Andean-U.S. Free-Trade Agreement Negotiations

CRS Report for Congress
Andean-U.S. Free-Trade
Agreement Negotiations
Updated March 14, 2006
M. Angeles Villarreal
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division

Congressional Research Service ˜ The Library of Congress

Andean-U.S. Free-Trade Agreement Negotiations
In November 2003, the Administration notified Congress that it intended to
begin negotiations on a free-trade agreement (FTA) with four Andean countries -
Colombia, Peru, Ecuador, and Bolivia. The notification said that an FTA would
reduce and eliminate foreign barriers to trade and investment and would support
democracy and fight drug activity in the Andean region. The Andean governments
wanted to ensure access to the U.S. market, especially since their current trade
preferences will terminate at the end of 2006. In the United States, the business
community indicated strong support for the trade agreement, with labor opposing it
as the case for many FTAs, and the agriculture community was split.
The Andean-U.S. FTA negotiations began in May 2004, when the United States,
Colombia, Peru, and Ecuador participated in the first round of talks. Bolivia
participated as an observer. After thirteen rounds of talks, however, negotiators
failed to reach an agreement. After the last set of talks, Peru decided to continue
negotiating, without Colombia or Ecuador, and concluded a bilateral agreement with
the United States in December 2005. Colombia later continued negotiations with the
United States and this agreement was successfully concluded on February 27, 2006.
Negotiations with Ecuador are stalemated. A senior US trade official recently stated
that the Peru and Colombian FTAs are likely to be submitted to Congress as separate
agreements, thereby constraining the possibility of an Andean-U.S. FTA.
The United States currently extends duty-free treatment to imports from the four
Andean countries under a regional preference program. The Andean Trade
Preference Act (ATPA) authorized the President to grant duty-free treatment to
certain products, and the Andean Trade Promotion and Drug Eradication Act
(ATPDEA) reauthorized the ATPA program and added products that had been
previously excluded. Over half of all U.S. imports in 2005 from the Andean
countries entered under these preferences.
In 2005, the United States imported $20.1 billion from the four Andean
countries and exported $9.9 billion. Colombia accounted for about half of U.S. trade
with the region. Peru and Ecuador almost evenly split the other half, and Bolivia
represented a very small share. The leading U.S. import from the region in 2005 was
crude petroleum oil, which accounted for 35% of imports. Leading U.S. exports to
the region were petroleum products, mining equipment, and broadcasting equipment.
There were several important issues in the FTA negotiations. The trade
negotiators stated that the main obstacles to concluding an overall agreement were
in agriculture and intellectual property rights. Another major concern was the issue
of labor standards. Under the notification procedures founded in the Trade
Promotion Authority Act, the trade agreements with Peru and Colombia could be
voted on by the Congress sometime this summer. The narrow passage of CAFTA-
DR had been viewed as an indicator that any U.S.-Andean FTA might also face
considerable opposition. How the Bush Administration’s decision to negotiate and
submit separate FTAs with Peru and Colombia might affect this calculation remains
uncertain. This report will not be updated.

Background ......................................................1
The Negotiations..................................................1
Developments Prior to the Negotiations............................1
Negotiation Process and Outcome.................................3
Andean Perspective............................................5
Perspective of U.S. Industry and Other Groups.......................6
U.S.-Andean Trade................................................7
Selected Issues in the Negotiations....................................8
Agriculture ...................................................9
Intellectual Property Rights (IPR).................................9
Worker Protections and Human Rights............................10
Tex tiles .....................................................11
Investor/State Disputes........................................11
Visas .......................................................12
Environment .................................................12
Prospects .......................................................12
List of Tables
Table 1. U.S. Trade with the ATPA Countries, 2005......................8

