Statement of the Hon. Marta Lucia Ramirez Rincon,
Minister of Foreign Trade, Government of Columbia

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on Summit of the Americas and Prospects for Free Trade in the Hemisphere

May 8, 2001

I. Introduction

Mr. Chairman, members of the Subcommittee, I am Marta Lucia Ramirez, Minister of Foreign Trade for the Government of Colombia. I appear here today on behalf of the Andean Community countries to express our strong support for a Free Trade Area of the Americas (FTAA) and for early enactment of legislation to renew and enhance the Andean Trade Preferences Act (ATPA). As you know, the ATPA expires in December of this year.

It is appropriate that this committee today looks at both the FTAA and the ATPA, as these two important trade initiatives are integrally related. A hemispheric free trade area will increase economic growth and employment and create new opportunities for all our countries. It will also provide direction for the Andean countries to establish a firm schedule for liberalization and to achieve consistency in the breadth of our liberalization schemes. In this respect, we were pleased with the outcome of last month's Summit in Quebec City. We look forward to advancing negotiations toward creation of the FTAA by no later than 2005.

More immediately, the issue of ATPA renewal and enhancement must be addressed by the U.S. Congress, and soon since the current ATPA will expire in December. ATPA was designed to promote export diversity and to create new legal employment in our countries, and thus help to confront the destabilizing threats to our democracies posed by illegal narcotics production and trafficking. But ATPA is also about saving lives both in Andean countries and the United States because it reinforces our fight against illegal drugs.

ll. Renewal and Enhancement of ATPA

The current ATPA has been meaningful for both the Andean countries and the United States. The report of the Office of the U.S. Trade Representative (USTR) on the operation of the ATPA makes clear that ATPA is working. The report states explicitly that the ATPA is strengthening the legitimate economies of the countries in the region and is an important component in the U.S. effort to contain the spread of the illegal drug trade. USTR has concluded that the ATPA has resulted in export diversification for our countries and that net coca cultivation has declined.

The Andean countries are firmly united in their quest for prompt enactment of legislation to renew and enhance the ATPA. A renewed and enhanced ATPA will serve as a stepping stone toward completion of the FTAA. Moreover, expanded trade offers the most effective means for the Andean countries and the United States to work together to make progress against illegal narcotics production and trafficking.

An unintended impact of the Caribbean Basin Trade Partnership Act is that the ATPA countries have lost competitiveness against the Caribbean and Central American nations. In Colombia alone, almost 2,000 jobs already have been lost because U.S. importers have moved orders to the CBI region in order to obtain the duty savings. Many more jobs remain threatened. To prevent job losses, some Colombian companies have been forced to reduce their prices in order to keep the business, but obviously they cannot sustain this practice.

Expanded trade will complement the investments we have made together to combat drugs. Indeed, our partnership to fight drug production and trafficking will not succeed without economic growth spurred by expanded trade between our countries. It is absolutely essential that Colombia and other Andean countries create jobs to assist those who are displaced by illegal crop eradication and to lure workers back to those areas where legitimate employment can develop.

No country has had to incur more sacrifices to stop drug production and trafficking than Colombia. We count our dead by the thousands and our material losses by the billions of dollars. Currently, with unemployment at 20% - the worst level in our history -- it is absolutely essential to generate more jobs. President Pastrana has implemented tough reforms and austerity measures to address the economic downturn in Colombia. These reforms have resulted in a fragile economic recovery.

A renewed and enhanced ATPA will help Colombia fortify its economy and lay the foundation for sustainable long-term economic growth. We therefore believe it is imperative to renew the ATPA before it expires on December 4, and to enhance it to include the products currently excluded from the legislation.

 III. ATPA Benefits the Andean Region and the United States

Andean industries benefiting from ATPA - including cut flowers, non-traditional fruits and vegetables, jewelry and electronic components - have generated $3.2 billion in new output since ATPA's inception in 1991, and $1.7 billion in new exports. Over the last nine years ATPA has created 140,000 new jobs in the region.

