Only Six Weeks

The U.S. Senate extended the Andean system of preferences, the Andean Trade Promotion and Drug Eradication Act, for only six weeks. The broader Generalized System of Preferences was not extended and expired at the end of the year.

This U.S. legislative omission gives us an advantage in the short term: Our exports are included in both lists. In such cases, U.S. imports from non-Andean countries will pay tariffs, while ours will continue to be exempt.

Both the approval of the GSP as well as a longer term for the ATPDEA were tied together by a key legislator whose state produces sleeping bags, and which suffers when faced with competition of a similar product imported from Bangladesh.

The GSP will pass in a few weeks, and perhaps the ATPDEA term will be extended. But the fact that a detail such as the sleeping bags could derail preference programs highlights how little importance these programs have for the U.S. and, in particular, for its legislature.

But it needs to be added that to get out of this crisis, the U.S. must produce more and import less. In part, this will be achieved with a weaker dollar against the currencies of emerging markets. But, in addition, the U.S. could adopt a less-generous GSP, thereby limiting imports.

The point is not that what Ecuador and other Andean countries export to the U.S. greatly affects U.S. production. It is mostly manufactured goods exported by Asian countries. Our exports to the North are mainly primary products with little value added.

What we do have to prepare for is the end of ATPDEA. The U.S. has to extend it, since it protects Colombia, its major ally within the conflicted Andean region. Bogotá signed a Free Trade Agreement with Washington, but President Obama has not sent it to Congress for ratification, nor has he done this with the South Korea and Panama FTAs.

The South Korean agreement is very important for U.S. farmers, since Korea is short on food.

Will Obama send these FTAs to the legislature? His Democratic Party, close to trade unions, is generally opposed to free trade agreements.

From 2011’s perspective, President Toledo’s decision to accept the final U.S. provisions for the FTA with Peru was right; these concessions were excessive for Colombia. The FTA with Peru entered the approval process just in time. The Colombian agreement has remained in limbo.

The day that the FTA with Colombia is ratified, the ATPDEA will be effective only in Ecuador. Washington will hardly maintain a preference program applicable to the only country on the Pacific coast of the Americas that refused to reach an FTA with the U.S.