[WPRT 109-6]
[From the U.S. Government Publishing Office]
109th Congress WMCP:
COMMITTEE PRINT
1st Session 109-6
_______________________________________________________________________
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
__________
REPORT
on
TRADE MISSION TO COLOMBIA, ECUADOR, AND PERU
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13
SEPTEMBER 2005
Prepared for the use of Members of the Committee on Ways and Means by
members of its staff. This document has not been officially approved by
the Committee and may not reflect the views of its Members.
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
E. CLAY SHAW, JR., Florida CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut FORTNEY PETE STARK, California
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota JOHN LEWIS, Georgia
JIM NUSSLE, Iowa RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona JOHN S. TANNER, Tennessee
JERRY WELLER, Illinois XAVIER BECERRA, California
KENNY C. HULSHOF, Missouri LLOYD DOGGETT, Texas
RON LEWIS, Kentucky EARL POMEROY, North Dakota
MARK FOLEY, Florida STEPHANIE TUBBS JONES, Ohio
KEVIN BRADY, Texas MIKE THOMPSON, California
THOMAS M. REYNOLDS, New York JOHN B. LARSON, Connecticut
PAUL RYAN, Wisconsin RAHM EMANUEL, Illinois
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California
Allison H. Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
LETTER OF TRANSMITTAL
U.S. HOUSE OF REPRESENTATIVES
COMMITTEE ON WAYS AND MEANS
SUBCOMMITTEE ON TRADE
Washington, DC, September 9, 2005
The Honorable Bill Thomas
Chairman
Committee on Ways and Means
1102 Longworth House Office Building
Washington, D.C. 20515
Dear Mr. Chairman:
I am pleased to transmit to you the enclosed congressional
delegation report on the recent Committee mission to Colombia, Ecuador,
and Peru. This report contains an overview of the mission as well as
summaries of meetings with foreign officials.
The report describes the trade, investment, and security issues
which were investigated during the trip.
Sincerely,
Angela Paolini Ellard
Staff Director and Counsel
Subcommittee on Trade
Enclosure
MEMBERS OF THE DELEGATION
MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES
HON. BILL THOMAS, Chairman, HON. STEPHANIE TUBBS JONES
Committee on Ways and Means
HON. E. CLAY SHAW, Chairman,
Subcommittee on Trade,
Committee on Ways and Means
HON. JERRY WELLER
HON. DEVIN NUNES
COMMITTEE ON WAYS AND MEANS STAFF
ANGELA P. ELLARD, Staff Director JULIE HERWIG, Democratic Trade
and Counsel,
Counsel, Subcommittee on Trade Committee on Ways and Means
MARY SUE ENGLUND, Special
Assistant,
Committee on Ways and Means
STEPHANIE LESTER, Professional
Staff,
Subcommittee on Trade
STEVEN SCHRAGE, International Trade
Counsel, Subcommittee on Trade
C O N T E N T S
__________
Page
Members of the Delegation........................................ iv
Outline of Trip Conclusions...................................... 1
Discussion of Trip Meetings...................................... 4
Colombia......................................................... 4
Ecuador.......................................................... 7
Peru............................................................. 15
INTRODUCTION AND BACKGROUND
On July 3-9, 2005, a bipartisan delegation of Members of the
Committee on Ways and Means traveled to Colombia, Ecuador, and Peru.
The purpose of the delegation's trip was to focus on the ongoing
negotiations for a free trade agreement with the countries and to
discuss investment and security issues in the region. The delegation in
particular emphasized that current unilateral trade preferences under
the Andean Trade Promotion and Drug Eradication Act (ATPDEA) are set to
expire in December 2006, and the only way that the Andean countries can
replicate their access to the U.S. market after these benefits expire
is through a comprehensive bilateral free trade agreement providing
reciprocal market access.
Congress first granted unilateral trade preferences to the region
in 1991 under the Andean Trade Preference Act (ATPA), and the law
identifies Bolivia, Colombia, Ecuador, and Peru as potential
beneficiaries. Columbia and Bolivia were designated for benefits in
1992; Ecuador and Peru were designated in 1993. Each of these
designations has been reviewed annually and renewed. The original ATPA
did not allow duty-free treatment for several sensitive products such
as certain textile and apparel articles. In 2002, Congress enacted the
ATPDEA to extend and enhance ATPA trade benefits as a way to create
additional alternatives to illicit drug production, thereby enhancing
political security in the Andean region and the hemisphere. In general,
the ATPDEA extended trade benefits until December 31, 2006, and
expanded coverage to include additional products such as apparel made
of U.S. fabric, Andean apparel made of regional fabric subject to a
cap, and certain tuna.
During the Ministerial for the Free Trade Area of the Americas in
Miami, Florida in November 2003, the Administration notified Congress
of its plans to negotiate a free trade agreement (FTA) with Colombia,
Peru, Ecuador, and Bolivia. FTA negotiations began in May 2004 with
Colombia, Peru, and Ecuador, and eleven negotiating rounds have been
held. Bolivia is currently an observer in the negotiations.
OUTLINE OF CODEL CONCLUSIONS
General comments:
FTAs must be comprehensive: The delegation supports the
negotiation of a comprehensive free trade agreement with the Andean
countries, in compliance with the objectives of Trade Promotion
Authority, which provides commercially meaningful market access for
goods, services, and agriculture, without exclusions, and includes
strong protections in areas such as investment and intellectual
property rights. The Andean market holds tremendous opportunity for
U.S. interests but only if a comprehensive agreement is struck.
Congressional passage of an Andean FTA dependent on
content: The Administration and Congress have developed a successful
structure for FTAs, and the Andean FTA must contain the elements of
that structure to maximize support.
Unilateral preferences to expire: The ATPDEA provides
preferences to the region that are temporary and expire at the end of
2006. These preferences have successfully served their purpose of
supporting the Andean countries through unilateral access to the U.S.
market. The relationship between the Andean countries and the United
States, however, has matured, and such unilateral preferences are no
longer appropriate after 2006. Instead, a reciprocal, mutually
beneficial arrangement must take the place of the unilateral access.
Accordingly, the only way for these countries to guarantee permanent
preferential access to the U.S. market is through a comprehensive FTA.
Colombia's negotiating efforts lagging: Commercially,
Colombia's market holds the greatest potential in the region for the
U.S. private sector, but Colombia's government is finding it
politically challenging to agree to a comprehensive FTA, particularly
regarding agriculture. The delegation believes that Colombia expects
special treatment because of its valuable role in counternarcotics and
counterterrorism efforts. Despite the strategic importance of the
relationship between the United States and the Andean community, the
U.S. Congress will judge an Andean FTA on its merits; Congressional
support for trade deals--even with Colombia--cannot be assumed, as
evident during Congressional consideration of the United States-
Dominican Republic-Central America Free Trade Agreement (CAFTA).