But it is important to note that there has been a two-way benefit. The United States is an extremely important trading partner for the Andean countries, with the United States serving as the leading source of imports for each of the ATPA countries as well as our leading export market. In dollar terms, U.S. exports to ATPA countries have risen 75 percent between 1991 and 2000, with two-way trade increasing dramatically from $9.2 billion in 1992 to $17.9 billion in 2000. As a result, ATPA benefits have generated employment in the U.S. as well as in the Andean region. A review of the trade data indicates that many of the items shipped by the United States to the Andean region are used to generate ATPA qualifying goods. These items include, among others, fertilizers, paperboard and plastics, which are used in our flower industry, including for the greenhouses in which these flowers are grown.

The Colombian flower industry is an excellent example of how trade between our countries is mutually beneficial. In Colombia last year, one percent of total household income came from the cut flower industry, with Colombia shipping $400 million worth of flowers to the U.S. Approximately two thirds of $14 billion worth of cut flowers sold in the U.S. last year came from Colombia. Importantly, that means that the $400 million in cut flowers Colombia shipped to the U.S. resulted in some $9 billion in retail sales in America. Clearly, we are bringing profit to U.S. companies.

Colombia's flowers are not simply generating economic rewards for the U.S. market. They also are a prominent example of how our two countries' trade, national security and social policy objectives are intertwined. The Colombian flower industry is a world-recognized leader in the War on Drugs, maintaining perhaps the most state-of-the-art drug interception technology in our region and has long collaborated with the US Customs Service on interdiction. In addition, since ATPA was inaugurated, and due directly to the benefits ATPA provides, the Colombian flower industry has been able to initiate major labor and environmental programs that stand out as models in Colombia. Among other things, the Colombian flower sector has initiated anti-violence training programs for its 75,000 workers; established an aggressive anti-pesticide program for Colombia's many flower farms to help promote a greener Colombia; launched a new program to build better homes for the workers of the Colombian flower industry; and established strong child care and nutrition programs for the tens of thousands of working mothers who are critical to the flower industry.

This is positive news, but the fact remains that last year only about 10 percent of all Andean exports to the United States were eligible for ATPA benefits, according to a Congressional Research Service study. ATPA must be expanded to cover all products, not just selected goods. Strengthening the legal economies in our countries is absolutely vital to stabilizing the region economically and politically. Only through such enhancement of the ATPA will we generate the level of new employment opportunities needed to help those workers whose jobs are eliminated as a result of crop eradication as well as the many skilled workers who are currently unemployed. Even USTR's report notes that the ATPA has just "begun to show important successes." Beginning, after almost ten years, is not enough. To achieve full success, ATPA must be both extended and enhanced.

An enhanced ATPA that provides duty-free access to the U.S. market for a maximum variety of labor-intensive goods would offer great support for democratic institutions in the region. This program would also attract new investment and economic development, thereby redirecting the unemployed and underemployed away from the coca and poppy fields and providing alternative employment for those displaced by the eradication of illegal crop production. Moreover, an enhanced program that undermines the economic power of insurgents and credits our democratic leaders with achieving that program would inevitably strengthen the hand of democratic institutions in the region. Key to such success, however, is an ATPA renewal that is sufficiently broad in scope, without being overly complicated, and of a duration that is adequate to ensure that investors believe there is sufficient time to reap a return.

IV. Crafting Textile and Apparel Provisions in the ATPA

We are well aware of suggestions that ATPA could be rewritten to match the benefits provided to the Caribbean and Central American countries last year, under the Caribbean Basin Trade Preferences Act. Indeed, Senator Graham of Florida already has introduced such an ATPA renewal bill in the Senate, S. 525, and we appreciate that first step. However, the Andean region and the CBI region are very different and the purposes of the CBTPA were very different from what the ATPA must accomplish. Therefore, we believe that the ATPA must reflect those differences.

One of the sectors offering the greatest opportunities for the generation of employment is textiles and apparel. The ATPA countries are currently a minor player in the U.S. apparel market. The ATPA countries account for only one percent of total apparel imports -- and that is all we have accounted for every year since 1992. The CBI countries account for almost 23 percent of total U.S. apparel imports, and their share of the U.S. market has been growing over the past decade. Those numbers demonstrate that, with respect to textile and apparel exports to the United States, the ATPA countries are more like the sub-Saharan African countries than we are like the CBI countries. Therefore, we believe that an enhanced ATPA should be based on the model established in the African Growth and Opportunity Act rather than the one in the CBTPA.

