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

expansion-related investments in all ATPA countries except Ecuador, where investment innon-oil ATPA-eligible products was frozen in 2005. Such investments could generateincreased exports to the United States in the future.According to industry and other sources (as cited later in this chapter), during 2005, majornon-oil investments in ATPA-eligible products were constrained in most ATPA countriesby uncertainties related to ATPA’s expiration and to negotiations to conclude bilateral freetrade agreements with the United States. However, investors in Colombia and Peru facedfewer uncertainties than those in Bolivia and Ecuador because of expectations that ATPAtrade preferences would be replaced by similar trade preferences under bilateral FTAs.Indeed, both countries concluded bilateral trade promotion agreements with the UnitedStates, but uncertainties continue regarding when the agreements will enter into effect andwhether there will be a gap between when ATPA expires at the end of 2006 and when thenew agreements are implemented. Industry sources reported that major investments in Peruhave been postponed as a result. Exports from Ecuador, including flowers, will likely declinewhen duties are reimposed, particularly if the U.S. FTAs with Colombia and Peru areimplemented.The Commission identified ATPA-related investments in oil, textiles and apparel, flowers,jewelry, wood products, ethanol, and various fruits and vegetables, including asparagus andavocados, which may generate increased exports to the United States in the future. However,in the textile and apparel sector, competition from China stemming from the expiration ofglobal quotas on January 1, 2005, already adversely affected 2005 total exports to the UnitedStates from three out of the four ATPA beneficiaries. Regional officials in the sector notedthat continued trade preferences that are immediately implemented following ATPA’sexpiration are essential for the Andean textile and apparel industry to remain viable.Investments are described in more detail in the country sections below.Because it is difficult to isolate trends in investment related to ATPA-eligible products alone,information on ATPA-related investment activity and trends during 2005 was drawn largelyfrom official telegrams from U.S. embassies in the Andean region, except as noted.Information on apparel-related investments was gathered from a variety of publishedsources.All four U.S. embassies in the ATPA countries responded to the Commission’s request forinformation regarding new or expansion investments related to ATPA-eligible products. Ofthe four embassies, three were able to provide specific information regarding new orexpansion ATPA-related investment. Information on the textile and apparel industries ineach of the four countries is also provided.The most recent official foreign direct investment (FDI) statistics show that FDI inflows tothe ATPA region increased in 2004 to $5.9 billion (table 3-6). 178 FDI inflows overallincreased to Colombia and Peru and declined to Bolivia and Ecuador. Among other factors,the strong demand for commodities, especially from China, contributed to FDI in mineralsin Peru and in oil and gas in Colombia and Peru. 179 The declines in FDI inflows to Boliviaand Ecuador resulted from continued political and social instability and the 2003 completion178United Nations Conference on Trade and Development (UNCTAD), World Investment Report 2005:Transnational Corporations and the Internationalization of R&D, New York and Geneva, 2005, pp. 304-305.179 Ibid., p. 62.3-18