Andean-U.S. Free-Trade Agreement
The Andean-U.S. free trade agreement (FTA) negotiations began in May 2004,
when the United States, Colombia, Peru, and Ecuador participated in the first round
of talks, with Bolivia participating as an observer. After thirteen rounds of talks,
however, negotiators failed to reach an agreement. Peru decided to continue
negotiating alone with the United States and concluded a bilateral agreement in
December 2005. On January 6, 2006, President Bush notified the Congress of his
intention to enter into a free trade agreement with Peru. Colombia later continued
negotiations with the United States and this agreement was concluded on February
27, 2006. Negotiations with Ecuador are stalemated. This report discusses the
Andean-U.S. FTA negotiation process and the evolution from the concept of a single
FTA into more than one bilateral agreements. The report also discusses U.S.-Andean
trade relations and the major trade issues in the negotiations. Given that the
prospects of a single Andean-U.S. FTA now appear low, this report will not be
The Negotiations
Developments Prior to the Negotiations
At a meeting with President George W. Bush on April 28, 2003, in Washington,
Colombian President Alvaro Uribe sought a free-trade agreement (FTA) with the
United States as a means to improve Colombia’s economy, provide employment, and
offer an attractive alternative to drug activity in his country. President Bush was
reluctant to agree to free-trade talks, however, because he wanted to achieve broader
market opening through the hemispheric Free Trade Agreement of the Americas
(FTAA).1 Because the FTAA talks appeared to be stalled, President Bush reportedly
offered at the meeting to send then-U.S. Trade Representative (USTR) Robert
Zoellick to Colombia to discuss bilateral trade between the two countries.
At the time, some Members of Congress supported free-trade talks with
Colombia. On June 11, 2003, Senator Max Baucus, Ranking Member of the Senate
Finance Committee, and three Democratic Members on the House Ways and Means
Committee urged USTR Zoellick to give “significant weight” to market size in
selecting countries for FTAs and included Colombia in a list of possible FTA

1 “Bush Plays Down Prospects for Colombia Trade Pact.” Reuters. April 30, 2003.

partners.2 On August 1, 2003, Senator Charles Grassley, Chairman of the Finance
Committee, and a bipartisan group of four other Senators on the Senate Finance
Committee sent the USTR a letter asking for “serious consideration of initiating
[FTA] negotiations with Colombia....”3
The USTR traveled to Bogota and met with Colombia’s President and others on
August 8, 2003. The purpose of his trip, according to the USTR, was “ clearly
lay out the scope and depth of such a possible negotiation, what it would involve, and
to listen and learn from Colombians about their goals and expectations.”4 Peru and
Ecuador also expressed interest in FTA negotiations with the United States.
On November 18, 2003, USTR Zoellick formally notified Congress of the
Administration’s intent to begin FTA negotiations with Colombia, Peru, Ecuador,
and Bolivia. A press release that accompanied the notification said that the
Administration planned negotiations to begin the second quarter of 2004, initially
with Colombia and Peru, and that the United States would work with Ecuador and
Bolivia “with a view to including them in the agreement as well.”5
The USTR’s letter of notification to Congress identified economic reasons for
the negotiations. It said that an FTA would help U.S. interests “ reducing and
eliminating barriers to trade and investment between the Andean countries and the
United States. The FTA will also enable us to address impediments to trade and
investment in the Andean countries....” The combined markets for the four Andean
countries, according to the USTR, have a gross domestic product (on a purchasing
power parity basis) of $463 billion and a combined population of 93 million people.6
The letter of notification also stated that an Andean FTA would add momentum to
the broader negotiations on an FTAA. Those negotiations were still stalled, primarily
because of differences between the United States and Brazil.
The notification identified political reasons for the talks as well. It said that an
FTA “...will also enhance our efforts to strengthen democracy and support for
fundamental values in the region.” It said that one reason for negotiating with all
four countries was that a regional strategy would help in combating narcotrafficking.7

2 Brevetti, Rossella. “Pro-Trade Democrats Urge Zoellick to Consider Market Size in FTA
Choices.” The Bureau of National Affairs, Inc. International Trade Reporter. June 19,


3 Letter reprinted at website of Inside U.S. Trade, [].
4 Office of the USTR. “Zoellick to Visit Colombia, Meet with President Uribe on August

8.” Press Release. August 7, 2003. Available at [].

5 Office of the USTR. “USTR Notifies Congress of Intent to Initiate Free Trade Talks with
Andean Countries.” Press Release. November 18, 2003.
6 Ibid.
7 On a regional approach to combating illegal drug activity, the letter of notification stated:
“Narcotrafficking is a regional scourge that respects no borders. Experience has shown that
to combat it effectively requires coordination and effective strategies among all four Andean
countries.” For more information on Andean countries and issues of interest to Congress,

