WorldCity Business Magazine

Elusive Agreements

by WC

Has Latin America seen its last free trade agreement?

Andean countries are working against the clock, scrambling to nail down free trade agreements with the United States before existing trade benefits expire. Peru is the farthest along in the process and a Colombia deal is also in the pipeline. But the chances that any pact will be approved this year are dimming.

“The United States benefits most from these trade agreements, so the opposition doesn’t make much sense,” said Ambler Moss, a former U.S. ambassador to Panama who is of counsel in the global trade practice group at law firm Greenberg Traurig in Miami. “For Peru to be lost, for that opportunity to be lost, I think it would be pretty catastrophic.”

He made the comments at a Coral Gables trade panel hosted in late July by the Council of the Americas, a membership organization of corporations interested in economic development and investment in Latin America.

Peru, Colombia and Ecuador for which talks have stalled want bilateral trade pacts to replace the benefits they have enjoyed under the Andean Trade Promotion and Drug Eradication Act, which expires in December. The U.S. Congress is unlikely to extend the act, in effect in various forms since 1991. The act allows nearly 6,000 products to enter the United States duty free.

The proposed Peruvian free trade pact was not approved before Congress took its summer break, and Washington insiders said it was unlikely to get much attention in the fall when lawmakers will be concentrating on mid-term elections. Fast-track trade authority is also soon to expire.

That means the United States’ free trade agreement covering the Dominican Republic and five Central American countries could be the last pact for Latin America for a while.

U.S-DR-CAFTAwas approved by only a two-vote margin in July 2005.

“We do not have reciprocal market access with Peru. So this agreement will eliminate Peruvian tariffs on our exports,” said Bennett Harman, the deputy assistant for the Andean Region at the Office of the U.S. Trade Representative. “For example, Peru has not just tariffs on pharmaceuticals but also price preferences tacked on.

“Peru would get access to our market on a permanent basis,” Harman told participants at the trade panel. “These agreements are forever unless a country wants to terminate it. [Free trade agreements] provide tremendous certainty to the investment community.”

Peru and the United States exchanged $7.4 billion in goods in 2005, up nearly 28 percent from a year earlier. Total trade with the Miami Customs District also mostly exports reached $1.3 billion. *WORLDCITY’S *analysis of trade results for the first six months of 2006 showed that Peru’s commerce with South Florida had risen 18.6 percent.

Harman said the duty free access now enjoyed by Peruvian products has helped boost that country’s economy. “To be able to keep riding that wave, to continue to grow, is important to Peru,” he added.

Colombia’s trade with the United States is also on the rise and free trade advocates say a bilateral pact would help keep it that way. Colombia’s trade with the United States last year neared $13.4 billion, a jump of more than 21 percent from 2004. The Miami Customs District handled $3.9 billion of that cargo, about 56 percent of it in the form of exports to Colombia.

In the first six months of 2006, South Florida and Colombia exchanged $2.2 billion in goods, an increase of 12.6 percent. Trade talks with Ecuador reached an impasse in April when Ecuador increased its taxes on foreign oil producers. A month later it revoked the drilling contracts of Occidental Petroleum Corp. Ecuador’s government said that the California company sold part of an oil bloc to Canadian company Encana without appropriate authorization.

Bolivia also receives trade benefits under the Andean Trade Promotion and Drug Eradication Act but the new leftist government of Evo Morales is not interested in a trade agreement with the United States.

Chile’s free trade agreement with the United States has been credited for a dramatic jump in commerce between the two countries since the deal went into effect in January 2004. The value of that bilateral exchange jumped 42.3 percent last year to $11.9 billion. The Miami Customs District handled $2 billion of the exchange, a gain of 23.2 percent from a year earlier.

In the first semester of 2006, Chile’s trade with South Florida leaped by 27.3 percent.

“These [free trade agreements] are sort of like a seal of approval,” Harman noted.

“They say this is a good place to invest’ and not just foreign investment but also local capital.”