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

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FDI inflows to Peru increased 39 percent in 2005 to an estimated $2.5 billion, 270 with themining sector accounting for the bulk of the increase. With respect to ATPA-relatedproduction, the U.S. Embassy notes that the “dramatic and sustained growth of Peru’sexports in the last few years could not have taken place without new investment.” However,the Embassy reported that investments have not reached companies’ desired levels. Therelatively short life span of ATPDEA has been the main deterrent of major investmentprojects. Business representatives told the Embassy that companies have been postponinglarge investments until either ATPA is extended or the U.S.-Peru Trade PromotionAgreement (TPA) has entered into force. Companies recalled reduced sales to the UnitedStates when the original ATPA expired in 2001, and they are concerned about whether theU.S.-Peru TPA will be implemented January 1, 2007, immediately following the expirationof ATPA. 271The U.S. Embassy says that agriculture “is a clear winner” under ATPA. According to theEmbassy, “in the span of a few years, local companies developed desert lands, and employedmodern irrigation and farming techniques to grow export-oriented crops, such as asparagusand mangoes. Building on this success, local producers began to grow other nontraditionalcrops, including paprika and grapes, and began or increased exports to other countries basedon the recognition of its success in the U.S. market.” New export products includeartichokes, flowers, beans, and onions. 272In 2005, investment in the agricultural sector for the purchase of machinery and equipmentgrew 28 percent to $52.6 million. The Embassy was able to identify three companies thattogether made investments in 2005 valued at $93 million, which would not have been madein the absence of ATPA. Two companies made investments related to the production ofsugar and ethanol, and one company made investments to begin production of asparagus andavocados and establish a processing plant. One of the sugar producers also anticipatesproducing other exportable crops, including asparagus and avocados, which could beexported to the United States. 273The Government of Peru projects that the United States will continue to be the primarydestination for nontraditional exports and that exports of both apparel and agriculturalproducts will increase in 2006 due to ATPA. The Ministry of Finance recently revised itsexport projections upward, forecasting a 16.8-percent increase in total Peruvian exports, anda 12.6-percent increase in nontraditional exports in 2006. The Ministry anticipates that theU.S.-Peru TPA will generate continued strong growth. 274270ECLAC, Foreign Investment in Latin America and the Caribbean, 2005, p. 26.271U.S. Department of State telegram, “Peru: USITC 2005 Investment and Drug Crop Survey,” messagereference No. 2490, prepared by U.S. Embassy, Lima, June 21, 2006.272 Ibid.273 Ibid. The Peruvian Asparagus and Vegetables Institute also noted that ATPA has fostered economicgrowth in the agroexport industry and that the development of the asparagus sector has served as a model forthe production of other export-oriented crops. Carlos Mateo Paz-Soldan, and John B. Totaro, Jr., attorneys,Schmeltzer, Aptaker & Shepard, on behalf of the Peruvian Asparagus and Vegetables Institute, writtensubmission to the Commission concerning inv. No. 332-352, Andean Trade Preference Act: Impact on U.S.Industries and Consumers and on Drug Crop Eradication and Crop Substitution, June 8, 2006.274U.S. Department of State telegram, “Peru: USITC 2005 Investment and Drug Crop Survey,” messagereference No. 2490, prepared by U.S. Embassy, Lima, June 21, 2006.3-30
Textile and Apparel SectorPeru has been the leading Andean textile and apparel supplier to the United States for thepast several years, and in 2005 Peru’s exports to the United States rose 19 percent, to $821million (table 2-8). Most of these exports (96 percent) entered duty-free under ATPDEA, andthe leading products were cotton knit shirts. Peru’s textile and apparel sector is a leading andgrowing source of economic activity, accounting for an estimated 14 percent of industrialproduction ($1.4 billion). 275 Available data for 2004 show that textile and apparel productiontotaled $672 million and $755 million, respectively. 276 Approximately 25 out of about 15,000of Peru’s registered apparel firms supply almost three-fourths of Peru’s total apparelexports. 277 The textile and apparel sector employs 150,000 workers directly and 375,000workers indirectly, 278 accounting for about 3 percent of the country’s total employment. 279Textile and apparel products account for slightly less than 10 percent of Peru’s exports, mostof which are shipped to the United States. 