It also pointed out several issues of concern to the United States: protection of
worker rights in Ecuador; disputes involving U.S. investors in Peru; violence against
trade unionists and disputes with U.S. investors in Colombia; and the need to work
with Bolivia and the other Andean countries on capacity building.
On March 23, 2004, the USTR issued a press release announcing that the United
States and Colombia would begin FTA negotiations between the two countries, and
possibly other Andean countries, on May 18-19, 2004.8 The naming of only
Colombia made it clear that there were still concerns with Peru and Ecuador that had
not been addressed. The press release mentioned outstanding disputes between U.S.
investors and the Peruvian government and concerns about protection of worker
rights and investor disputes in Ecuador. According to the press release, “We [the
U.S. government] hope that in the coming weeks these countries will take the follow-
on steps that will enable us to include them at the negotiating table, along with
Colombia, at the start of the negotiations. We look forward to including Bolivia at
a later stage, and are working with them to increase their readiness.” On May 3,
2004, the USTR announced that issues with respect to Peru and Ecuador had been
addressed, and those two countries would join with Colombia in the first round of the
Negotiation Process and Outcome
During the first round of FTA negotiations in Cartagena, Colombia in May
2004, negotiators agreed on a schedule that, according to chief U.S. negotiator
Regina Vargo, would probably involve seven rounds by early 2005 — one round
every five to seven weeks.10 Fourteen working groups were established during that
first round. On the day that negotiations began, students, union members, farmers,
and others in Cartagena held a one-day protest against the negotiations because of
feared job loss in the agriculture sector.11
By November 2005, thirteen rounds of negotiations for the U.S.-Andean FTA
were held with no successful conclusion: Cartagena (May 18-19, 2004); Atlanta

7 (...continued)
see CRS Report RL32250, Colombia: Issues for Congress, by Connie Veillette; CRS Report
RL32580, Bolivia: Political and Economic Developments and Implications for U.S. Policy,
by Connie Veillette; CRS Report RS21687, Ecuador: Political and Economic Situation and
U.S. Relations, by Clare Ribando; and CRS Report RL32733, Latin America and theth
Caribbean: Issues for the 109 Congress, coordinated by Mark P. Sullivan.
8 Office of the USTR. “U.S. and Colombia to Begin FTA Negotiations on May 18.” Press
Release. March 23, 2004.
9 Office of the USTR. “Peru and Ecuador to Join With Colombia in May 18-19 Launch of
FTA negotiations with the United States.” Press Release. May 3, 2004.
10 Mozzo, Javier. “U.S. Toasts Strong Start to Andean Trade Talks.” Reuters. May 19,


11 Toro, Juan Pablo. “U.S., South American Nations Complete First Round of Free Trade
Talks, Meet Next in Atlanta.” The Associated Press. Associated Press Newswires. May

19, 2004.

(June 18, 2004); Lima, Peru (July 26-30, 2004); San Juan (September 13-17, 2004);
Guayaquil, Ecuador (October 25-29, 2004); Tucson (November 20-December 4,
2004); Cartegena (February 7-11, 2005); Washington (March 14-18, 2005); Lima
(April 18-22, 2005); Guayaquil (June 6-10, 2005); Miami (July 18-22, 2005);
Cartagena (September 19-23, 2005); and Washington (November 14-22, 2005).
Bolivia attended the negotiating sessions as an observer, but was not expected
to be a party to an agreement. The USTR said, “We want to maintain the door being
open....but we also have to recognize realities,” and noted that Bolivia’s government
had “‘some basic stability issues.’”12 In mid-June 2005, the Bolivian president
resigned amid widespread opposition to foreign participation in the natural resource
sectors and other policies, and an interim president took office. In the December
2005 elections, Bolivians elected Evo Morales as their president. When Morales was
inaugurated on January 22, 2006, he started a five-year term as Bolivia’s fourth
president since August 2002. Ecuador experienced political change as well during
the negotiations. On April 20, 2005, during the ninth round of FTA negotiations, the
Congress in Ecuador impeached Ecuador’s president Lucio Gutierrez and replaced
him with the vice president, Alfredo Palacio, a physician and political independent.
Palacio is the country’s seventh president in nine years.
The thirteenth round of negotiations in Washington was expected to be the last,
but negotiators failed to conclude the talks over disagreements in intellectual property
rights and agriculture. Colombian and Ecuadorian negotiators said they pulled out
because they could not accept U.S. demands for stricter patent protections and
reductions in agricultural barriers, while Peruvian negotiators appeared to be more
flexible. The Peruvian negotiators decided that they would continue talks with the
United States without the other countries. The two countries arrived at an agreement
in the first week of December 2005.13
On December 7, 2005, U.S. Trade Representative Rob Portman and Peru’s
Minister of Foreign Trade and Tourism, Alfredo Ferrero Diez Canesco, announced
a successful conclusion to the U.S.-Peru free trade agreement negotiations. The
agreement would eliminate tariffs and other barriers to goods and services.14
Ambassador Portman stated that “An agreement with Peru is a key building block in
our strategy to advance free trade within our hemisphere, which we hope to later
bring in the other Andean countries including Colombia and Ecuador.”15 Afterwards,

