The Impact of the Andean Trade Preference Act Twelfth ... - USITC

CHAPTER 3ECONOMIC IMPACT OF ATPA ON THEUNITED STATES AND PROBABLEFUTURE EFFECTSThis chapter addresses two issues: the economic impact of the Andean Trade Preference Act(ATPA) on the U.S. economy, industries, and consumers in 2005 and the probable futureeffects of the program. 111 The impact analysis identifies those items most affected by ATPApreferences and examines specific U.S. industries. The chapter also provides an assessmentof the probable future effects based on information on ATPA-related investment in thecountries, collected from U.S. embassies in the region and other public sources.Impact of ATPA on the United States in 2005Since it was implemented in 1992, 112 ATPA has had a minimal effect on the overall economyof the United States. In each year from 1992 through 2002, the value of ATPA duty-freeU.S. imports was 0.02 percent or less of U.S. gross domestic product (GDP). Starting in2003, ATPA country producers took advantage of expanded opportunities under the AndeanTrade Promotion and Drug Eradication Act (ATPDEA), with imports under ATPA rising to0.05 percent of U.S. GDP in 2003 and to 0.09 percent in 2005. As pointed out in chapter 2,although the total value of U.S. imports from ATPA countries increased 30 percent in 2005,it remained small in 2005, amounting to 1.21 percent of total U.S. imports, while importsunder ATPA provisions totaled 0.69 percent of total U.S. imports.ATPDEA has sharply increased the number of products and value of imports benefiting fromATPA, especially apparel and petroleum and petroleum products. However, the value of theATPA program to countries and its potential for affecting the U.S. economy, consumers, andindustries has fallen over time because of the erosion of the margin of preference for manyATPA products. 113 Sources of this erosion include phased tariff cuts under the UruguayRound, the extension of preferential trading arrangements such as the North American FreeTrade Agreement (NAFTA) and the U.S.-Chile Free Trade Agreement, tariff cuts andeliminations under sectoral trade negotiations, and the erosion of the ad valorem equivalentof specific duty rates because of inflation. 114 Final tariff cuts under the Uruguay Roundbecame effective in 2004, but the other erosions will continue. In addition, the margin of111 As discussed in chapter 1, the term “ATPA” refers to ATPA as amended by ATPDEA, and the term“original ATPA” is used to identify the original ATPA program that expired in Dec. 2001.112ATPA was enacted in December 1991, but the tariff preferences were implemented in 1992 and 1993.See footnote 1 in chapter 1.113 The higher the ad valorem equivalent NTR duty rate for any given product, the greater the benefit toATPA beneficiaries and therefore the higher the margin of preference. ATPA beneficiaries also benefit moreif the NTR rate is more extensively applied—that is, if fewer non-ATPA countries enjoy preferential rates.114For a more detailed analysis of the erosion of the margin of preference, see USITC, ATPA, FifthReport, 1997, p. 132.3-1