Ecuador struggling with democratic institutions and an
unfavorable investment climate: Ecuador's economy is strong, but its
political institutions are unstable and face tremendous challenges. The
environment for business is unfavorable and even perceived as hostile,
and it is not clear that Ecuador's government institutions have the
confidence of the U.S. business community that they would comply with
FTA obligations. Nevertheless, the business community supports the FTA
as a mechanism for pushing the government to be transparent and enact
reforms and as an opportunity for dispute settlement to enforce
Ecuador's commitments.
Peru making good progress, but more work needed: Peru has
been the most forward-leaning Andean country in the negotiations. It
began the negotiations with a relatively more open trade regime, and as
a result it is more focused in its priorities. In some areas Peru has
broken ranks with Colombia and Ecuador in stating that it could accept
U.S. proposals, and the delegation appreciates Peru's leadership in the
negotiations. However, Peru also has a lot of ground to cover to close
the agriculture negotiations.
FTA could include fewer countries: The delegation
supports including in an FTA only those countries that are ready and
have made the requisite concessions. At the same time, an effort to
conclude a smaller FTA must be balanced with the reality of obtaining
U.S. Congressional support. While negotiations with Peru are the most
advanced, the delegation encouraged Peruvian officials to work with
their counterparts particularly in Colombia to reach agreement on a
comprehensive FTA to maximize Congressional support; it will be
difficult for Congress to pass an FTA with Peru alone. If Peru and
Colombia are united in presenting commercially significant
opportunities to U.S. interests through the agreement, Ecuador would
have a strong incentive to join in order to protect its ability to
compete commercially with its neighbors, and this combination increases
the chances for Congressional approval.
Window is closing: There is very little time left to
finish negotiations and obtain Congressional approval for an FTA,
particularly given Congressional interest in the WTO negotiations and
FTAs with Middle Eastern countries as well as upcoming Presidential
elections in the region. While the Andean countries hope that the
negotiations will conclude in October, the delegation is somewhat
pessimistic that the negotiations will finish and be implemented before
the preferences expire, given that negotiators have held 11 rounds
without resolution of critical agriculture issues. The delegation
intends to work with USTR negotiators to make sure that there is no
delay on the U.S. side in presenting offers and responding to Andean
requests.
Sector-specific comments:
Narcotics: The delegation shares the concerns of the
Andean countries about the serious problems posed by narcotics
production and trafficking in the region. Free trade is compatible with
counter-narcotics objectives, and the United States should be prepared
to allow for transition periods where warranted. Consequently, the
delegation believes that U.S. negotiators should take into account
requests for flexibility if there is credible proof that an FTA
provision would negatively impact counternarcotics efforts,
particularly whether the specific agricultural products for which the
Andean countries are seeking protection are crops targeted as
alternatives to drug production. More generally, the United States
should also help in the development of alternative crops. However, the
specter of narcotrafficking cannot be used as a broad brush excuse for
exceptional treatment to protect sectors from competition.
Agriculture: The delegation is very concerned that
Colombia and some elements of the government in Ecuador insist on
perpetuation of their price bands in the FTA and is encouraged that
Peru is willing to eliminate such distorting mechanisms. The delegation
notes that the WTO has found such price bands to violate WTO
obligations, and Chile eliminated its price bands through its FTA with
the United States without adverse effects. The delegation is also
opposed to using safeguards in perpetuity as a means for the Andean
countries to protect their agriculture sectors. Negotiators should
instead work with USTR to identify sensitivities and to craft a path to
liberalization for each product.
Agriculture subsidies/supports: The delegation firmly
believes that the United States must not negotiate agriculture domestic
support or subsidies in this or any other FTA. The appropriate forum to
negotiate domestic support is in the WTO because it is a multilateral
issue affecting third countries.
Intellectual property rights: Because support from the
U.S. IPR community is essential to passage of the FTA, the delegation
believes that the FTA must contain a strong IPR chapter with
commitments that go beyond the WTO Agreement on Trade Related Aspects
of Intellectual Property Rights (TRIPs), to which the Andean countries
are already party. Support from the U.S. IPR community is essential to
passage of the FTA.
All three negotiating partners are on USTR's Special
301 watch list, which means IPR problems in each country merit
bilateral attention.
Colombia is the only Andean country to provide a full
five years of data protection for pharmaceuticals. In the copyright
context, Colombia has increased criminal penalties for copyright
infringement and has established a specialized IPR unit in the
Prosecutor General's office. Notwithstanding these improvements,
however, high levels of piracy continue to dominate the Colombian
market. Efforts to combat piracy through raids and other enforcement
measures are hindered by a judicial system that fails to actively
prosecute cases or issue deterrent criminal sentences.
Although Ecuador generally has an adequate IPR law,
enforcement remains a problem. Copyright piracy is rampant. The
delegation is also concerned about Ecuador's lack of effective
protection for undisclosed test data.
A major concern of U.S. industry in Peru is the lack of
IPR protection relating to both copyrights and patents. In particular,
the lack of data protection is of concern.
Investment: The Andean countries risk losing support from
the private sector and Congress if they are viewed as not serious in
establishing a good investment regime with fair and transparent dispute
settlement.
The delegation was particularly struck by the lack of
confidence of the U.S. business community with respect to investment
protection in Ecuador. Ecuador must resolve its disputes with U.S.
investors in order to demonstrate that it can be a viable FTA partner.
While the delegation welcomes the creation of an office to look into
these issues, resolution will require political will and potentially
significant judicial reforms, and tangible results are essential.
Peru: The delegation appreciates that since 2002, Peru
has committed to resolve or take steps to resolve several longstanding
investment disputes. Despite some recent progress, several of the most
difficult disputes remain unresolved. Peru cannot afford the liability
these disputes represent if it wishes to be included in an FTA with the
United States.
Sanitary and phytosanitary measures: Several countries
raised concerns regarding the U.S. application of sanitary and
phytosanitary (SPS) rules. The delegation agrees with U.S. negotiators
that the United States must not negotiate food safety and animal and
plant health in FTAs because the WTO rules binding all WTO countries
are already comprehensive. Instead, U.S. trading partners should engage
in specific bilateral problem-solving discussions. The delegation
supports U.S. efforts to provide technical capacity building, but the
Andean countries, particularly Colombia, must demonstrate more
willingness to engage in problem solving discussions on specific
bilateral SPS issues during the negotiations.
Labor: Ecuador's labor code must be modernized to ensure
consistency with the core International Labor Organization (ILO) labor
standards, particularly with respect to the right to organize.
Ecuador's labor laws and practices, and their enforcement, will be
closely scrutinized by the international community and the U.S.
Congress. Congress will particularly demand that Ecuador improve
enforcement of its child labor laws. The delegation is willing to
explore technical assistance to Ecuador in these areas.
Biodiversity: The delegation recognizes that biodiversity
is an important issue for the Andean countries. The delegation observed
that these countries have some of the greatest numbers of species in
the world. However, the protections that the Andean countries seek in
the FTA do not fit within the U.S. intellectual property regime.
Instead, biodiversity should be protected through contract enforcement.
Peruvian debt prepayment: The delegation will investigate
options with the Administration to permit Peru to prepay its debt
without penalty.
