CRS Report for Congress: Andean-US FTA negotiations

CRS Report for Congress

Andean-U.S. Free-Trade Agreement Negotiations

Updated September 30, 2005

M. Angeles Villarreal
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Congressional Research Service - The Library of Congress - Washington DC


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.
Twelve rounds have been held thus far. The latest round was held in Cartagena,
Colombia on September 19-23, 2005. Reports suggest that progress was made and
that negotiators expect to conclude the agreement by the end of 2005. The next
round, scheduled in mid-October in Washington, D.C., is expected to be the final
round of negotiations and the final agreement is expected to be concluded in
November. The Cartagena talks drew an estimated 7,000 protestors while Ecuador
and Peru also faced strong protests. Of note, after the negotiations Ecuador
announced that its entry into the agreement would be delayed. In the last few
months, Ecuador and Bolivia have had sudden changes in their presidencies.

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 American-
Dominican Republic FTA (CAFTA-DR) was enacted on August 2, 2005 (P.L. 109-
53). c