280Peru’s textile and apparel sector is recognized for being vertically integrated, from theproduction of raw material inputs (cotton, 281 alpaca, llama, and vicuña) to the manufactureof intermediate products such as yarns and fabrics, to the production of finished goods suchas apparel. In recent years, the sector has increasingly focused its efforts on manufacturingproducts with higher value added, 282 offering full-package programs, 283 and rapidly boostingapparel exports made from alpaca, llama, and vicuna wool. 284Despite increased competition from China and lower-cost Asian suppliers that resulted fromthe elimination of quotas on January 1, 2005, Peru’s textile and apparel sector grew 13percent in 2005, 285 in contrast to a decline in production and exports from the other Andean275Italo Acha, counselor, Embassy of Peru, e-mail to Commission staff, Mar. 23, 2006.276 Ibid.277 U.S. Department of State telegram, “Textile Sector Growing at Diminished Rate,” message referenceNo. 1825, U.S. Embassy, Lima, May 11, 2006.278Carlos Mateo Paz-Soldan, attorney, Schmeltzer, Aptaker & Shepard, on behalf of Exporamerica,written submission to the Commission concerning inv. No. 332-352, Andean Trade Preference Act: Impacton U.S. Industries and Consumers and on Drug Crop Eradication and Crop Substitution, June 8, 2006.279Italo Acha, counselor, Embassy of Peru, e-mail to Commission staff, Mar. 23, 2006; Carlos MateoPaz-Soldan, attorney, Schmeltzer, Aptaker & Shepard, on behalf of Exporamerica, 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 8, 2006; and U.S. Department ofState telegram, “Peru: Updated Textile and Apparel Information,” message reference No. 4184, prepared byU.S. Embassy, Lima, Sept. 27, 2005.280U.S. Department of State telegram, “Textile Sector Growing at Diminished Rate,” message referenceNo. 1825, prepared by U.S. Embassy, Lima, May 11, 2006.281 Peru is known for two major varieties of cotton: tanguis—a long staple cotton that is used for yarns,and pima—an extra long staple cotton that is used for higher quality textiles. See USDA, ForeignAgricultural Service, “Peru: Cotton and Products Update 2005,” June 23, 2005.282Italo Acha, counselor, Embassy of Peru, e-mail to Commission staff, Mar. 23, 2006.283Carlos Mateo Paz-Soldan, attorney, Schmeltzer, Aptaker & Shepard, on behalf of Exporamerica,written submission to the Commission concerning inv. No. 332-352, Andean Trade Preference Act: Impacton U.S. Industries and Consumers and on Drug Crop Eradication and Crop Substitution, June 8, 2006.284 Industry sources note that the once endangered wild vicuna herds, which reportedly have very finefibers, have been making a comeback in Peru’s highlands because of export markets created in the last 15years for apparel made with their wool. See, Carlos Mateo Paz-Soldan, attorney, Schmeltzer, Aptaker &Shepard, on behalf of Exporamerica, written submission to the Commission concerning inv. No. 332-352,Andean Trade Preference Act: Impact on U.S. Industries and Consumers and on Drug Crop Eradication andCrop Substitution, June 8, 2006.285U.S. Department of State telegram, “Textile Sector Growing at Diminished Rate,” message referenceNo. 1825, U.S. Embassy, Lima, May 11, 2006.3-31
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U.S. International Trade Commission
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PREFACEThe submission of this study
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Trade-Related Activities in 2005•
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Organization of the ReportThis chap
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actions to withdraw or suspend coun
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textile and apparel articles made i
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duty-free entry are identical—a C
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analysis assumes that the supply of
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$11.1 billion in 2005 compared with
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Table 2-2 Leading U.S. imports for
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and 9.5 percent in 2004 to 7.7 perc
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2-8Table 2-5 U.S. imports for consu
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2-10Table 2-6 Leading U.S. imports
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2-12Table 2-7 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 50 and 51: 2-22Table 2-10 Leading U.S. imports
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 and 76: esulted in greater availability of
Page 77 and 78: In recent years, some U.S. growers
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: textile and apparel machinery and t
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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