DISCUSSION OF CODEL MEETINGS
COLOMBIA
Country Team Briefing with U.S. Ambassador William Wood, Deputy Chief
of Mission Milton Drucker, and other U.S. Embassy Staff
Ambassador Wood and his team gave the delegation a briefing on the
political and economic issues facing Colombia with special attention on
the ongoing Andean free trade agreement (FTA) negotiations and the
fight against narcotrafficking and terrorism. The primary U.S.
objectives in Colombia are to prevent the flow of illegal drugs into
the United States and to help Colombia promote peace and economic
development. The Ambassador noted that the U.S. Embassy in Colombia is
the largest American Embassy in the world, with 2,100 employees.
The United States and Colombia, Ecuador, and Peru are seeking to
consolidate and make permanent a preferential trade relationship
through the conclusion of a free trade agreement (FTA). Current
unilateral trade preferences under the Andean Trade Promotion and Drug
Eradication Act (ATPDEA) expire in December 2006, and the countries
seek to conclude and implement the FTA before those preferences end to
provide a seamless transition. An FTA would increase bilateral trade,
ease unemployment and underemployment, stimulate business, and help to
create a modern private sector in Colombia.
The Colombians are eager to conclude the FTA negotiations as
quickly as possible, and before the political cycle in Colombia begins.
Colombian elections for the Congress will be held in March 2006, and
for the President in May 2006. At the same time, Colombia's government
is finding it politically challenging to agree to a comprehensive FTA,
particularly regarding agriculture. FTA talks with Colombia are lagging
behind the other two countries, and it does not appear that Colombia is
prepared to reduce all tariffs, particularly on sensitive agriculture
products.
Colombia's economy has been recovering over the past two years
despite serious internal armed conflict. The economy continues to
improve as a result of Uribe government budgets, focused efforts to
reduce public debt levels, and export-oriented growth. Several
international financial institutions have praised the economic reforms
introduced by President Uribe, which include measures to reduce
government debt to 40% of gross domestic product by 2015. The
government's economic policy and democratic security strategy have
fostered a growing sense of confidence in the economy, particularly
within the private sector.
Colombia is one of South America's richest sources of natural
resources (including petroleum, coal, coffee, flowers, fruits, gold,
and emeralds). Unfortunately, Colombia is also home to decades of
political-criminal insurrection. For over 40 years, several terrorist
organized organizations (FARC, AUC, and ELN are the largest three) have
taken advantage of a lack of state presence in outlying rural areas to
wage extremely violent campaigns for control of parts of the country.
Drug trafficking has replaced leftist and rightist ideologies as the
prime motivators to control the specific regions. The drug trade (coca,
opium poppy, and some marijuana) and kidnappings are major income
streams. The Embassy estimates that 3,000-4,000 civilians are killed
each year as a result of the conflict. In addition, Colombia has the
world's third largest internally displaced population, after Sudan and
Congo.
The United States has aggressively pursued the fight against
narcotrafficking and terrorism in Colombia by supporting Plan Colombia.
Plan Colombia was developed by former Colombian President Andres
Pastrana (1998-2002) and continued under current Colombian President
Alvaro Uribe as a six-year plan to end Colombia's long armed conflict,
eliminate drug trafficking, and promote economic and social
development. The Andean Counterdrug Initiative (ACI) is the primary
U.S. program that supports Plan Colombia. ACI funding for Plan Colombia
from FY2000 through FY2005 totals approximately $2.8 billion. In
addition, Colombia receives assistance from the Foreign Military
Financing (FMF) program and the Department of Defense's central
counter-narcotics account. With the inclusion of FMF and DOD
assistance, the total level of U.S. support to Colombia is $4.5
billion.
There has been measurable progress in Colombia's internal security,
as indicated by decreases in violence and in the eradication of drug
crops. In 2004, the United States fumigated 160 tons of cocaine and
seized 325 tons for a total of 485 tons. This was the first time that
more than half of Colombia's production was prevented from reaching
market. Unfortunately, despite these efforts, no effect has been seen
with regard to price and purity of cocaine and heroin in the United
States.
The United States Agency for International Development (USAID) has
a large mission in Colombia with $460 million in funds, $83 million of
which goes to alternative crop development. Other USAID programs
include: improving the efficiency and transparency of the justice
system, strengthening democracy, promoting human rights, and providing
support for more than 1.4 million Colombians displaced by violence.
USAID is also strengthening a center to support an estimated 3,000 to
7,000 children who were forced to serve as child combatants and is
investigating whether to assist in the demobilization and reintegration
of adult combatants. Since President Uribe came into power, USAID has
provided alternative development aid to 38,000 small farm families,
built 18 justice houses handling over 1,700,000 cases, built 22 oral
trial courtrooms, and developed over 770 infrastructure projects.
Meeting with Colombian Minister of Agriculture and Rural Development,
Dr. Andres Arias
Minister Arias opened the meeting by confirming that Colombia is
committed to free trade and must maintain a long-term view. At the same
time, he said that some issues are very difficult and sensitive, such
as market access for rice, chicken leg quarters, wheat, and corn, and
Colombia fears that granting too much market access could create
instability and increase the terrorist threat in rural areas. Minister
Arias emphasized the importance of gaining special treatment for
Colombian agriculture to help rural areas in the fight against drugs
and terrorism. Minister Arias said that Colombia needs ``real'' access
to the U.S. market and a clear and agile mechanism for handling
sanitary and phytosanitary (SPS) issues. Finally, Minister Arias raised
concerns that the United States has not responded to Colombia's recent
proposal in agriculture.
Chairman Thomas responded by noting that there are many countries
asking for special treatment for different reasons, but any FTA will
have to fit into the overall framework of what the United States has
agreed with other countries. For example, the Chile FTA is a good
indicator of what Congress expects in a free trade agreement. As long
as Colombia is making proposals that do not fall within the framework
of what was done previously in other U.S. FTAs, then the United States
cannot move forward. He also noted that Colombia cannot insist on
maintaining price bands and then expect U.S. negotiators to engage
technically. SPS restrictions, he said, have to be based on sound
science. Chairman Thomas said that delaying the FTA negotiations is not
to the advantage of Colombia. Colombia has had a window of opportunity
to negotiate the FTA, but this is closing fast, and Colombia needs to
show leadership in the negotiations. ATPDEA preferences will not, he
said, be renewed beyond December 2006 because the U.S.-Colombia
relationship has evolved and matured. The price of permanent access is
giving up protections. A good FTA, he said, is mutually beneficial.
Congresswoman Tubbs Jones asked about support for trade in
Colombia. Minister Arias responded that there is growing anti-trade and
anti-American sentiment, and the Government of Colombia is trying to
stop that movement. She also asked about alternative crops in Colombia.
Minister Arias responded that it is difficult to start growing new
crops, and the new crops need to be just as lucrative or there will be
no incentive to change.
Congressman Shaw said that sugar will be a difficult issue in the
FTA negotiations, and he noted that Colombia has an abundance of sugar.
