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USTR Reviewing Andean Trade Preferences as Questions About Future Remain

Monday, April 08, 2013
By Shawn McCausland
Sandler, Travis & Rosenberg Trade Report

The Office of the U.S. Trade Representative is accepting through May 8 comments on whether Ecuador is continuing to meet the eligibility criteria under the Andean Trade Preference Act. These criteria cover topics such as illegal expropriation, enforcing arbitral awards in favor of U.S. citizens or companies, upholding internationally recognized workers’ rights and working to eliminate the worst forms of child labor, overall economic conditions and adherence to the accepted rules of international trade, protection of intellectual property rights, and cooperation with counternarcotics and antiterrorism efforts. USTR states that any comments submitted will be used in the preparation of a report to Congress on the operation of the ATPA, which is currently scheduled to expire on July 31.

While this USTR inquiry cannot by itself lead to any change in ATPA benefits, there has been mounting speculation as to whether Congress will vote to continue the program or let it expire. One factor likely to be considered in any such determination is the declining utilization of the available benefits. Colombia and Peru, for years the two biggest users of the ATPA to ship products duty-free to the U.S. market, have instead opted for a more permanent arrangement through free trade agreements and are no longer ATPA beneficiaries. Bolivia was suspended from the program in 2009 based on its failure to meet the counternarcotics cooperation criteria and reinstatement seems an unlikely prospect, at least anytime soon.

There have been calls to end Ecuador’s eligibility as well after a series of actions critics say are antagonistic to the U.S. These include the termination of a long-standing agreement allowing U.S. military aircraft to use a base in Ecuador for counterdrug operations, efforts to collect billions of dollars from Chevron after it was deemed liable for a predecessor’s environmental missteps, and a stated intent to withdraw from a bilateral investment treaty with the U.S. Other factors weighting against continuation of the ATPA include the small and indirect effect it has had on drug crop eradication in the Andean region, which has been one of the primary objectives of the program, and the declining value of ATPA benefits in relation to other U.S. preference programs and FTAs.

On the other hand, USTR received no new allegations of violations of ATPA eligibility criteria by Ecuador in response to an August 2012 request (though there are a handful of previous charges that remain under review) and in fact received several expressions of support for the ATPA, indicating at least some continuing interest in providing trade preferences to Ecuador. USTR sources note that while some of the products entering from Ecuador under the ATPA would continue to receive duty-free treatment under the Generalized System of Preferences if the ATPA expires, goods such as petroleum and cut flowers, which are among the largest beneficiaries of ATPA benefits, would not.

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