U.S.-South American Trade Promotion Agreements
Background / Current / Impact
The Americas are well-developed for trade and investment. The United States has signed and implemented multiple free trade / trade promotion agreements with Latin American Nations. NAFTA, including the United States, Mexico and Canada has been in place for over a decade. The U.S.-Dominican Republic/Central American Free Trade Agreement including the DR, El Salvador, Nicaragua, Honduras, Guatemala and Costa Rica met with U.S. approval in 2005. There is on-going discussion of an eventual Americas Free Trade Agreement (AFTA). Currently two South American nations are the focus of the United States for Trade Promotion Agreements:
US - Peru Trade Promotion Agreement
On April 12, 2006, Trade Representative Rob Portman and Peruvian Minister of Foreign Trade, Alfredo Ferrero Diez Canseco, signed the U.S.-Peru Trade Promotion Agreement in a ceremony at the Organization of American States. Total trade in 2007 between Peru and the United States was over $9 billion. The United States exported $4.1 billion worth of goods to Peru.
According to the U.S. Department of Commerce, in 2007, California exported $181 million to Peru, making it our state's 49th largest trading partner. $167 million of those exports were manufactured goods, $144 million being durable goods and $23 million being non-durable goods, such as textiles, paper and plastics. Agricultural exports totaled $9.5 million, not including livestock and other natural commodities.
Peru is the third largest country in South America and is approximately three times the size of California. It is the fifth most populous country in Latin America (after Brazil, Mexico, Colombia, and Argentina), and has an annual GDP of more than $181 billion. The President of Peru is popularly elected for a five-year term. A constitutional amendment passed in 2000 prevents reelection. The legislative branch consists of a unicameral Congress of 120 members.
Peru's economy is one of the most dynamic in Latin America, showing particularly strong growth over the past three years. During the 1990s, Peru was transformed by market oriented economic reforms and privatizations. From 1994-1997, the economy recorded robust growth driven by foreign direct investment, but stagnated from 1998 through 2001. Upon taking office in 2001, Peruvian President Alejandro Toledo maintained largely orthodox economic policies, and took measures to attract investment. Recent economic expansion has been driven by construction, mining, investment (most significantly in the Camisea natural gas project), domestic demand, and exports.
Peru is a source of both natural gas and petroleum, although the country is currently a net energy importer. In August 2004, Peru inaugurated operations of the Camisea natural gas project. Camisea gas is fueling an electricity generator and six industrial plants in Lima, with other facilities in the process of switching to gas. In a second phase, liquefied natural gas will be exported to the west coast of the United States and Mexico. Once the export phase is in place, the project is expected to boost GDP by 1.3 percent annually, draw over $3 billion in foreign investment, create thousands of jobs, and turn Peru into a net energy exporter.
Peru is the world's second largest producer of silver, sixth largest producer of gold and copper, and a significant source of the world's zinc and lead. Mineral exports make up around half of Peru's total export revenue.
About 200,000 U.S. citizens visit Peru annually for business, tourism, and study. Nearly 16,000 Americans reside in Peru, and more than 400 companies are represented in the country.
In June 2006 the Peruvian Congress overwhelmingly approved the agreement by a vote of 79-14 with six abstentions. The TPA was approved by the U.S. Congress on November 8, 2007 by a vote of 285-132. The TPA was approved by the U.S. Senate on December 4, 2007 by a vote of 77-18. Both the U.S. and Peruvian Presidents have signed the TPA.
U.S.-Colombia Trade Promotion Agreement
In February 2006, the United States and Colombia concluded their negotiations for a trade promotion deal. "An agreement with Colombia is an essential component of our regional strategy to advance free trade within our hemisphere, combat narco-trafficking, build democratic institutions, and promote economic development," then U.S. Trade Representative Rob Portman said in a statement.
In November 2006, President Bush signed the U.S. Colombia Trade Promotion Agreement . U.S. Secretary of Commerce, Carlos Gutierrez, commented, "The Colombia TPA ...will generate new export opportunities for U.S. agriculture, industry, service providers and workers. In Colombia, the agreement will attract new investment, create jobs and raise living standards."
In 2007, the United States exported over $8.6 billion worth of goods to Colombia, with total trade amounting to over $18 billion. Colombia is California's 39th largest trading partner exporting over $320 million in goods in 2007.
Per the U.S. Department of Commerce, International Trade Administration, the U.S.-Colombia Trade Promotion Agreement offers tremendous opportunities for California's exporters. When the Agreement enters into force, 80 percent of U.S. consumer and industrial exports to Colombia, including nearly all information technology products; mining, agriculture, and construction equipment; medical and scientific equipment; auto parts; paper products; and chemicals, will be duty-free immediately. The remaining tariffs phase out over 10 years. U.S. farmers and ranchers will also become much more competitive, benefiting from immediate duty-free treatment of 77 percent of current U.S. agriculture exports. Key U.S. agriculture exports such as cotton, wheat, soybeans, high-quality beef, apples, pears, peaches, cherries, and almonds will be duty-free upon entry into force of the Agreement. Colombia will phase out all other agricultural tariffs within 19 years.
The U.S.-Colombian TPA must now pass through both the U.S. and Colombian Congresses.
Latin America Trade Coalition Fact Sheet
Andean Trade Preference Act Extension
On October 16, 2008 President Bush signed legislation to extend the Andean Trade Preference Act (ATPA). ATPA ensures that products from several trading partners in South America continue to enter the United States duty-free. With this extension, the US is committed to continue economic growth in our hemisphere with a global system based on free and open trade. Congress extended the ATPA, ensuring duty-free access to the U.S. market for trading partners in South America, including Colombia and Peru. The ATPA also allows for suspending trade preferences with countries that do not live up their promises. Unfortunately, Bolivia has failed to cooperate with the United States on important efforts to fight drug trafficking, so President Bush has proposed to suspend Bolivia's trade preferences until it fulfills its obligations.
CalChamber Position
The California Chamber of Commerce, in keeping with long-standing policy, enthusiastically supports free trade worldwide, expansion of international trade and investment, fair and equitable market access for California products abroad and elimination of disincentives that impede the international competitiveness of California business. New multilateral, sectoral and regional trade agreements ensure that the United States may continue to gain access to world markets, resulting in an improved economy and additional employment of Americans.
Reasons for Position
- These Trade Promotion Agreements are critical elements of the U.S. strategy to liberalize trade through multilateral, regional and bilateral initiatives.
- Bilateral and regional agreements will complement the possible goal of creating a Free Trade Area of the Americas.
- The TPAs will increase momentum toward lowering trade barriers and set a positive example for other small economies in the Western Hemisphere.
Additional Information