Mr. Shaw was interested to hear whether Colombia will consider making
ethanol from sugar. Minister Arias noted that U.S. sensitivities
regarding sugar are similar to Colombia's sensitivities regarding rice.
Congressman Weller noted that corn, soy, and livestock are
important agriculture industries in Illinois, and the FTA would need to
provide market access for those products. He also noted that Colombia's
price bands would have to be eliminated as part of an agreement, as
Chile had done in its FTA with the United States.
Congressman Nunes asked about Colombia's capacity for value-added
crops. Minister Arias responded that Colombia successfully exports
dairy, beef, horticulture, fruits, palm oil, sugar, rubber, and cocoa.
Meeting with Colombian Minister of Commerce, Industry, and Tourism
Jorge H. Botero, Colombia's Chief Negotiator for the Free Trade
Agreement Hernando Gomez, and Colombia's Vice Minister for
Foreign Trade Eduardo Munoz
Minister Botero began the meeting by thanking the delegation for
the unilateral preferences provided under the Andean Trade Promotion
and Drug Eradication Act (ATPDEA). The positive results from ATPDEA
have been significant. Minister Botero also stated that he sees an FTA
as a cornerstone for the U.S.-Colombian relationship, and it has
political significance as well as commercial meaning. Colombia is
anxiously watching the outcome of U.S. Congressional consideration of
the Dominican Republic-Central America Free Trade Agreement (CAFTA).
While CAFTA is still pending, it is difficult for the Andean FTA
negotiations to move forward, he said, particularly on agriculture,
sanitary and phytosanitary measures, and intellectual property rights.
Once the CAFTA is approved, Colombia hopes that the Andean FTA
negotiations can move forward expeditiously and conclude by the end of
the year. Botero said it is his hope that the FTA talks can conclude by
the end of October, at the latest.
Minister Botero also noted that, just as in the United States,
Colombia has to be mindful of its political process and negotiate a
deal that could pass in its Congress. Botero stated his belief that
while Colombia has demonstrated political will to move the agreement
forward, he has not seen comparable will on the part of U.S.
negotiators due to the CAFTA approval process. Botero, like Minister
Arias, pointed out that the United States has yet to respond to many
offers on the table. He said that until Colombia sees U.S. engagement,
it is difficult to put anything but the most conservative offers on the
table. Botero also said that Colombian agriculture must have ``real
access'' to the U.S. market, including some movement toward an SPS
permanent committee.
Chairman Thomas committed that he would obtain a response from the
U.S. negotiators on Colombia's proposals. At the same time, he
commented that it is difficult to move forward in the negotiations if
Colombia is not offering real market access. For example, the United
States sent 2.2 million tons of corn to Colombia last year, but
Colombia's latest proposal offered a tariff rate quota of only a small
fraction of that level. Chairman Thomas also said that the best window
of opportunity for negotiating an Andean FTA was really in late 2003
and early 2004. After a tough CAFTA fight, he explained, it is
difficult to imagine much support for pushing through the Andean FTA,
with its similarities to CAFTA on sugar, textiles, labor, and
agriculture. As a result, the Andean agreement will likely need to be
better in these areas.
Chairman Thomas also noted that ATPDEA is a temporary grant from
Congress to the Andean countries. It would be wise, he said, for
Colombia to conclude an FTA in time for its benefits to replace ATPDEA
benefits when they expire in December 2006. Otherwise, it would be very
difficult for Congress to renew ATPDEA if it sees that Colombia is
unwilling to open its market to U.S. exports, particularly if Congress
turns its focus to other regions of the world such as the Middle East,
which have shown great interest in concluding comprehensive trade
agreements. For example, an FTA with Bahrain is awaiting
implementation, and trade negotiations are ongoing with Oman and the
United Arab Emirates. Egypt has also introduced several economic
reforms which improve its prospects for an FTA with the United States.
The Chairman reiterated that the Andean FTA must follow the template
established by the United States in previously concluded FTAs to
maximize Congressional support, and holding out for more will not
produce gains, only delay.
FTA chief negotiator Gomez added that Colombia is worried about the
timetable and the lack of U.S. responses. He and Botero stated that
Colombia is looking for pragmatic solutions to the remaining issues,
but both sides have to engage to achieve results. The key is a balanced
agreement where both sides see positive benefits. Gomez added that
Colombia understands it has to open up its market on many products, but
in some areas of agriculture, Colombia has to ensure the survival of
some domestic production to maintain populations in the rural sector.
Otherwise, he believes that increasing instability and insecurity will
result.
Congresswoman Tubbs Jones noted that the FTA should have a strong
labor chapter and raised concerns about the deaths of labor leaders in
Colombia. Vice Minister Munoz said that Colombia has tried to include
unions in the FTA process, but unions in Colombia are opposed to the
FTA, both philosophically and practically, even with the inclusion of a
strong labor chapter. He said unions represent a tiny and declining
portion of the Colombian workforce--mostly in large corporations and
the government. Minister Botero responded that Colombia is trying to
stop all crimes and murders, including those of labor leaders. He also
noted that crime in Colombia is declining.
The delegation noted that sugar is sensitive in both Colombia and
the United States, and the discussion turned to the potential of
agriculture production, particularly value-added production, in both
Colombia and the United States. The participants agreed that any trade
deal has to be beneficial for all parties.
Meeting with Members of the Colombian American Chamber of Commerce
The delegation met with representatives of the American business
community in Colombia to discuss the Colombian business climate and the
ongoing FTA negotiations. Representatives of the insurance, consumer
product, manufacturing, accounting, legal services, and energy sectors
were among those present at the meeting. The business community
expressed strong support for an FTA and emphasized its hope that the
negotiations would result in an expeditious and successful conclusion
of a comprehensive free trade agreement. They agreed that the signing
of an FTA requires a satisfactory agricultural agreement which will
need to balance Colombia's sensitivities and U.S. priorities on a
handful of agricultural products. Business representatives underscored
the great economic progress that has taken place in Colombia under
President Uribe, and they expressed confidence in the Uribe
Administration's economic policies to attract more investment and
economic opportunity in Colombia. They noted that, unlike Ecuador and
Peru, Colombia has already resolved its outstanding investment
disputes--thanks to the personal and persistent dedication of President
Uribe. They said that Colombia's market holds the greatest potential in
the region for American businesses.
Meeting with Colombian President Alvaro Uribe, Minister of Agriculture
and Rural Development Andres Arias, Minister of Commerce,
Industry, and Tourism Jorge H. Botero, and Colombian Ambassador
to the United States Luis Alberto Moreno
President Uribe welcomed the delegation and thanked them for their
efforts to support Colombia, including through passage of trade
preferences. The President said he would like to conclude a free trade
agreement, but he argued that there is an important link between
agricultural employment and security so that Colombia needs additional
flexibility to protect a basic group of products (corn, chicken leg
quarters, rice, beans, and sorghum) in an FTA. The rural sector is also
important because a quarter of the Colombian population lives in rural
areas. President Uribe said that he understands that a bilateral FTA
cannot hinder the United States' ability to use domestic supports for
agriculture, but the agreement should then provide countries some
mechanism to offset the distortionary effects of those subsidies.
