February 22, 2000
Mr. Chairman, Senator Moynihan, Senator Biden, Members of the Caucus, Members of the Subcommittee:
I welcome this opportunity to appear before you today to discuss the Administration's trade policy in support of the Andean region's anti-narcotics efforts. This joint hearing reflects the fact that our trade and anti-narcotics policies do intersect in important ways. As one looks across South America today the overall view is one of a region that has made significant advances – economically, politically and socially, as well as in terms of security – over the past decade. The Summits of the Americas in Miami in 1994 and in Santiago in 1998 highlighted and gave further impulse to the reforms that began in the early 1990s.
As we meet today, we see the region responding to the challenges from financial turmoil, recession in important markets and rising expectations of the regions' citizens. I have just returned yesterday from a trip to Argentina, Brazil and Uruguay where democracy and economic reform remain on track despite the recession that recently hit the Southern Cone. Chile is also recovering from a slowdown and remains an exemplar of economic efficiency and democratic accomplishment. Bolivia has continued to make impressive economic strides.
These countries are proceeding apace. The remaining countries in South America, however, are facing particularly serious economic and political – in some cases even security – challenges: Colombia, Ecuador, Paraguay, Peru and Venezuela. Today we are focusing on four of those five countries as we examine our relations with members of the Andean Community.
Mr. Chairman, our Administration shares your concerns, and those of Congress as a whole, regarding the need to support the Andean countries in their attempts to diversify away from narcotics production and trafficking. As this timely hearing will examine, the Administration has proposed an important assistance package in support of Plan Colombia, which has a significant counternarcotics and economic strengthening nexus. Your joint forum today is commendable because it gives us the chance to demonstrate how our trade and counternarcotics policies intersect and reinforce each other.
ANDEAN TRADE PREFERENCES ACT
Our trade policy, in addition to its general purpose in developing mutually beneficial trade and investment bilateral relationships, has been designed to give countries in the region greater opportunities to move away from narcotics cultivation into legitimate trade. This support has been part of a bipartisan effort dating back to the passage of the Andean Trade Preferences Act (ATPA) in 1991.
The ATPA granted Bolivia, Colombia, Ecuador and Peru tariff
benefits for a ten year period comparable to the Caribbean Basin
Economic Recovery Act. Its intention was to help these countries
expand economic alternatives in their fight against drug production
and trafficking by providing reduced duty or duty-free treatment to
most of their exports to the United States. Thus the rationale for
the program is that if jobs are not created and maintained in the
legitimate economy, a certain number of people will inevitably seek
opportunities in the drug trade. The ATPA has, indeed, been
providing benefits to items of significant export interest to the
region, such as:
DEVELOPMENT OF TRADE RELATIONSHIP
This type of targeted benefit has helped to prompt substantial growth in our trade relationships with the Andean countries. Bilateral trade between the U.S. and the Andean region has more than doubled since the passage of ATPA, which is all the more impressive given the 1999 drop in U.S. exports due to the effects of the financial crisis on South America as a whole. The four countries combined have increased their exports to the United States by about 80 percent since 1991, with Colombia gaining about 95 percent and Peru nearly 140 percent.
Section 203 of the ATPA requires the President to submit a report to Congress every three years on the operation of the program. The most recent report was submitted to Congress in December 1997, and we are due to submit another in December of this year. The 1997 report showed that the ATPA has facilitated economic development and export diversification in ATPA beneficiary countries. The report also showed that the ATPA had a positive effect on drug-crop eradication and crop substitution in the beneficiary countries. By offering Andean products broader access to the U.S. market, the ATPA has provided viable economic alternatives to drug-crop cultivation, production, and trafficking.
The ATPA program expires in a little under two years, in December 2001. The Andean Community has requested that the U.S. Government enact legislation extending the program for at least several years. In addition, they have asked us to reduce the list of products excluded from preferential treatment under the current legislation, and to add Venezuela (the fifth member of the Andean Pact) as a beneficiary country.
We are prepared to examine all these proposals very closely, in consultation with Congress. We, in turn, have suggested to the Andean Governments that they conduct and share with us any analysis they have on how well the program has been meeting its goals. The Administration will provide its analysis to Congress in the December 2000 USTR report on the operation of the program. We anticipate that this report will trigger intensive consideration on the future of the program in early 2001, so that any decision on the ATPA's future can be taken before it expires in December 2001.
FREE TRADE AREA OF THE AMERICAS
In parallel with this special focus on the Andean region, we are developing a much broader program with the potential to spur development and create opportunities for economic diversification throughout the hemisphere.