12 Brevetti, Rossella. “Zoellick Hopes Progress in Global Round Will Help Lagging
Hemispheric Trade Talks.” Daily Report for Executives. Bureau of National Affairs, Inc.
September 10, 2004.
13 Ibid.
14 For a summary of the U.S.-Peru Trade Promotion Agreement, see USTR, U.S.-Peru Trade
Promotion Agreement (TPA) Policy Brief, Free Trade with Peru: Summary of the U.S.-Peru
Trade Promotion Agreement, [].
15 Office of the United States Trade Representative (USTR) Press Release. “United States
and Peru Conclude Free Trade Agreement, Negotiations with Colombia, Ecuador to
Continue Early Next Year.” December 7, 2005.

Colombia and Ecuador both announced that they would also like to see a successful
conclusion to their negotiations.
On February 27, 2006, U.S. Ambassador Portman and Colombia’s Minister of
Trade, Industry, and Tourism, Jorge Humberto Botero, announced that the United
States and Colombia had concluded their work on a free trade agreement.
Ambassador Portman announced that the agreement is an essential component of the
U.S. regional trade strategy and that it would “...generate export opportunities for
U.S. agriculture, industry, and service providers and help create jobs in the United
States”. He also stated that the agreement would “ foster economic
development in Colombia, and contribute to efforts to counter narco-terrorism, which
threatens democracy and regional stability.”16
The government of Ecuador has stated that it too would like to continue
negotiations with the United States and arrive at an agreement, but these talks have
been postponed several times.
Andean Perspective
The Andean governments are pursuing FTAs with the United States to assure
access to the immense U.S. market. They have preferential access now under
unilateral U.S. programs (see following section), but that access is scheduled to
expire at the end of December 2006. An FTA would lock in those preferences and
additional duty-free treatment. The Andean governments also want to attract foreign
investment and see an FTA with the United States as a way to establish a more secure
economic environment and increase foreign investment.
Within the Andean countries, however, there is broad grass-roots opposition to
free trade with the United States. Opponents argue that any economic benefits from
increased trade under an FTA will be realized by only a small segment of the
economy, worsening the separation of the classes. They also argue that a large part
of the Andean population is poor farmers, who are especially vulnerable and cannot
compete against increased agricultural imports from the United States, which some
Andean officials claim are heavily subsidized. The Development Group for
Alternative Policies states that one of the few remaining mechanisms protecting
family farmers in the Andean region is the Andean Community’s “price band”
system which, they argue, has served to cushion farmers from the vagaries of
international commodity prices.17 A further argument is that an FTA would mean
reduced revenues for the Andean governments, and some opponents state that
revenue losses will have to be replaced with regressive domestic taxes.18

16 USTR Press Release. “United States and Colombia Conclude Free Trade Agreement.”
February 27. 2006.
17 Hansen-Kuhn, Karen, The Development Gap, Andean FTA: Threats to Development, July


18 Several arguments against the Andean FTA are presented in: Hansen-Kuhn, Karen.
“Andean FTA: Threats to Development,” available on The Development Group for

The three Andean countries have faced considerable opposition in their
countries over a trade agreement with the United States. News accounts reported that
during the Cartagena round in September 2005, an estimated 7,000 anti-free trade
activists gathered in Cartagena and Bogota, while protesters in Peru erected
roadblocks.19 These protests may have influenced the governments to delay entry
into an agreement, but after the successful completion of Peru’s agreement with the
United States, there likely was more pressure for Colombia and Ecuador to continue
negotiations. Ecuador’s chief trade negotiator, Manuel Chiriboga, stated in January

2006 that if Colombia concluded an agreement, Ecuador “cannot fail to conclude”

due to the risk that Ecuador would be left out of the agreement to be voted on in the
U.S. Congress.20
Perspective of U.S. Industry and Other Groups
In the United States, much of the business community supported an Andean
FTA. The National Association of Manufacturers (NAM), for example, states in its
trade agenda that one of its key objectives is the congressional approval of the
Andean FTA and other FTAs now being negotiated. The NAM has written
comments on its position in various aspects of the negotiations some of which
include the removal of tariff and non-tariff barriers, transparency and accountability
in technical regulations, enforcement of national customs laws, protection of U.S.
investment abroad, and strengthening and enforcement of intellectual property rights
laws. 21 NAM’s trade agenda states, “The NAM supports FTAs because U.S.
manufacturers face much higher barriers in foreign markets than foreign producers
face here.”
A number of other groups, however, oppose an Andean FTA. A coalition of 51
labor, religious, and environmental groups wrote to the USTR on September 9, 2004,
urging him to suspend the negotiations. They argued that the negotiations have been
conducted in secret, there has been no meaningful dialogue with the public, and the
Andean negotiations are modeled on failed trade agreements.22 Among the
signatories were the AFL-CIO, American Friends Service Committee, and Public