President Uribe proposed a tool that would be applied to a handful of
very sensitive products for which the United States provides domestic
supports.
President Uribe made a geopolitical argument about the importance
of the FTA, stating that Colombia is a strong supporter of the United
States, while Brazil is trying to supplant American leadership in South
America and Venezuela is trying to buy a leadership role with
inexpensive oil. The President also emphasized that instability in the
region would increase if the United States were unable to conclude an
FTA with as strong an ally as Colombia. With so many political
uncertainties in the region, President Uribe said, a positive American
presence is critical.
Chairman Thomas said that he is very concerned about the pace of
the FTA negotiations, noting that the ATPDEA will expire in December
2006 but there is a real possibility that there will not be an FTA in
force to replace ATPDEA benefits. He emphasized that Colombia is a very
important friend and ally of the United States, and he does not want to
see this happen. Therefore, it is critical that Colombia show
leadership in the negotiations and work with U.S. negotiators to
conclude a comprehensive and commercially meaningful trade agreement
that benefits all parties. On domestic supports, Chairman Thomas
responded that the U.S. Congress simply would not approve offset
mechanisms, but he pledged to work with Colombia to find solutions
within the existing framework created by previous agreements.
Congresswoman Tubbs Jones raised concern regarding labor violence
in Colombia. President Uribe responded that security for everyone,
including labor leaders, is a cornerstone of his administration. The
President said that when he took power in 2002, 161 labor leaders were
killed and 400 (of 1,096) mayors could not exercise their duties
because of guerilla threats. Today, there might be one or two mayors
that are having security problems, and the Colombian government is
doing everything in its power to eliminate these problems. The
President added that this year, five labor leaders have been killed,
and that is five too many. Uribe's goal is to eliminate violence and
stop all assassinations--against labor leaders, against mayors, and
against the civilian population.
Other Members asked President Uribe about implementation of the
peace and justice law. The President responded that 12,700 members of
terrorist groups have turned themselves in, of which 55 percent were
from paramilitary groups and 45 percent guerillas. The President
defended the law, stating that this time there would be penalties and
no amnesty. Moreover, those who are solely narcotraffickers would not
have any benefits under the law, and those who commit human rights
abuses would have to serve sentences and would have no amnesty or
pardon. The President also stated that extradition would be permitted
under the law.
ECUADOR
Country Team Briefing with Charge Kevin Herbert, Economic Officer Larry
Memmott, and other U.S. Embassy Staff
Charge Kevin Herbert and representatives of the Embassy staff
provided a broad overview of the political, economic, and security
challenges facing Ecuador. With a population of approximately 13
million, Ecuador's GDP in 2003 was $26.5 billion with exports making up
40 percent. Top exports from Ecuador include petroleum, bananas,
shrimp, cut flowers, and tourism. In spite of Ecuador's petroleum and
other natural resources, 70 percent of the population lives below the
poverty line.
The Charge and country team outlined U.S. policy priorities and
actions in five areas: (1) democracy, (2) economic development, (3)
combating narcotrafficking, (4) fighting terrorism, and (5) promoting
regional stability. On democracy, the Charge noted that over the last
several years, governance in Ecuador has been under siege with
frequently changing presidential administrations undermining the
ability of basic government institutions to move forward. The new
Palacio Administration does not have strong political backing and has
not yet voiced a consistent ideological approach. In particular, the
new administration's early comments on the FTA, a U.S.-funded facility
at Manta that monitors drug trafficking, and Plan Colombia have all
raised concern. The Embassy is working to engage the new government
further to clarify its position on these issues.
On economic development, President Palacio has emphasized social
spending, and there is heavy pressure to waive government spending
controls. Bondholders have shown concern about the economic direction
of the country, and Ecuador risks losing foreign investment. Questions
remain as to whether the new Administration will be able to conclude
the FTA negotiations and what position it will take on key issues. Most
U.S. companies operating in Ecuador have disputes with the government,
including Occidental Petroleum, the country's largest investor, which
has been threatened with expropriation. The U.S. Embassy continues to
press the Government of Ecuador to resolve its investment disputes
expeditiously. Labor reform is another important issue, and while the
new Labor Minister is committed to reform, it is unclear whether he
will have the ability to advance new measures. On the FTA, some
government officials have indicated that Ecuador should conclude an
agreement but then reevaluate whether it is in the best interests of
the country to ratify it. Yet the Embassy believes that Ecuador will
feel pressure to move quickly if Colombia and Peru appear to be moving
forward in an FTA without Ecuador.
On combating illicit drugs, Ecuador is challenged by its location
between the world's two largest narcotics producers and is a major
transshipment point. U.S. efforts have focused on improving border and
port enforcement capabilities and providing assistance and training to
the Ecuadorian police and military.
Combating terrorism is another priority area, and Ecuador's alien
smuggling industry (which funnels large numbers of illegal immigrants
into the United States) has been a focus of U.S. efforts, with special
attention on aliens from the Middle East and China. Immigration has a
large domestic impact in Ecuador, as there are 2 million Ecuadorians
living in the United States, 80 percent illegally. Ecuadorians living
abroad provided over $1.52 billion in remittances to Ecuador in 2003,
and remittances are the third largest source of income.
Finally, promoting regional stability has been a key U.S. interest,
especially given the ongoing conflict in Colombia. Narcoterrorists
frequently transit Ecuador's Northern provinces, and Colombian
migration creates the potential for individuals and combatants to
attempt to seek a safe haven in Ecuador. One of the Embassy's key
messages to the Palacio Administration is to urge cooperation with
Colombia to implement Plan Colombia.
In terms of U.S. development assistance, USAID briefed on the broad
range of its efforts, including work to strengthen government
institutions and justice reforms, provide infrastructure in the border
regions, build economic opportunities with programs such as micro-
finance and trade capacity building, and support biodiversity
conservation. The Peace Corps program in Ecuador is one of the oldest
and largest in the world with over 120 volunteers in country and
remains an important part of U.S. engagement with Ecuador.
In response to Chairman Thomas' question about the social and
economic makeup of Ecuador and how it impacts the government, the
Charge indicated that a small group, fewer than 20 families, owns most
of the land in Ecuador, and that this group makes up most of the
political elite of the country. Congressman Weller inquired about the
new government's position on the conflict in Colombia, and the Embassy
team indicated that Ecuador had a strong desire to avoid having the
conflict spread across its borders and has worked closely with the U.S.
Government on counter-drug and counterterrorism efforts.
