With less than three weeks to go before the scheduled June 30 expiration of the Andean Trade Preferences Act (ATPA), which provides duty-free benefits for most imports from Bolivia, Colombia, Ecuador and Peru, supporters remain cautiously optimistic that Congress will act to extend this preference program, at least on a temporary basis. 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-months 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.) While the bilateral free trade agreements with Peru and with Colombia may well be approved later this year (more on this below), it is highly unlikely that this approval will come before the end of June; indeed, the Administration has still yet to submit formal implementing legislation regarding the Peru agreement to Congress for its review and approval, while Colombia remains even further behind the curve.
Nevertheless, hope springs eternal as House Ways and Means Committee Chairman Charles Rangel (D-NY) and Trade Subcommittee Chairman Sander Levin (D-MI) had earlier this year introduced a “no strings attached” two-years ATPA extension bill, and the Administration last week publicly stated its support for an unconditional two-year extension for all four beneficiary countries. Sources indicate that the House Ways and Means Committee may explore an ATPA extension in the context of a previously schedule hearing on trade adjustment assistance later this week. Although it remains feasible for an ATPA extension to be achieved prior to the end of this month, the more likely scenario is for a retroactive extension with a “refund” mechanism on qualifying imports, similar to the manner in which some previous extensions of the GSP program operated. In any case, the Senate will prove to be a bigger challenge, particularly in light of the opposition of Senate Finance Committee Ranking Member Charles Grassley (R-IA) to an extension for Bolivia and Ecuador, and a feeling among many Senators that an additional ATPA extension will divert attention from gaining approval for the Peru and Colombia free trade agreements.
On behalf of the Association, we have made several representations to key players on Capitol Hill in support of an across-the-board two-year extension of ATPA. Members are now asked to lend their support for this action. Attached to this ALERT is a draft political action letter and an address sheet for key Chairman and Ranking Minority Members. We urge all Members to take just a few minutes to complete a handful of blanks in the draft, print off the letter on your company’s letterhead, and transmit the letter by fax as soon as possible. Please remember that even if your company does not directly benefit from an ATPA extension, it is very important to others in the Association and contributes mightily to AFI’s voice before policymakers.
Trade promotion authority (TPA, otherwise known as “fast track” authority), which was granted to President Bush as part of the Trade Act of 2002 after an eight years lapse, is also scheduled to expire as of the end of this month. 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 that the result of such negotiations could then be amended during the Congressional review process). There is nearly unanimous agreement that Congressional renewal of TPA is essential for any hope of progress in the Doha Round of multilateral negotiations under the World Trade Organization. While there remains a good possibility that a modified form of TPA will be approved by the Congress for limited use with respect to Doha Round talks (either before or subsequent to the currently scheduled expiration), the absence of TPA renewal will in all likelihood prove fatal for these negotiations. It is important to note that TPA renewal is not required for ATPA extension. Similarly, it is not required to complete the approval process for the Peru and Colombia FTAs since both of those agreements have been signed by the countries’ respective Presidents and President Bush. However, it may be necessary for another FTA in the pipeline, that with Panama, unless that agreement too is signed by the executives of the two signatory countries before the end of this month (which is a good possibility according to our sources).
The prospects for an immediate extension of TPA are mixed. On the one hand, a recent agreement on a “new trade policy” between the Administration and key Democrats in Congress on labor, environmental and similar provisions in pending and future trade agreements may indicate a new bipartisan spirit in the formulation and execution of trade policy. The President is surely anxious to gain a TPA extension, and the Democrats as a whole do not want to be blamed if the Doha Round dies its final death by reason of the Congress’ failure to approve such an extension. On the other hand, members of Congress on both sides of the aisle are not exactly doing the President’s bidding these days (as was made abundantly clear by the collapse of the comprehensive immigration reform bill last week). And open trade policies remain a nefarious “third-rail” to politicians in many regions of the country, especially in those areas in which agricultural, textile and manufacturing industries are prevalent.
Congressional Democrats and administration trade officials continue to work on drafting text that will incorporate stronger provisions on labor, the environment, and other issues into trade agreements with the four pending FTAs in the pipeline (with Peru, Panama, Colombia and South Korea). Only when they complete that step will House Ways and Means Chairman Rangel schedule a hearing and an informal "mock mark-up" for the U.S.-Peru free trade agreement. For now, it is still possible that those steps will be taken and the finished Peru trade deal sent up for votes in the House and Senate prior to the August recess; indeed, the weeks immediately preceding the August recess have often seen rapid movement on FTA approvals. Peru and Panama are generally considered to have the best chances for Congressional approval. Colombia continues to face an uphill battle as many in Congress are deeply disturbed about that country’s political ties with organized crime and drug cartels, and the continuing violence against labor officials. The Korean agreement is in trouble because of several issues that were left essentially unaddressed during the negotiations process, including access to the Korean market for U.S. auto and auto parts manufacturers, and beef exporters.
With just over three weeks remaining before June 30 and with less that seven session weeks left before the August recess, the clock is ticking on all of the fronts addressed in this Alert. While Congress will return to session in September, the Presidential campaign season will be truly accelerating by that time, and the prospects for agreement on any contentious issue – whether related to trade or otherwise – will be minimized if not marginalized.
We will continue to keep Members closely advised.