18 (...continued)
Alternative Policies (The Development Gap) website at [].
19 Joynes, Kate. “Protests Overshadow Andean FTA Talks”. Global Insight Daily Analysis.
Global Insight Limited. September 23, 2005.
20 Joynes, Kate. “Ecuador Should Finalize U.S. Trade Deal in February.” Global Insight
Daily Analysis. Global Insight Limited. December 29, 2005.
21 National Association of Manufacturers website at []. See “NAM
Written Comments on the Proposed United States-Andean Free Trade Agreement”, March

30, 2004.

22 Alliance for Responsible Trade website at [].

U.S.-Andean Trade
The United States extends special duty treatment to imports from Bolivia,
Colombia, Ecuador, and Peru under a regional trade preference program. This
program accounted for over half of all U.S. imports from the four countries in 2005.
The program began under the Andean Trade Preference Act (ATPA; title II of
P.L. 102-182), enacted on December 4, 1991. ATPA authorized the President to
grant duty-free treatment to certain products from the four Andean countries that met
domestic content and other requirements. It was intended to promote economic
growth in the Andean region and to encourage a shift away from dependence on
illegal drugs by supporting legitimate economic activities. ATPA was originally
authorized for 10 years and lapsed on December 4, 2001.
After ATPA had lapsed for months, the Andean Trade Promotion and Drug
Eradication Act (ATPDEA; title XXXI of P.L. 107-210), was enacted on August 6,
2002. ATPDEA reauthorized the ATPA preference program and expanded trade
preferences to include additional products that were excluded under ATPA. The
additional products under ATPDEA included petroleum and petroleum products,
certain footwear, tuna in flexible containers, and certain watches and leather
products. ATPDEA also authorized the President to grant duty-free treatment to U.S.
imports of certain apparel articles, if the articles met domestic content rules. Duty-
free benefits under ATPDEA end on December 31, 2006.
In 2005, a considerable share (46%) of all U.S. imports from the four Andean
countries entered duty-free under ATPDEA, and a smaller share (11%) entered duty-
free under ATPA.23 A very small share (2%) entered duty-free under the U.S.
Generalized System of Preferences, which applies to most developing countries
throughout the world. Of the remaining 41% of imports, most entered duty-free under
normal trade relations, which applies on a nondiscriminatory basis to almost all U.S.
trading partners. Only 7% of the value of U.S. imports from the four countries was
dutiable in 2005. Thus, compared to the status quo, only a relatively small share of
U.S. imports would become duty-free under an FTA. That small share, however,
might include products that are relatively import-sensitive in the United States or
disproportionately important to the Andean countries.
In 2005, the United States imported $20.1 billion, or 1% of total U.S. imports,
from the four countries. The same year, the United States exported $9.9 billion, or
1% of all U.S. exports, to the four countries. Colombia accounted for 44% of those
U.S. imports and 55% of the U.S. exports (see Table 1). Peru and Ecuador split
nearly all of the other half of imports and exports, and Bolivia accounted for a very
small share.

23 Data from USITC Interactive Tariff and Trade DataWeb at []. For
more information on U.S. imports under ATPDEA and ATPA, see, U.S. International Trade
Commission (USITC). The Impact of the Andean Trade Preference Act. USITC Publication
3725. September 2004; and USITC. “The Expanded Andean Trade Preferences Act and
a U.S. Free Trade Agreement with its Beneficiaries.” International Economic Review.
USITC Publication 3742. November/December 2004. P. 14.