Meeting with Ecuadorian President of Congress Wilfrido Lucero and Other
Representatives of the Ecuadorian Congress
The President of Congress, Wilfrido Lucero, opened the meeting by
welcoming the U.S. delegation. Chairman Thomas noted that the United
States had just celebrated Independence Day and that there has been
recent movement in the area of free trade, including the recent passage
of CAFTA in the Senate. The next round of negotiations for the Andean
FTA in Miami offers an opportunity to continue to build momentum. The
current Andean preference program is designed to give access to U.S.
markets in order to promote reforms, and Chairman Thomas noted that the
delegation appreciates Ecuador's effort to help in the fight against
terror and drug trafficking. He noted, however, that like other trade
preference programs, the Andean preference program is not intended to
be permanent, and these benefits will expire in December 2006.
The Chairman added that his goal is to move from this preference
program to a more permanent relationship through a free trade
agreement. The primary mission of the delegation is to determine how
important Ecuador believes it is to have permanent access to the U.S.
market, which can be achieved only by reaching agreement on a
comprehensive FTA, including the key provisions which the United States
requires in all FTAs. All previously concluded FTAs have uniform
standards, such as in labor, agriculture, and sanitary and
phytosanitary standards. He emphasized that if the negotiators do not
move with some degree of alacrity, there will be no seamless transition
to an FTA. The Chairman stressed the importance of engagement by the
Ecuadorian Congress on the FTA, noting that Ecuador's legislative
branch cannot afford to wait on the side while the agreement is driven
forward and then decide at the end it was not worth the trip. On the
U.S. side, he emphasized that the U.S. Congress is the entity that
would say yes or no to an agreement, while the Congress delegates to
USTR the responsibility to negotiate only. The Chairman noted that the
new USTR Robert Portman comes from the Ways and Means Committee.
Perhaps more than any recent time, the Administration and the Congress
are closely linked in advancing a common agenda, but time is short and
the negotiators need to move quickly. The United States is willing to
move forward with all the countries of the region, or with one or two
of the countries, depending on whether a country is willing to take the
steps necessary to conclude a comprehensive FTA.
Guillermo Landazuri, the President of the Democratic Left party,
emphasized that the United States is Ecuador's most important trading
partner, with an important trade surplus. Yet it would be a mistake to
see the FTA under the lens of a commercial relationship only. There
will be sectors that win and sectors that lose from an FTA, and
Ecuador's market is not of great significance for the United States.
For this reason, the geopolitical aspects loom large, such as Ecuador's
agreement to host a base to monitor counter-narcotics activity at Manta
and other efforts along its border with Colombia. Turning to the
business relationship, Deputy Landazuri said he recognizes that every
country has a right to support its companies, and that the U.S.
Government has the right to subsidize agriculture. Yet Ecuador is a
poor country and cannot support subsidies, so it needs quotas and price
bands to protect its internal production. He believes that the United
States should be willing to discuss subsidies in the context of the
negotiations, and this would help make progress possible.
Chairman Thomas responded that there is no question of Ecuador's
strategic importance in efforts such as those against narco-terrorism.
He said that despite the size of Ecuador's economy, imports from
Ecuador do have an impact on U.S. interests; for example cut flowers
will hurt U.S. producers. In addition, Ecuador's efforts on human
rights, labor, intellectual property rights, and protection of investor
rights are extremely important for U.S. consideration of the FTA.
Chairman Shaw noted that Deputy Landazuri's statement on the need to
protect agriculture is one that he hears from U.S. Members of Congress,
showing the universal nature of politics and the issues involved in
pushing forward new trade agreements.
Alfredo Serrano, a deputy from the Social Christian Party who
serves as the President of the International Affairs Commission of the
Ecuadorian Congress, noted that the World Trade Organization (WTO)
calls for differential treatment of developed and developing nations,
and he said similar differential treatment should be granted in an FTA.
He believes that an FTA is not necessarily a good or bad thing, and the
Ecuadorian Congress will have to look at the final product and make a
decision whether it would benefit Ecuador. He also said he believes it
would be a very serious issue if an FTA is signed with Peru and
Colombia, yet Ecuador is not included.
Chairman Thomas responded that he is very well aware of the WTO's
Doha Agenda, and he hopes that all the nations involved would make
strong efforts to ensure that it remains on track. On the Andean FTA,
he stressed that it is up to the Andean nations to work together
towards a common position, and while there is a profound respect for
the geopolitical situation facing the Andean countries, negotiators
should not overplay the issue. Free trade agreements are negotiated to
be mutually beneficial. There are difficult issues to resolve such as
intellectual property rights and labor, but they are not
insurmountable. Failure to conclude an FTA may be more damaging to
Ecuador's economy than to the U.S. economy, he said, but it would be a
sad, missed opportunity for both nations if it does not succeed.
Deputy Andreas Paez of the Democratic Left noted that he had been
appointed by the Ecuadorian Congress to visit the U.S. Congress to
address what he believes are misunderstandings about labor law and
policy in Ecuador. He cited labor law reforms of the 1990s as being
progressive modernization efforts that have been followed up with new
procedures. For example in July 2004, new procedures reduced the trial
time from three years to three months to protect labor rights and
provide full access to the court system. He highlighted labor as an
area where there should be mutual cooperation, and he requested aid,
even if only in the form of used equipment, to build on a $1.3 million
program USAID funded last year.
Chairman Thomas thanked Deputy Paez for his comments on labor,
which he noted is very important to both the U.S. majority and minority
parties. He commented that the amount of aid cited as needed for labor
capacity building seemed small compared with Ecuador's large oil
revenue, but he stated that the United States should explore this
issue. Labor is an area in which Ecuador needs to show results as the
FTA process advances, he emphasized.
Deputy Jorge Sanchez of the Democratic Left noted that FTA comes at
a very difficult time for Ecuador with the impact of a new monetary
system and dollarization, which has increased production costs. After
expressing concern about the expiration of ATPDEA preferences, he added
that Ecuadorian markets could collapse if U.S. agricultural exports are
allowed to come into Ecuador in sensitive sectors. He suggested that
Ecuador be allowed to keep protection on these areas, perhaps based on
the productivity of different Ecuadorian groups, with reductions in
tariffs if the groups become more competitive.
Congressman Weller expressed his belief that Ecuador has so much
potential and has a great opportunity for development, while
recognizing that political uncertainties make it difficult to move
forward. He encouraged Ecuador to look at Chile's performance following
its FTA with the United States. Chile also had a price band system
prior to the FTA but has done quite well after removing it under the
agreement. Finally, Congressman Weller stressed the importance of
border issues, particularly along Ecuador's border with Colombia.
President Wilfrido Lucero made closing remarks for the Ecuadorian
legislators. He said that the FTA is difficult for Ecuador because
Ecuador has to deal with the great asymmetry between the political,
economic, and social realities of the two nations and a fear by
Ecuador's people that they may be absorbed by the FTA. In particular,
he highlighted agricultural subsidies, where he believes Ecuador is
negotiating from a position of weakness when dealing with the United
States or Europe, as these nations have the ability to subsidize crops.
He also highlighted labor as a sensitive issue, raising questions as to
how the FTA could impact the implementation of local laws. He stressed
his fundamental belief in the government working to satisfy basic human
rights, including providing education and work for people. Finally, he
stressed the great pressure that the people of Ecuador experience as a
result of problems nearby in Colombia. While there is great sympathy
for their sister nation, there is also a desire to make sure that the
problem does not spread throughout the region.
