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

place will have a devastating effect on the industry. In the absence of trade preferences,Ecuador’s rose exports would face a 6.8 percent ad valorem tariff in the U.S. market andwould have difficulty competing with roses from Colombia, where costs are generally lower,including transport costs. 245 Although many industry representatives indicated that they arenot planning to move their operations to Colombia, the Embassy noted that new investmentin the industry is likely to target Colombia, rather than Ecuador. One local flower growerindicated that financial institutions have already eliminated credit lines, forcing him toabandon investments in order to make his early loan payments. 246In addition, the U.S. Embassy reported that investments in the tuna industry could move toPeru or elsewhere in the absence of U.S. trade preferences. According to the Embassy, theStarkist tuna factory in Guayaquil, which is responsible for all pouched tuna exports to theUnited States under ATPDEA, is in the process of deciding whether to move the entireoperation to Mexico, or possibly Costa Rica. 247 This factory employs 2,400 people andindirectly supports another 15,000. The President of Empesec tuna packers in Guayaquil,which markets the Starkist brand, said the prospective loss of ATPA trade preferences willcause enormous damage. 248 The Chamber of Fisheries of Ecuador indicated that with thesuspension of bilateral FTA negotiations with the United States, ATPA renewal is essential,or the sector could lose about $120 million and 15,000 jobs. 249The Association of Ecuadorian Growers of Fruits and Vegetables reported that broccoli hasbecome a major nontraditional export under ATPA, and that the U.S. market would probablyclose to Ecuadorian broccoli should ATPA expire. Currently, 97 percent of Ecuador’sbroccoli production is exported, of which one-third is exported to the United States in theform of frozen broccoli. Ecuador is the United States’ fourth-largest source of such imports,following Mexico, Guatemala, and Canada, all countries that benefit from U.S. tradepreferences. U.S. imports of frozen broccoli from Ecuador have grown from nearly $600,000in 2000 to approximately $12 million in 2005. Because frozen broccoli from Ecuador is noteligible for GSP, it would face a 14.9 percent NTR tariff should ATPA expire, which would“make it very difficult to survive” on the U.S. market. 250According to the Government of Ecuador, “ATPDEA has had positive effects on Ecuador,”and non-renewal could result in the loss of as many as 358,515 direct jobs in non-oilindustries that export to the United States under ATPA, including tuna, flowers, textiles, andfruits and vegetables. The government estimates that Ecuadorian exporters saved $26 millionin 2005 from trade preferences under ATPA and that in the absence of trade preferences,GDP would decrease 1.8 percent and fiscal revenues of the Ecuadorian state could declineby more than $40 million. The government points out that an analysis of the agriculturalsector shows that production and exports of key ATPA-eligible products have increasedsignificantly in Ecuador, including important increases in exports of broccoli and pineapples.The government estimates that increased exports under ATPA of certain vegetables and245 Also see IMF, Ecuador: Selected Issues, IMF Country Report No. 06/103, Mar. 2006, p. 64.246 U.S. Department of State telegram, “Flower Industry and the Aftermath of Oxy,” message referenceNo. 1463, prepared by U.S. Embassy, Quito, June 14, 2006.247Paul Baldwin, Economic Section, U.S. Embassy, Quito, e-mail message to Commission staff, June 30,2006.248 Chris Kraul, “Oil Dispute Seeps Down to Grass Roots,” Los Angeles Times, June 25, 2006.249Andres Teran, Charge d’Affairs, Embassy of Ecuador, Washington, D.C., written submission to theCommission concerning inv. No. 332-352, Andean Trade Preference Act: Impact on U.S. Industries andConsumers and on Drug Crop Eradication and Crop Substitution, June 16, 2006.250 Ibid.3-27