The leading U.S. import from the region in 2005 (35% of imports) was
petroleum oil, principally crude oil from Ecuador and Colombia. Other leading U.S.
imports were jewelry, gold, coal, coffee, articles of copper, and cut flowers. Leading
U.S. exports to the region were petroleum products, mining equipment, broadcasting
equipment, and data processing machines.
Table 1. U.S. Trade with the ATPA Countries, 2005
U.S. ImportsU.S. Exports
Count ry Region Region
ShareLeading ItemsShareLeading Items
Bolivia1jewelry, crude oil2mining machinery, jewelry
Colombia44crude oil, coal55data processing machines,
mining machinery
Ecuador29crude oil,20petroleum products,
crustaceansbroadcasting equipment
Peru26gold, refined23petroleum products, mining
Source: USITC Interactive Tariff and Trade DataWeb at []. Data are for
U.S. imports for consumption (Customs value) and domestic exports (Fas value). Regional
shares may not add to 100% due to rounding.
Selected Issues in the Negotiations
The following highlights some of the more difficult issues in the Andean-U.S.24
FTA negotiations. In addition to the following, the negotiations also covered other
issues such as services trade, electronic commerce, and government procurement.
Trade negotiators identified the difficulties in agriculture and intellectual property
rights as the main obstacles in reaching agreement. Andean negotiators stated at the
time that the United States needed to be more flexible in these areas. U.S. trade
officials said that the United States was very interested in reaching agreement in
these areas, but that it had also been clear in laying out its expectations before the
negotiations began.25

24 For information on the provisions of the U.S.-Peru Trade Promotion Agreement, see CRS
Report RS22391, U.S.-Peru Trade Promotion Agreement, March 2, 2006. For information
on the provisions of the Colombia-U.S. FTA, see USTR, Free Trade with Colombia:
Summary of the Agreement, February 27, 2006. Information is available on the USTR
website, [].
25 See Brevetti, Rossella, “Andean Officials Stress Importance of Finishing FTA Talks in
October, International Trade Reporter, September 15, 2005; and National Association of
Manufacturers (NAM), “Andean FTA,” in the NAM website [].

U.S. negotiators refused to talk about rules for agricultural subsidies, saying that
subsidies should be dealt with in the on-going multilateral trade negotiations in the
World Trade Organization. Nevertheless, an important goal for the United States in
the FTA talks was the elimination of a practice called the “price-band mechanism.”
Under this mechanism, a fluctuating tariff is imposed on an import for the purpose
of keeping the import’s price within a specific range. The band addresses changes
in world commodity prices. Colombia and Ecuador have these variable duties on
over 150 items, including corn, rice, soybeans, and powdered milk.26 Andean
negotiators said that the price-band mechanism is necessary to protect their farmers,
especially small farmers, against subsidized imports. A spokesperson for small
farmers in Colombia said that there is a large rural population and high
unemployment in Colombia, and without protected alternative crops, the people will
produce drugs.27
Some specific products were especially important to the trading partners. For
example, access to the U.S. market is critical for Andean producers of cut flowers
(Colombia and Ecuador) and asparagus (Peru). These products, however, have the
largest potential displacement effects on U.S. producers under ATPDEA28, so they
are worrisome to U.S. growers. Also, U.S. sugar producers are concerned about
increased imports from the Andean countries. Conversely, Andean farmers see some
U.S. products, such as corn and chicken parts, as threatening.
Intellectual Property Rights (IPR)
A major area of disagreement was the so-called “data exclusivity.” This term
refers to an additional period of patent protection that is given to test data, especially
data on pharmaceuticals and agricultural chemicals. The United States wanted rules
on data exclusivity in an FTA to protect the results of research by pharmaceutical
companies for five years.29 In related action, the Pharmaceutical Research and
Manufacturers of America (PhRMA) petitioned the U.S. government to withdraw
ATPDEA benefits for Peru and Ecuador because they have no data exclusivity laws.30

26 USTR. 2004 National Trade Estimate Report on Foreign Trade Barriers. Pgs. 96 and


27 Otis, John. “Tree Oil Plan Tries to Bear Fruit; Growing Palm Extract Instead of Lucrative
Coca is a Hard Sell for Colombia Farmers.” Houston Chronicle. February 6, 2005.
28 USITC. The Impact of the Andean Trade Preference Act. P. 3-11.
29 The United States negotiated rules on data exclusivity in the Central American-
Dominican Republic FTA. Guatemala subsequently approved a law that the USTR claims
is inconsistent with the data exclusivity provisions of the FTA. A bill to repeal that law was
introduced in the Guatemalan congress on January 28, 2005. See, Brevetti, Rosella.
“Guatemala Takes Steps Toward Repeal of Data Law USTR Claims Violates CAFTA.”
Bureau of National Affairs, Inc. Daily Report for Executives. February 1, 2005.
30 The Colombian government issued decrees in 2002 and in 2003 that gave protection of
data for drugs and for agricultural chemicals respectively. See, USTR. 2004 National