Meeting with Ecuador's Minister of Trade, Industrialization, Fisheries
and Competitiveness, Dr. Oswaldo Molestina
Chairman Thomas opened the meeting by emphasizing the delegation's
mission to energize the Andean FTA negotiations. He stressed that the
existing Andean trade preferences will expire in December 2006, and now
is the time to move toward a more permanent trading relationship. He
noted that the U.S. Administration and Congress are completely united
in their desire to advance this FTA and that the U.S. Government is
willing to do so with all, some, or one of the Andean countries.
Minister Molestina thanked Chairman Thomas for his remarks and
expressed a strong belief that the FTA is a benefit to both Ecuador and
the United States. He said the day before, he had presented a report to
the Ecuadorian Congress on the progress on the FTA and pledged that the
Palacio Administration would work to keep it on track. He cited the
fact that Ecuador sent the former Deputy Secretary of the United
Nations to negotiate at the recent bilateral discussions on agriculture
as a sign of the importance that Ecuador places on the FTA. Minister
Molestina noted that he recently traveled to the United States, where
he met with senior officials throughout the U.S. Government, to stress
Ecuador's commitment. He foresees another trip to the United States
when the FTA negotiations are further along, and he expressed concern
that U.S. Congressional consideration of CAFTA might delay discussions
of key issues such as agriculture and intellectual property. Minister
Molestina recognizes that the existing trade preferences have allowed
Ecuador and the United States to deepen their relationship, and he
knows that unilateral preferences would not be renewed. He said that it
is his government's desire to embody these preferences in an FTA that
is of much greater scope. He stressed that while there are many issues
outstanding, among the most important for Ecuador are those related to
agriculture, and he is disappointed that agriculture is not on the
agenda in more detail for the next negotiating round in Miami. While he
anticipates the need for another round of negotiations in the United
States, he expressed optimism that obstacles can be overcome and the
negotiations concluded then.
Chairman Shaw noted that Minister Molestina's tone conveys an
optimism and understanding that was missing from the meeting with
Ecuador's Congress, and many of the representatives in that meeting did
not appear to see the need to maintain access to the U.S. market. Given
this situation, it is clear that Ecuador would proceed with sensitivity
to domestic concerns, and the commitment expressed by Minister
Molestina is important to conclude an FTA.
Congressman Weller also expressed concern regarding the tone taken
by Ecuador's Congressional representatives, noting that trade
agreements are a give and take for both sides, and everyone should work
together to compete against nations such as China. He added that the
treatment of investors in Ecuador is a very important issue, citing
Occidental Petroleum's investment of over $1 billion in Ecuador and
ongoing concerns regarding threatened expropriation. Treatment of
companies such as Occidental impacts the constituents of U.S.
Congressman and Senators who support free trade and can have a serious
impact on the U.S. ability to conclude an FTA, he emphasized.
Minister Molestina thanked the Members for their frank comments and
noted that in his two months in office, Ecuador has moved to address
investment concerns by creating a special unit to deal with
international commercial disputes. He also pointed out that Ecuador has
signed a bilateral investment treaty with the United States--which he
noted other nations in Latin America have been hesitant to do--that
provides additional protections for U.S. investors. The Ecuadorian
government has been holding meetings with these companies to resolve
the disputes. While expressing that there may be limits as to how far
certain of the disputes can be moved by his Ministry (because under
Ecuador's governmental system several of the disputes are under
processes within other governmental units such as the Attorney
General's office), he stated that the U.S. delegation should be assured
that Ecuador intends to demonstrate progress and resolve the disputes
as quickly as possible.
Chairman Thomas noted that he sees many obstacles that must be
overcome to move quickly on an FTA, including the difficulty in
maintaining continuity in the negotiations when governments change.
Labor is a key issue, and while Ecuador has signed core International
Labor Organization conventions, there can be a distinction between
paper and practice, and the U.S. Congress will be looking for real
world results. Standardization of FTAs, so that they are comprehensive
and contain core language, is another important point, and overall
standardization on key issues is critical to efforts in the World Trade
Organization. He further noted that agriculture is an important area
for both Ecuador and the United States, as imports such as cut flowers
and livestock will compete with U.S. interests. He concluded that
despite these issues, the differences between the United States and
Ecuador pale in comparison to those that the United States and Ecuador
have with China, and they are not insurmountable.
Congressman Nunes stressed the importance of agriculture to his
district and asked the Minister to describe the most sensitive areas in
the agriculture negotiations. In response, Minister Molestina noted
that Ecuador's offers to the United States have been delayed by
political events in Ecuador, but Ecuador has submitted offers and has
received counteroffers in various areas. Key products of concern for
Ecuador are rice, cattle, milk and dairy, and corn. Congressman Nunes
added that Ecuador is not a major producer of sugar and does not appear
to raise the same level of concern as the CAFTA did with U.S. sugar
producers.
Chairman Thomas urged Minister Molestina to find creative solutions
to the banded tariff system and mechanisms for phasing out existing
protections. He stressed that the United States is under a tight
timeframe with the expiration of Trade Promotion Authority, and
negotiators need to move quickly between now and 2006, which is the
window for action.
Manuel Chiriboga, the lead agriculture negotiator for Ecuador,
added that the range of agriculture grown in Ecuador and the Andean
region is much wider than Central America, and, in fact, the Andean
countries produce virtually everything that the United States does, as
well as some other items. He stated that he could foresee moving away
from the price band mechanism, but there would need to be a transition.
In addition, he suggested that the negotiators explore a special
agricultural safeguard and consider how this might be used to address
sensitive issues. He noted that Ecuador has put on the table items such
as wheat and soy where Ecuador is looking for access to the United
States and, just as sugar is sensitive for the United States, rice is
sensitive for Ecuador. Overall, he remains confident that an agreement
can be reached. While hesitant to set a conclusion date, Mr. Chiriboga
indicated that he believes that an agreement could be reached by
December 2005.
Cristian Espinoza, an Ecuadorian official involved in the FTA
negotiations, asked the delegation to pay special attention to two
issues. First, concerning tuna, which he described as particularly
sensitive for Ecuador, he hopes that through the FTA negotiations
Ecuador would be able to achieve benefits beyond those available under
existing preference programs, which only apply to tuna caught on flag
vessels of Andean countries and the United States, and he cited more
favorable treatment that the United States has provided to Mexico and
Costa Rica. Secondly, he stressed the importance of U.S. trade capacity
building assistance to Ecuador, such as programs provided by USAID in
helping with Ecuador's development. Chairman Thomas responded that he
has worked closely on the issue of tuna in the current trade preference
programs, and he would review this issue with an eye towards not only
the immediate impact of preferences but in terms of how the issue is
likely to develop moving forward.
