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

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Fresh-Cut FlowersFresh-cut flowers have been a major component of U.S. imports from ATPA countries sincethe 1980s, and they continue to represent an important economic activity of ATPAbeneficiary countries. ATPA countries supplied 96 percent of the total value of U.S. importsof fresh-cut roses (HTS 0603.10.60) and 89 percent of the total value of U.S. imports ofchrysanthemums etc. (HTS 0603.10.70) in 2005. 159 Virtually all U.S. imports of the twofresh-cut flower categories considered here from beneficiary countries entered free of dutyunder ATPA. U.S. imports of the subject fresh-cut flowers from ATPA countries areprimarily sourced from Colombia and Ecuador, with Colombia dominating, particularly inchrysanthemums etc.Fresh-cut flowers are a major nontraditional agricultural export product for both Colombiaand Ecuador, which were the second- and third-largest exporters of fresh-cut flowers in theworld in 2005, respectively. 160 Both countries enjoy year-round production and benefit fromabundant water, labor, and high-quality land. The United States is the principal fresh-cutflower export market for ATPA countries, accounting for 81 percent of the total value ofColombian exports ($727 million) and 60 percent of Ecuadorian exports ($353 million) in2005. 161 U.S. companies owned approximately 17 percent of total Colombian production in2004, and accounted for nearly 20 percent of total exports to the United States. The valueof U.S. investments in the Colombian flower industry in 2004 was estimated at $250million. 162The wholesale value of domestically produced fresh-cut flowers was $397 million in 2005. 163The number of commercial U.S. cut-flower growers continued to decline in 2005, falling to498 from 542 the previous year, 164 and U.S. growers continued to face significantcompetition from cut-flower imports, which represented more than one-half of U.S. fresh-cutflower sales.Low-priced imports placed downward price pressure on all cut flowers in the U.S. marketin 2005. Low-priced cut flowers are also a result of the trend in the industry toward largevolume production and mass marketing, reflecting increasing sales to supermarkets, homecenters, and discount stores. 165 Demand for cut flowers in the U.S. market in 2005 wasweakened as consumer spending was constrained by higher energy and gasoline expenses. 166After a 10-percent rise during 2003-04, prices of imported flowers decreased slightly in2005, 167 while prices of all cut flowers in the U.S. market were up only 1 percent on averagein 2005 over 2004.159 The imports referred to in this section are calculated on a Customs value basis.160Global Trade Atlas database, Global Trade Information Services, http://www.gtis.com.161Global Trade Atlas database, Global Trade Information Services, http://www.gtis.com.162Augusto Solano, President, Colombian Flower Exporters Association, written submission to theCommission concerning inv. Nos. TA-131-28 and TA-2104-10, U.S.-Andean Countries Free TradeAgreement: Advice Concerning the Probable Economic Effect of Providing Duty Free Treatment for Imports,Feb. 17, 2004.163USDA, NASS, Floriculture Crops, 2005 Summary, Apr. 2006.164 USDA, NASS, Floriculture Crops, 2005 Summary, Apr. 2006. The number of growers includes onlythose with more than $100,000 in annual sales.165Alberto Jerardo, “Volume Production Keeps Floriculture Prices Low,” Amber Waves, EconomicResearch Services, U.S. Department of Agriculture, Feb. 2004, pp. 4-5.166USDA, ERS, Floriculture and Nursery Crops Outlook, Sept. 2005, p. 3.167 USDA, ERS, Floriculture and Nursery Crops Outlook, Sept. 2005, p. 3.3-14
In recent years, some U.S. growers have differentiated their products from imports to someextent by offering services not available from importers, such as quick turnaround times onspecial orders. U.S. cut-flower growers also continue to switch to high-value cut varietieswith limited import competition (e.g., delphinium, larkspur, and orchids) as well as othernursery products such as annual and perennial flowering plants. U.S. production of roses andchrysanthemums etc. accounted for only 16 percent of total U.S. production of cut flowersin 2005. However, imports of roses and chrysanthemums etc. accounted for 86 percent ofU.S. consumption of those flowers and 42 percent of U.S. consumption of cut flowers of alltypes.Increasing import volumes of roses and chrysanthemums etc. from ATPA countries have hada positive impact on U.S. consumers, who are able to purchase high-quality flowers inmultiple varieties at low prices. Many U.S. importers, distributors, and retail florists dependheavily on moderately priced fresh-cut flowers from overseas. Reportedly, imports of cutflowers directly and indirectly contribute approximately 226,000 jobs to the U.S. market 168in areas such as transportation companies, import brokerage houses, wholesalers, retail floristshops, supermarkets, mass merchandisers, and convenience stores. The floral importingindustry in the Miami area alone reportedly spends almost $20 million annually oninsurance, professional fees, and office expenses. 