Oxfam, a development and relief organization, argued, “Guaranteeing exclusive
rights over pharmaceutical data will result in delays and limit generic competition in
cases where the patent has expired or a compulsory license has been granted.”31 The
Andean countries opposed rules on data exclusivity, arguing that the additional
period keeps generic pharmaceuticals from entering the market and thus hurts poor
Another IPR issue was the so-called “bio-piracy.” Andean negotiators wanted
IPR provisions to go beyond those contained in the WTO. They wanted protection
against the use of “traditional knowledge” and “genetic resources” without fair
compensation. The United States wanted “second use” protection, where a product
gets additional protection if it is found to serve a use other than the original one under
the patent. It also wanted protection against parallel imports, which are products
legitimately made in one foreign country, but imported into another country without
the approval of the IPR holder. The Andean countries opposed these U.S. positions.
Worker Protections and Human Rights
Some unions and labor rights groups protested against trade negotiations with
Ecuador and Colombia, because they claimed that these countries have unacceptable
records on worker rights and permit violence against trade unionists. For example,
an official with the International Confederation of Free Trade Unionists (ICFTU)
criticized Colombia’s president for negotiating with paramilitary forces, who are the
killers of trade unionists according to the ICFTU official, and said that the more a
union protests the president’s economic policy, the more the union is persecuted.32
The Colombian government responded that through several programs it instituted,
it “...clearly demonstrated its commitment to the protection of human rights and has
given special priority to the protection of union members.”33 The U.S. State
Department country report on human rights for Colombia identifies many legal rights
for unions, but recognizes problems with protecting those rights.34 For example, the
report states that in Colombia, the Constitution provides a right for most workers to
organize unions, but in practice, “...violence against union members and anti-union
discrimination were obstacles to joining unions and engaging in trade union
Another point of controversy was Ecuador’s record on human rights. On
February 1, 2005, 38 House Members (37 Democrats, 1 Independent) wrote to the
foreign trade minister of Ecuador, expressing concern with “...serious workers’ rights

30 (...continued)
Trade Estimate Report on Foreign Trade Barriers. P. 98.
31 Oxfam. “Make Trade Fair for the Americas; Agriculture, Investment and Intellectual
Property: Three Reasons to Say No to the FTAA.” Oxfam Briefing Paper 37. Available at
the Oxfam website a [].
32 Interview on ICFTU web page [].
33 Written Comments by the Government of Colombia Regarding Its Commitment to Human
Rights and Labor Rights. Before the Trade Policy Staff Committee. April 2, 2004.
34 U.S. Department of State web page at [].

violations in Ecuador and Ecuador’s failure to live up to commitments made to the
U.S. government in October 2002, as part of a review of Ecuador’s benefits under the
[ATPDEA].”35 They said that they would recommend the gradual withdrawal of
Ecuador’s ATPDEA benefits and that Ecuador’s continued failure to observe the
ATPDEA commitments “...casts doubt on whether Ecuador will be able to follow
through with obligations...” under an FTA.36
A small but significant share of U.S. apparel imports from Andean countries
still pay full duty under ATPDEA. The Andean region is not considered a major
supplier, but free trade could cause some increase in imports. In addition, the rule
of origin for textiles and apparel was an important issue in the negotiations.
Investor/State Disputes
One of the most important issues in the negotiations was the unresolved disputes
involving U.S. investments in Andean countries. On October 6, 2004, the House
Committee on International Relations, Subcommittee on the Western Hemisphere,
held a hearing on U.S. investment disputes in Peru and Ecuador. At the hearing, E.
Anthony Wayne, Assistant Secretary of State for Economic and Business Affairs,
testified, “Nearly every U.S. company doing business in Ecuador has faced problems
with Ecuadorian government entities, from regulatory bodies to the courts and the
customs agency.” He said that the situation in Peru was “...considerably better,”
although there still were problems. He stated that both countries had been cautioned
that, “...left unresolved, these disputes are a stumbling block to achieving an FTA.”
A few months later in October 2004, Deputy USTR Peter Allgeier warned that Peru
and Ecuador could be dropped from the FTA, if outstanding investor disputes were
seen as endangering congressional approval of an FTA with Colombia.37
On April 13, 2005, the House Committee on International Relations,
Subcommittee on the Western Hemisphere, held a hearing on U.S. trade agreements
with Latin America. At the hearing, John Murphy, Vice President for Western
Hemisphere Affairs of the U.S. Chamber of Commerce, said that the situation
regarding investment disputes with Peru and Ecuador was difficult and that persistent
disputes could “...stand as a substantial obstacle that could block the participation of
these countries [in an FTA].” These disputes were discussed at the negotiations.

