Maximizing U.S. Opportunities in South America

By April 24, 2007Trade

President Bush played host to Peru’s President Alan Garcia yesterday, an important exchange (transcript here) as the United States continues to foster strong diplomatic and economic ties through Free Trade Agreements. President Garcia:

It is vital for our country. It is fundamental to continue this path of growth and social redistribution that we have started in my country. We have achieved an 8 percent annual growth in my country. This year we’re expecting a similar growth, 8 percent annually, with 1 percent inflation, which creates more job opportunities.

But this growth, as far as development, needs a greater space and a greater degree of investment, and for that the FTA is essential. It would help us keep and maintain a strong democracy, a democracy that takes care of the poorest and that provides work to the unemployed. It is important to show the world that a democracy, with investment, leads to development. And development is not achieved by becoming static and not opening our doors to the market.

The Peru FTA is a winner for U.S. manufacturers of all sizes, exporters and all Americans who benefit from export-driven economic growth. As the NAM’s fact sheet (.pdf file) on the agreement reports:

  • The United States exported $2.3 billion in merchandise to Peru in 2005. Manufactured goods accounted for 89 percent of those exports. U.S. exports to Peru have increased 46 percent since 2001.
  • A total of 5,519 U.S. companies exported merchandise to Peru in 2004 (the latest year for which data are available). Of those, 4,403 (80 percent) were small and medium-sized firms (SMMs) with fewer than 500 employees.
  • SMMs exported approximately $627 million in merchandise to Peru in 2004. This represented 42 percent of total U.S. exports to Peru and, well above the 27 percent SMM share of U.S. exports to the world.
  • Fully 98 percent of all imports to the U.S. from Peru already enter the duty-free through the Andean Trade Preferences Agreement (ATPA), which expires at the end of 2006.
  • The average U.S. duty on imports from Peru is less then one-tenth of one percent (0.8) while Peru’s average applied duty on U.S. manufactured goods is 8 percent. The elimination of these duties will provide a significant advantage to U.S. firms.
  • Eighty percent of U.S. exports of consumer and industrial products to Peru will be duty-free immediately upon entry into force of the U.S.-Peru Trade Promotion Agreement, and additional 7 percent will be duty free within five years. All remaining tariffs will be eliminated within ten years.
  • President Garcia’s invoking of democratic principles is worth appreciating as well. With Venezuela’s Hugo Chavez thuggishly expropriating and destroying the private sector (hospitals are his most recent victim), and Ecuador lurching left, reinforcing democracy and freedom in an ally like Peru also serves America’s interests.

    More about the U.S.-Peru FTA is available here.