169U.S. market conditions and the oversupply of flowers on the world market have reducedprofit margins of cut-flower exporters in ATPA countries to their current levels of 2 percentto 4 percent, 170 generally less than the current tariff preference. Growers in ATPA countriesreport that they are limited in their cost control measures because direct labor accounts for50 percent of the total cost of production. 171 In addition, transportation costs for cut flowersfrom ATPA countries are high, especially so when transportation costs from Miami (themain port of entry) to other U.S. destinations are included. Therefore, the roughly 6 percentto 7 percent U.S. tariff forgone makes up a much smaller portion of the final cost toconsumers, mitigating the impact of the tariff preferences under ATPA.Much of the current high market share of imports from ATPA countries was attained beforeATPA was implemented. Because of the high ATPA-country market share, the smalladvantage of duty-free treatment under ATPA likely has a modest impact on U.S. growersof roses and chrysanthemums etc. In addition, the diversification into other cut varieties andnursery products by U.S. growers noted earlier likely lessens the impact of preferential dutytreatment under ATPA for roses and chrysanthemums etc. on the U.S. industry as a whole.168 Lin Watts, Executive Vice President, Association of Floral Imports of Florida, written submission tothe Commission concerning inv. Nos. TA-131-28 and TA-2104-10, U.S.-Andean Countries Free TradeAgreement: Advice Concerning the Probable Economic Effect of Providing Duty Free Treatment for Imports,Feb. 16, 2004.169 South Florida Industry Statistics, Association of Floral Imports of Florida, found athttp://www.afifnet.org/sflstats.htm, retrieved June 22, 2006.170 Lin Watts, Executive Vice President, Association of Floral Imports of Florida, written submission tothe Commission concerning inv. Nos. TA-131-28 and TA-2104-10, U.S.-Andean Countries Free TradeAgreement: Advice Concerning the Probable Economic Effect of Providing Duty Free Treatment for Imports,Feb. 16, 2004.171Augusto Solano, President, Colombian Flower Exporters Association, written submission to theCommission concerning inv. Nos. TA-131-28 and TA-2104-10, U.S.-Andean Countries Free TradeAgreement: Advice Concerning the Probable Economic Effect of Providing Duty Free Treatment for Imports,Feb. 17, 2004.3-15
Page 2 and 3:
U.S. International Trade Commission
Page 5:
PREFACEThe submission of this study
Page 17:
Trade-Related Activities in 2005•
Page 20 and 21:
Organization of the ReportThis chap
Page 22 and 23:
actions to withdraw or suspend coun
Page 24 and 25:
textile and apparel articles made i
Page 26 and 27: duty-free entry are identical—a C
Page 28 and 29: analysis assumes that the supply of
Page 30 and 31: $11.1 billion in 2005 compared with
Page 32 and 33: Table 2-2 Leading U.S. imports for
Page 34 and 35: and 9.5 percent in 2004 to 7.7 perc
Page 36 and 37: 2-8Table 2-5 U.S. imports for consu
Page 38 and 39: 2-10Table 2-6 Leading U.S. imports
Page 42 and 43: Table 2-8 Textiles and apparel: U.S
Page 44 and 45: Virtually all flower imports from t
Page 46 and 47: The 2005 list of leading imports un
Page 48 and 49: Table 2-9 U.S. imports for consumpt
Page 52 and 53: cathodes, four apparel products, on
Page 54 and 55: 2-26Table 2-11 U.S. exports to ATPA
Page 56 and 57: 2-28Table 2-12 Leading U.S. exports
Page 58 and 59: Figure 2-5U.S. exports to ATPA coun
Page 60 and 61: EcuadorThe growth rate of the Ecuad
Page 63 and 64: CHAPTER 3ECONOMIC IMPACT OF ATPA ON
Page 65 and 66: Products That Benefited Exclusively
Page 67 and 68: Several leading imports that were i
Page 69 and 70: Table 3-3 Leading imports that bene
Page 71 and 72: Table 3-5 Estimated displacement ef
Page 73 and 74: more in 2004. 132 Asparagus and cut
Page 75: esulted in greater availability of
Page 79 and 80: U.S. sales of domestically produced
Page 81 and 82: Table 3-6 Foreign direct investment
Page 83 and 84: product quality at the volumes requ
Page 85 and 86: $314 million purchase by Phillip Mo
Page 87 and 88: Industry sources attribute the slow
Page 89 and 90: place will have a devastating effec
Page 91 and 92: textile and apparel machinery and t
Page 93 and 94: Textile and Apparel SectorPeru has
Page 95: could begin producing the high-end
Page 98 and 99: Role of ATPA in Counternarcotics Ef
Page 100 and 101: (table 4-1, figure 4-1). 306 Net co
Page 102 and 103: Figure 4-1Net Coca Cultivation in t
Page 104 and 105: to other forms of legal justice. Th
Page 106 and 107: ulk of funding for the plan between
Page 108 and 109: Alternative DevelopmentThe USAID al
Page 111: APPENDIX AFederal Register NoticeA-
Page 114 and 115: 27278 Federal Register / Vol. 71, N
Page 117 and 118: American Chamber of Commerce of Per
Page 119 and 120: Government of Colombia—Colombian
Page 121: Peruvian Asparagus Importers Associ
Page 125: Technical Notes to Chapter 3:Partia
Page 128 and 129:
(1)N(Q a /Q a N) = (1+t)ε aa(2)N(Q
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