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

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Role of ATPA in Counternarcotics EffortsThe trade-based incentives of ATPA are intended to encourage legal export-led alternativesto illegal drug-crop production. In 2005, increased production of ATPA-eligible exportshelped support job growth in a variety of economic sectors in the region. As noted inprevious reports, the flower and asparagus sectors provided important employmentopportunities for workers who might otherwise have turned to illegal crop-growing activities.These sectors continued to prosper in 2005 in response to increasing exports. Building onsuch examples, farmers in Bolivia, Colombia, Ecuador, and Peru have begun to export othernontraditional crops, such as artichokes, beans, broccoli, grapes, guava, mangoes, onions,palm hearts, palm oil, paprika, pineapples, and other fruits and vegetables and theirpreparations. In addition, in response to the implementation of ATPDEA, jobs were createdduring 2005 in the textile and apparel sector. Because apparel assembly is a labor-intensiveindustry, even small increases in production yield a significant impact on job growth. 300ATPA trade preferences are intended to work in concert with broader U.S. counternarcoticsefforts in the region, stimulating economic development and growth in the beneficiarycountries to increase production, employment, and exports. Assistance programs carried outby the United States Agency for International Development (USAID) are a key componentin this counternarcotics effort, offering farmers in the Andean region an economicopportunity to abandon their reliance on illegal crop cultivation. Farmers can participate inthe legal economy through programs that introduce alternative, legal crops 301 to expandeconomic growth and exports, and thereby take advantage of benefits provided under ATPA.USAID economic development programs explicitly recognize that a major strategic objectivein the Andean countries is to stem “the flow of illegal drugs into the United States byencouraging small producers to join the legal economy through licit economic activities andinfrastructure projects.” 302Such development assistance helps provide new economic opportunities but does notnecessarily provide a substitute for illegal crop cultivation in the same location. In Bolivia,direct substitution of alternative legal crops (e.g., bananas and pineapples) may havesucceeded in the Chapare region in conjunction with forced eradication of illegal coca crops,but additional factors may have also played a role, such as terrain favorable to law300U.S. Department of State telegram, “USITC 2005 Investment and Drug Crop Survey,” messagereference No. 2490, prepared by U.S. Embassy, Lima, June 21, 2006; U.S. Department of State telegram,“Colombia ATPDEA-related Activity 2005,” message reference No. 5571, prepared by U.S. Embassy,Bogota, June 21, 2006; Andres Teran, Charge d'Affairs, Embassy of Ecuador, Washington, D.C., 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 16, 2006; U.S.Department of State telegram, “Bananas Lead the Way for Sustaining a Licit Economy in Bolivia’sChapare,” message reference No. 2772, prepared by U.S. Embassy, La Paz, Sept. 13, 2005; USTR, SecondReport to Congress on the Operation of the Andean Trade Preference Act as Amended, Apr. 30, 2005, pp. 9-10.301 U.S. Department of State, INCSR 2006, pp. 16-17.302 USAID, USAID Budget–Colombia, “Complete USAID/Colombia Program,” found athttp://www.usaid.gov/policy/budget/cbj2005/lac/pdf/colombia_cbj_fy05.pdf, retrieved May 4, 2005. ForBolivia, see USAID, USAID Budget–Bolivia, “Complete USAID/Bolivia Program,” found athttp://www.usaid.gov/policy/budget/cbj2005/lac/bo.html, Jan. 14, 2005, andhttp://www.usaid.gov/policy/budget/cbj2005/lac/pdf/bolivia_cbj_fy05.pdf, retrieved May 4, 2005. For Peru,see USAID, USAID Budget–Peru, “Complete USAID/Peru Program—Data Sheet on AlternativeDevelopment,” found at http://www.usaid.gov/policy/budget/cbj2005/lac/pdf/peru_cbj_fy05.pdf, retrievedMay 4, 2005.4-2
enforcement and alternative development programs that offer suitable tropical crops as legalsubstitutes to illegal coca. 303 In the mountainous Yungas region of Bolivia, where certainindigenous coca cultivation is part of a centuries-old tradition, direct substitution of legalalternative crops for illegal coca cultivation is proving more difficult in isolated,mountainous terrain. Moreover, coca growers from the Chapare region are establishing newfields in the Yungas region, hoping to take advantage of indigenous peoples’ demands tolegalize more coca cultivation than presently is permitted. 304 In Colombia, employmentopportunities in the flower and textile industries, both of which are supported by ATPA tradepreferences, are not located in rebel-controlled territories where coca eradication campaignsby law enforcement forces are under way. In Peru, employment opportunities generated bythe asparagus sector and by other agricultural export industries stimulated by ATPApreferences are located largely on the southern coast of Peru, far from the central mountainswhere much of Peru’s coca is grown. Nonetheless, the opportunity for legal employment insuch instances has drawn workers away from illegal drug-crop production, processing, andtransportation, particularly laborers from impoverished regions. 305The Commission recognizes that ATPA is but a single element of the multifaceted U.S.counternarcotics effort. As a result, it is difficult to isolate the impact of ATPA on drugrelatedcrop eradication and crop substitution or alternative development. Nonetheless, usingan analysis of trade and drug-crop trends and a review of relevant literature, unclassifiedU.S. embassy reports, and publications from relevant U.S. Government agencies, theCommission estimates that in 2005 ATPA continued to have a small yet positive impact instemming further growth of the drug trade in the Andean region.Regional Cultivation and Eradication Trends during 2005In 2005, Bolivia and Peru faced increasingly active groups of coca farmers challenging thesuccessful coca reduction campaigns mounted previously in those countries. Colombiacontinued to contain its coca cultivation in 2004-2005, after its success in 2002-2003 inreducing its coca crop for the first time in a decade. Ecuador remained largely atransshipment point for drugs rather than a significant coca leaf producer.In 2005, the U.S. Government estimated net coca cultivation in the ATPA region at 169,900hectares, only slightly higher than the 166,200 hectares in 2004 (2-percent increase) butrepresenting a nearly 25-percent decrease from peak production of 221,800 hectares in 2001303U.S. Department of State telegram, “Bolivia’s Eradication Efforts: ‘Best Efforts’ May Not Be Enoughin the Future,” message reference No. 241, prepared by U.S. Embassy, La Paz, Jan. 25, 2005.304 Both Bolivia and Peru permit some legal coca cultivation for traditional and commercial use, butillegal coca cultivation is far in excess of legal production. In Bolivia, up to 12,000 hectares of cocacultivation is permitted under Bolivian National Law No. 1008 of 1988, largely in traditional areas of theNorth and South Yungas. In Peru, to produce coca leaf legally, farmers must register with and sell their cropto the national government coca monopoly—the National Coca Agency (ENACO, Empresa Nacional deCoca). Legal coca cultivation is located largely in the traditional areas east of the city of Cuzco.305Carlos Mateo Paz-Soldan, and John B. Totaro, Jr., attorneys, Schmeltzer, Aptaker & Shepard, onbehalf of the Peruvian Asparagus and Vegetables Institute, written submission to the Commission concerninginv. No. 332-352, Andean Trade Preference Act: Impact on U.S. Industries and Consumers and on DrugCrop Eradication and Crop Substitution, June 8, 2006.4-3
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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
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Table 2-8 Textiles and apparel: U.S
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Virtually all flower imports from t
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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 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 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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