Journal of Commerce, “House Votes to Extend Trade Programs”

The House on Monday voted to extend two widely-supported trade programs, but for only one year.

The General System of Preferences and the Andean Trade Preference Act were to expire on Dec. 31. The GSP, now in its 35th year, allows developing nations to export selected goods to the United States duty-free. There are currently 132 countries in the program, shipping some 3,400 products.

ATPA, started in 1991, gives similar benefits for exporters in Ecuador, Colombia, and Peru in exchange for cooperation in counter-narcotics efforts. President Obama suspended Bolivia’s ATPA privileges for failing to commit to an anti-drug program.

Latin Business Chronicle, “Business Concern Over Ecuador Benefits,” citing rising objections to the deterioration of the rule of law in Ecuador under President Rafael Correa.

“We are disappointed that the Congress did not include a message specifically putting Ecuador on notice that its behavior puts its continued receipt of preferences benefits at serious risk,” Franklin J. Vargo, NAM’s international vice president, said in a letter Monday to the chairman and ranking member of the U.S. House Committee on Ways & Means. “In light of the deteriorating investment climate in Ecuador, as well as Ecuador’s repudiation of its Bilateral Investment Treaty (BIT) with the United States and President Correa’s announcement on sweeping aside fundamental patent protections for pharmaceutical and agricultural chemical products, the NAM believes that language specific to Ecuador should have been maintained in the extension language of [the bill passed].”

NAM is concerned that without continuing language aimed at challenging Ecuador’s actions, other nations receiving preference programs will be tempted to follow suit, leading to worsening investment conditions and undermining a central tenant of preference programs that participants uphold their commitments to the United States on investment and rule of law, it said.

In any case, the House has now gone on record in support of lowering U.S. trade barriers to imports from foreign countries. It’s time to now lower foreign barriers to U.S. exports by approving the U.S.-Colombia, U.S.-Panama and U.S.-Korea free trade agreements.

The National Association of Manufacturers has submitted comments to the U.S. Trade Representative’s office for the 2009 review of the Andean Trade Preferences Act — a law that grants advantageous trade access to South American countries to encourage economic growth and democratic institutions and to fight drug trafficking. Excerpts:

The track record of countries granted benefits under ATPA is mixed. On the positive side, the NAM believes that Colombia and Peru have consistently upheld their responsibilities with regard to the ATPA, and that the growth and development through increased trade with the United States as a result of ATPA benefits has been strong, positive and integral to both nations’ economic growth. On the negative side, both Ecuador and Bolivia have not upheld key requirements of the ATPA program, particularly with regard to respect for foreign investment, and the NAM is extremely concerned that blanket extension of ATPA to either country would simply reward bad behavior.

The Obama Administration previously suspended Bolivia’s eligibility for the ATPA preferences, and in June it put Ecuador on notice, granting just a six-month extension. As the NAM states:

Unfortunately, there has been no improvement from the Ecuadorian Government. Indeed, the situation has continued to deteriorate. In light of these regrettable but undeniable developments, the NAM strongly recommends that, if the ATPA program is extended in some form beyond December 31, 2009, Ecuador’s eligibility be suspended based on its failure to meet the eligibility criteria. We further recommend that in renewing the ATPA legislation, provision be made for the Administration to restore eligibility for ATPA benefits if and when the Administration certifies that a country has come back into compliance with the eligibility criteria.

The NAM’s comments reinforce a letter sent to U.S. Trade Representative Ron Kirk in June by major business groups pointing to the weakening of the rule of law under the Correa government.

And from Reuters last week, “Ecuador warns oil companies to keep up investments“:

Last year, his government defaulted on $3.2 billion in global bonds, calling the debt “illegitimate”. He has ordered petroleum contracts to be renegotiated as part of his push for greater state control over natural resources.

Of course, the Correa government’s legal attacks and demagoguery against Chevron are clear evidence that Ecuador is not living up to the requirements of the Andean trade preferences law.