The Peru and Panama FTAs have been held in abeyance for several months due to the demands by the incoming Democrats that these agreements specifically embrace core principles of the International Labor Organization (ILO). (The pending FTAs with Colombia and Korea remain in trouble due to unrelated factors; specifically, there is widespread concern within Congress regarding continued violence against union officials in Colombia; the Korea FTA is attracting substantial objection due to that country’s continuing ban on imports of U.S. beef and barriers to U.S. automobiles and parts.) With regard to the labor issues at the core of the Peru and Panama discussions, the announced agreement incorporates the binding obligation that countries uphold in their own laws and practice the obligations of the ILO’s 1998 Declaration on the Fundamental Principles and Rights at Work. The language would refer to the declaration and spell out that the relevant principles are the freedom of association, the effective recognition of the right to collective bargaining, the elimination of all forms of forced or compulsory labor, the effective abolition of child labor and the elimination of discrimination in respect to employment and occupation.

Several salient facts remain unclear at this time, including: whether the agreement struck between the Administration and House Democrats will require that negotiations on these FTAs be reopened or whether the agreement’s principles can be fulfilled through “side letters”; whether the agreement may cause a backlash in Peru and Panama so as to preempt implementation of the FTAs by these trading partners; and whether the agreement will result in a sufficient number of “yes” votes in both houses of Congress to assure approval. Also unclear is timing: the Administration has still not submitted implementing legislation for any of the pending FTAs to Congress and there remains no schedule for Congressional consideration of the legislation once introduced.

Also unclear is the effect that this agreement with have on the Andean Trade Preferences Act (ATPA). Members will recall the ATPA was extended late last year until June 30, 2007, for all four beneficiary countries (Bolivia, Colombia, Ecuador and Peru), with the possibility of a further six-months extension if implementing legislation for an FTA that would replace the ATPA with a particular beneficiary country has been approved by that date. (Effectively, this six-month extension would apply only to Colombia and Peru, as the other two nations have not even negotiated a free trade agreement with the United States and no FTA appears on the horizon.) Officially, the governments of Peru and Colombia are not advocating an extension of ATPA - even if implementing legislation is not approved before the June 30 deadline - as they fear that such a push would unnecessarily distract from efforts to get the FTAs done. However, Chairman Rangel had earlier this year introduced a “no strings attached” ATPA extension bill and the majority of observers believe an ATPA extension will be approved if sufficient movement is evident on the free trade agreements themselves.

In addition, it is not clear that the newly-announced agreement will impact the Administration’s concerted desire for renewal of the president’s “trade promotion authority” (TPA, otherwise known as “fast track” authority). TPA, which was granted to the president as part of the Trade Act of 2002 after an eight-year lapse, is scheduled to expire July 1. TPA is of fundamental importance for the conclusion of bilateral or multilateral trade agreements since it allows for a simple “yea” or nay” vote by the Congress without the possibility of amendment (the long-held and widely accepted school of thought being that foreign trading partners would not enter into negotiations with the United States if they knew the result of such negotiations could then be amended during the Congressional review process). There is nearly unanimous agreement Congressional renewal of TPA is essential for continuing “progress” (much as it is) in the Doha Round of multilateral negotiations under the World Trade Organization. While there remains a distinct possibility a modified form of TPA will be approved by the Congress for limited use with respect to Doha Round talks, the absence of TPA renewal will in all likelihood prove fatal for these negotiations.

This Association should be primed to strongly and overtly advocate approval of the Peru and Panama FTAs, an extension of the ATPA in the interim and an extension of trade promotion authority. A “political action” letter for these purposes will be sent to members shortly for your submission to Congress and a day on Capitol Hill may be arranged for early June. In the meantime, we continue to make essential representations to relevant officials in Congress and the Administration.

We will continue to keep members closely advised.