bolivia participating as an observer) in Cartagena, Colombia, in May 2004. The thirteenth round of negotiations was held in Washington, D.C. in November 2005. The thirteen round was expected to be the last, but when negotiators failed to conclude an agreement, Peru decided to continue negotiations with the United States while Colombia and Ecuador decided to step out. On December 7, 2005, the United States and Peru announced that they had successfully completed a bilateral free trade agreement. The USTR also announced that the United States will continue to negotiate with Colombia and Ecuador to broaden the agreement. Talks between the United States and Colombia are expected to resume in January 2006, while talks with Ecuador are expected to resume in February 2006. Negotiators from Colombia and Ecuador have expressed hope to conclude negotiations in the next set of meetings.

The United States currently extends duty-free treatment to imports from the four Andean countries under a regional preference program. The Andean Trade Preference Act (ATPA) authorized the President to grant duty-free treatment to certain products, and the Andean Trade Promotion and Drug Eradication Act (ATPDEA) reauthorized the ATPA program and added products that had been previously excluded. Over half of all U.S. imports in 2004 from the Andean countries entered under these preferences.

In 2004, the United States imported $15.5 billion from the four Andean countries and exported $7.7 billion. Colombia accounted for about half of U.S. trade with the region. Peru and Ecuador almost evenly split the other half, and Bolivia represented a very small share. The leading U.S. import from the region in 2004 was crude petroleum oil, which accounted for 37% of imports. Leading U.S. exports to the region were mining equipment, wheat, broadcasting equipment, and maize.

There are several important issues in the FTA negotiations. The trade negotiators have stated that the main obstacles to concluding an agreement are in agriculture and intellectual property rights. Another major concern is the treatment of trade unionists, especially in Colombia, where union leaders are targeted by death squads. If an FTA is concluded, it is uncertain when an implementing bill might be considered in Congress. Legislation to implement the U.S.-Central AmericanDominican Republic FTA (CAFTA-DR) was enacted on August 2, 2005 (P.L. 10953). Given that CAFTA-DR passed only by a small margin, it is unclear how much support the U.S.-Andean FTA would have.