We and the Andean countries are full partners in the construction of the broadest expression of our new partnership with our hemispheric neighbors: the Free Trade Area of the Americas. The talks are due to conclude by December 2004 and appear to be on track to meet that deadline. These, when successful, will greatly increase the opportunities now open to the Andean countries.
First, elimination of obstacles to trade in goods will create significant new opportunities for the Andean countries -- in agriculture, industrial goods and services. Success will thus create substantial new opportunities for Andean farmers, miners, oil and gas producers, and manufacturers -- not just in the United States but also in the markets of their other hemispheric trading partners.
Second, opening markets in services will help to strengthen the Andean economies, by encouraging competition, transparency, and impartial regulation of financial systems, telecommunications, insurance and other industries basic to a modern economy. Improving productivity in these fields inherently encourages productivity gains in the overall economy. Equally important, helping to ensure that financial institutions are sound reduces the risk of future financial crises. And of course, exports of tourism and other services have great potential for the Andean nations.
Third, we will create job opportunities. The elimination of tariffs and non-tariff barriers will present new markets for our producers, and the fact of the world's largest free trade area (in terms of population, nearly 800 million) will be a powerful stimulus for investment in all our economies. It will stimulate domestic investment, which is critical in Latin America, where savings rates are undesirably low. And it will attract investment from outside the region. We already have seen, for example, that NAFTA has provided a strong incentive for European and Asian direct investment in all three North American economies.
And finally, we will strengthen the values of openness, accountability, democracy, and the rule of law which themselves make the FTAA possible. These are values central to any successful effort to combat narcotics trafficking.
The FTAA has already borne fruit when the 34 countries reached agreement at the Toronto Ministerial Meeting in November on a far-reaching set of business facilitation measures related to customs procedures. These include commitments to expedite express shipments, to simplify procedures for low value shipments, to allow duty free treatment of goods related to business travel, and to develop electronic systems accessible to the trading community. These changes will both assist in the movement of legitimate merchandise and enable the customs administrations to concentrate their enforcement resources on the most problematic shipments.
BILATERAL TRADE RELATIONS
Meanwhile, we are working to strengthen our trade ties with the region in other respects as well.
For instance, in May of last year the United States and the five Member States of the Andean Community held in Cartagena, Colombia the first meeting of the newly-formed U.S.-Andean Community Trade and Investment Council, or TIC. This new partnership with the Andean Community members is designed to address trade and investment concerns in a broad and coordinated way. It reflects the increasing importance the Andean Community has attained as a regional decision-making body and reflects our interest in expanding our trade relationships in the region. The TIC meeting addressed key issues, such as the FTAA negotiations, protection of intellectual property rights, trade issues under the Andean Trade Preference Act, and matters of mutual interest in the WTO.
We also have an active program of bilateral investment treaty, or BIT, negotiations with the region. These BITS provide mutual benefits by enhancing investor certainty and confidence, thus helping to create jobs and long-term growth which are inherently desirable and also help economies diversify away from narcotics. Specifically, a BIT is in force between the United States and Ecuador; we signed one with Bolivia in April 1998 which is still subject to ratification; and we are in various stages of exploratory talks with Colombia, Peru and Venezuela on possible BITs.
The Administration has also made the point to the Andean Governments -- and I personally made this point to the five Andean Presidents when we met on the margins of the TIC meeting in Cartagena -- that full implementation of WTO obligations and respect for the rule of law in such areas as intellectual property and customs valuation are critical to creating favorable business climates in their countries. The Plan Colombia released by President Pastrana makes a similar point in the section dealing with trade. The Plan also refers to the need for implementing business facilitation measures proposed in the FTAA negotiations, promoting a favorable environment for electronic commerce, and recognizing that transparency and due process in government procurement is an essential element in achieving greater efficiency in the use of public funds.
In conclusion, Mr. Chairman, a strong trade and investment relationship with the Andean region is a vital component of our counter-narcotics efforts, as well as being a critically important goal in its own right. It is not in any sense a substitute for policies directly focusing on narcotics issues, but offers nations afflicted by poverty opportunities to grow and develop healthier alternatives.
For the past decade, the ATPA has played precisely that role, giving agricultural producers and entrepreneurs from the Andean countries new opportunities in the U.S. market; and its success in this regard is evident in the growth of our bilateral trade relationships. Over the next year, as we consider our steps in the interim period between the ATPA's expiration and the implementation of the FTAA, we will consult closely with Congress to find the steps that best suit our needs and those of our Andean partners.
Thank you very much, Mr. Chairman, and we look forward to working with you and your colleagues in addressing these very important issues.