35 Letter from World Trade Online at [].
36 On December 17, 2004, Human Rights Watch reported that in a special session of
Ecuador’s congress called the preceding week by the president, “...52 members of the 100-
seat congress voted to replace 27 of the 31 justices with their own political allies.” Human
Rights Watch saw this action as a violation of judicial independence. Available at
[] .
37 Brevetti, Rossella. “Allgeier Says Peru, Ecuador Face Omission From FTA Unless
Investor Disputes Resolved.” The Bureau of National Affairs, Inc. Daily Report for
Executives. October 4, 2004.

Since the beginning of 2005, progress was made in resolving disputes with U.S.
Andean countries, especially Colombia, wanted to have visa and immigration
issues in the talks. They said that heightened U.S. security made it hard for their
business representatives to enter the United States. U.S. negotiators insisted that
immigration issues were not negotiable.
An important environmental issue concerned investment provisions. In a letter
dated September 13, 2004, a number of environmental groups, including Friends of
the Earth, Natural Resources Defense Council, and Sierra Club, expressed concern
about the possible inclusion in an Andean FTA of an investment chapter similar to
Chapter 11 of the North American Free-Trade Agreement.38 That chapter allowed
private investors from one signatory country to seek binding arbitration against the
government of another signatory. Such provisions, environmental groups argued in
their letter, could allow “... foreign companies to completely bypass domestic courts
to challenge public interest safeguards.” On the other hand, U.S. negotiators sought
such provisions in trade agreements, since U.S. companies wanted such protections
for their foreign investments.
The last round of negotiations in which the United States and the three Andean
countries all participated was held in Washington on November 14-22, 2005.
Subsequently, Peru and Colombia concluded bilateral FTAs with the United States
and talks with Ecuador have been postponed several times due to a number of
differences. The main outstanding issues are related to agriculture. Ecuadorian
President Alfredo Palacio has said that he would like to see a trade agreement with
the United States but would not sign a deal that is unfair to Ecuador. He is facing
considerable pressure from indigenous groups not to enter into an agreement.
Thousands of Ecuadorean Indians have been protesting the free trade talks saying that
they cannot compete with farm products from the United States. They believe a trade
agreement would put them at a disadvantage with U.S. farmers and disrupt their
ancestral culture.39
There has been some speculation that the United States will not renew the
ATPDEA in the absence of a PTPA. In September 2005, the House Ways and Means

38 The letter is available at []. For further
information on Chapter 11, see CRS Report RL31638, Foreign Investor Protection Under
NAFTA Chapter 11, by Robert Meltz.
39 Soto, Alonso, “Ecuador Indians Protest Free Trade Talks with the United States,” The
Washington Post, March 13, 2006.

Committee released a report on a bipartisan congressional trade mission to Colombia,
Ecuador, and Peru.40 The purpose of the trip was to focus on the ongoing
negotiations of the U.S.-Andean free trade agreement and to discuss investment and
security issues in the region. The report states that the current unilateral trade
preferences received by the Andean countries set to expire in December 2006 may
not be renewed. It indicates that a “reciprocal, mutually beneficial arrangement must
take the place of the unilateral access.”41
A senior US trade official recently said that the U.S. trade agreements with
Colombia and Peru are likely to be treated as separate agreements by the Congress,
thereby narrowing the possibility of a stand-alone Andean-U.S. FTA.42 Under
current deadlines in the Trade Promotion Authority Act (TPA), expedited legislative
procedures apply to implementing bills for trade agreements, if, among other
requirements, the agreements are entered into by June 30, 2007. Given the TPA
notification procedures, the free trade agreements with Colombia and Peru could be
voted on by the Congress sometime this summer. It is not known if or when a U.S.-
Ecuador FTA might be reached.
The narrow passage of CAFTA-DR (P.L. 109-53) had been viewed as an
indicator that any U.S.-Andean FTA might also face considerable opposition. How
the Bush Administration’s decision to negotiate and submit separate FTAs with Peru
and Colombia may affect this calculation remains uncertain.43

40 Committee on Ways and Means, U.S. House of Representatives, Report on Trade Mission
to Colombia, Ecuador, and Peru, WMCP: 109-6, September 2005.
41 Ibid, p. 1.
42 Trade Reports International Group, Washington Trade Daily, “U.S. Colombia Reach
FTA,” February 28, 2006.
43 See CRS Report RS22339, Trade Liberalization Challenges Post-CAFTA, by Raymond
J. Ahearn, November 30, 2005.