Apparel Imports to the United States

CBI versus NAFTA versus Andean Region
(% of total apparel imports to the U.S.)

Unlike the CBI region, the Andean region is not dominated by so-called 807 assembly operations. The apparel industry in the ATPA countries is highly vertical, meaning that we manufacture yarns, fabrics, and finished garments and textile goods, offering our customers a "full package" of services. To do this, we import a great deal of inputs from the United States. We would import even more if there were benefits for our textile and apparel exports to the U.S. under ATPA.

The fact is that today the Andean countries already import far more raw cotton from the United States than the CBI countries, even though there are only 4 ATPA countries and there are two dozen CBI countries ($72 million versus $58 million worth of raw cotton). The United States is by far Colombia's top supplier of raw cotton, accounting for 50 percent of our imports. The ATPA countries also import a significant quantity of manmade fibers and manmade fiber yarns from the United States - a total of $57 million worth in 2000. (The U.S. exported $32 million worth to the CBI region during the same period.) These inputs provide some indication of the extent to which enhanced ATPA offers real export opportunities for the U.S. cotton, manmade fibers and yarn industries.

V. Greater Incentives for the Andean Region

It also must be acknowledged that simply providing the ATPA countries with the same benefits as the CBI countries will not necessarily induce investors or U.S. importers to do business with the Andean countries. We need a greater incentive to overcome the higher cost of labor in our countries and to overcome the security concerns of American business.

We therefore sincerely hope that the U.S. Congress will craft an ATPA enhancement law that is simple and uncomplicated, providing unlimited duty-free access for all textile products made from either U.S. or Andean origin inputs. It is also essential to provide duty-free access for garments made in the region from third country inputs so long as the most important manufacturing operations occur in the Andean region. We hasten to note that the jobs generated by these benefits will in no way take away jobs from the United States. The duty-free access will instead permit the ATPA countries to compete with suppliers in Asia.

The Andean countries need duty-free access for all other products as well. We urge Congress to eliminate all of the exclusions that are part of the current ATPA. In our view, just as in the African Growth & Opportunity Act, duty-free access should be provided to all footwear, leather goods, watches, canned tuna, petroleum products, and any other product eligible for GSP treatment, if the GSP rules of origin are met.

For example, the labor intensive fishing industries of the ATPA beneficiary countries have developed significantly during the last years, but have been precluded from becoming competitive in the U.S. market because of the high duties and restrictive access rules that apply. Thus, ATPA countries account for only $10 million of the $600 million worth of tuna imported into the U.S. each year. Additionally, 90 percent of the capital goods and inputs necessary to produce canned tuna reflects U.S. investment in the ATPA countries. Improved access to the U.S. market would serve the interests of this U.S. investment in tuna processing plants and also provide new employment opportunities.

Additionally, we would like the Subcommittee to consider that while four of the five members of the Andean Community have benefited from ATPA, these preferences do not cover Venezuela. Our trading bloc, as well as the United States, would benefit if ATPA were expanded to include all the members of the Andean Community.

Conclusion

Mr. Chairman, members of the Subcommittee, the Andean countries greatly appreciate your support in holding this hearing today to discuss renewal of the ATPA. We are very hopeful that you will act quickly to enact a new ATPA before the current program expires. Time is of the essence. Colombia needs to promote new foreign investment in key economic sectors to achieve an economic recovery and effectively fight the drug war. While the original ATPA, with its 10-year term, initially brought new investment into the region, new investment has declined considerably. In order to generate new interest in the region, we need ATPA to be extended for a term sufficient to ensure that the FTAA has come into force before the ATPA completes another term. Only then will investors trust that they will have sufficient time to see a real return on that investment.

In particular, we ask that this subcommittee take up and pass ATPA legislation rapidly, preferably before the July 4^th recess, in order to generate momentum for this legislation. Such momentum is needed if a law to renew and enhance ATPA is to be enacted before the current ATPA expires in December.

We welcome the opportunity to work with you, and with the Bush Administration, which has been very supportive, to achieve both an enhanced ATPA and a FTAA as quickly as possible. Thank you.