In closing, Minister Molestina thanked the delegation for their
useful exchanges. Chairman Thomas said that he is encouraged by the
optimism and commitment shown in the meeting, concluding that a primary
goal of the delegation's visit is to encourage Ecuadorian negotiators
to move forward.
Meeting with Members of the Ecuador-U.S. Chamber of Commerce Executive
Committee
The President of the Ecuador-United States Chamber of Commerce,
Mauricio Robalino, welcomed the delegation and opened with a
presentation on the challenges facing U.S. businesses operating in
Ecuador. Major U.S. investors are operating in the energy,
pharmaceuticals, water, flowers, and consumer products and sales
sectors. While Ecuador's advantages of a dollarized economy, low
inflation, relatively non-violent society, and rich natural resources
were cited, the company representatives described deep, systemic
problems that threaten Ecuador's commercial environment and the
prospects of future investments. Serious problems with the rule of law,
including political interference in judicial decisions, ineffective law
enforcement and little respect for contracts, force companies to rely
on international arbitration. In addition, government control of key
sectors such as energy and communications, fragmented government
processes, corruption, and constantly shifting governments make Ecuador
an extraordinarily difficult commercial environment.
In addition to these overall concerns, representatives from key
industry sectors provided details on the specific problems they
encountered. In the petroleum sector, the constant change of energy
ministers, with six since 1993 alone, along with the lack of respect
for contracts was cited as leading to a decline in state oil company's
output and discouraging much-needed new investment. In electricity,
companies experience problems related to non-payment and discriminatory
treatment, and Ecuador is likely to face an electricity shortfall in
the fall that would lead it to rely on imported energy. Pharmaceutical
representatives noted that while Ecuador has an excellent intellectual
property rights (IPR) law, enforcement is weak, and copy-cat companies,
many of whom are based outside of Ecuador, have launched an aggressive
anti-FTA, anti-IPR campaign. In addition, a U.S. company that obtained
a water concession has been unable to obtain financing because its
contract is not being honored by the Ecuadorian government. Yet this
same company is then subjected to government fines when the lack of
financing makes it impossible for the company to meet the contract's
performance requirements. Other representatives cited instances where
their companies were approached by judges requesting bribes or
subjected to judicial proceeding without notice or the chance to
represent themselves. While the group supports the FTA as a way to
promote reforms and as a means to protect the rights of U.S. companies
operating in Ecuador, many representatives expressed concern about
whether the Ecuadorian government would honor its FTA commitments.
Chairman Thomas thanked the group for its presentation. He noted
that in the delegation's meetings with deputies from Ecuador's
Congress, it seems as though the deputies are weighing whether they
really want access to the U.S. market and investment. The meeting with
Trade Minister Molestina was much more encouraging, and his team
appears to be moving towards solutions. The Chairman added that in many
cases it seems as if there are legal or regulatory provisions that are
good on paper but have no effective enforcement or implementation.
Given the wide array of problems the companies described, the Chairman
asked what had led the companies to invest in Ecuador. Many of the
business leaders replied that their companies are in Ecuador because
they have been in the country for a very long time and had entered into
long term contracts when the business climate was more promising.
Others noted the great natural resources that Ecuador possesses,
ranging from oil to an ideal growing climate for crops such as bananas.
Chairman Shaw inquired whether there are impediments to companies
pulling out of Ecuador and whether Ecuador is likely to enact policies
similar to those in Venezuela under President Chavez. Business
representatives responded that while there was conflicting rhetoric in
the first days of the Palacio government, they generally do not believe
that the Ecuadorian government is moving toward policies similar to
those of President Chavez, and, instead, the new government has been
reaching out to the business community.
Congressman Weller asked whether, given the billions of dollars in
investment the group represents, the companies act collectively to
address their concerns, while Congresswoman Tubbs Jones asked if this
group is reaching out to other business groups to address these issues.
The Chamber representative responded that in terms of collective
action, the companies have worked to coordinate efforts on disputes.
The Chamber is also reaching out to other foreign investors and
business groups to coordinate efforts, such as a chamber of commerce
focused on industrial companies in Ecuador. Yet, Ecuador has not yet
shown a high level commitment within the government to resolve the
disputes.
Congresswoman Tubbs Jones noted that many business leaders cite the
constant turnover in governments as a problem and wondered whether
there is a contingent of career civil servants retained between
administrations to maintain continuity. The business leaders replied
that almost all key decision makers, down to the middle levels, tend to
shift with the change in government, making it difficult to predict
behavior or know with whom to deal on various issues.
Chairman Thomas inquired whether, given the constant change in
governments and the previous track record, the United States could
expect commitments reached in individual contracts or FTA negotiations
to be honored. Members of the business community agreed that honoring
commitments is a major problem. One representative noted that when his
company cited the U.S.-Ecuador Bilateral Investment Treaty (BIT)
commitments as supporting its rights, Ecuadorian officials began
looking for ways to get out of the BIT rather than try to address the
company's concerns.
Congressman Nunes emphasized that the delegation has heard many
different opinions on the direction that President Palacio and the new
government are likely to take and asked for opinions. Many of the
business leaders responded that are heartened by the new President's
explicit statement that he would adhere to Ecuador's international
commitments and by the recent greater access to government officials.
They believe the President is generally independent and less beholden
to traditional political interests, but at the same time he is dealing
with many of these issues for the first time. In addition, some
problems reside in offices that the President does not directly
control. While the FTA would not solve all of the problems cited, the
business representatives believe that the FTA would bolster and
strengthen reforms while giving them more leverage and tools for
protecting their rights. In closing, Chairman Thomas thanked the group
for their frank and lively discussion, noting that they gave the
delegation a vivid description of the difficulties they face while
doing business in Ecuador.
Meeting with Ecuadorian President, Dr. Alfredo Palacio
President Palacio welcomed the delegation, and expressed his desire
to establish a strong relationship with the United States. He sees the
people of the United States as the brothers and sisters of the people
of Ecuador.
Chairman Thomas said that while it is cliche to say that ``we are
from the United States and we are here to help,'' that is part of the
delegation's mission--to help advance the FTA. He noted that he is
impressed by Minister Molestina, and if he is representative of
President Palacio's Cabinet, the President has established an excellent
team. Chairman Thomas stated that the delegation believes it is
important to come to Ecuador to personally deliver the message that
time is short and that the current trade preference programs, which
have helped Ecuador, will soon expire and will not be renewed. The
desire of the Chairman is to transition to an FTA as soon as possible,
and he will seek to do so in a spirit of compromise, but it is
important to recognize that the negotiations must meet the standards
necessary for an FTA. The delegation seeks to help and work with
Ecuador to advance these issues, and sometimes it is those who are
thrust into responsibility rather than those who seek it who are most
able to get things done. President Palacio thanked Chairman Thomas for
his comments and stated that Ecuador and the United States need to work
together to resolve differences.
Congresswoman Tubbs Jones noted that the President's training in
the United States gives him a familiarity with America and an ability
to build stronger ties. President Palacio agreed, noting that the time
he spent in the United States, including during his educational
training, gives him a strong appreciation for the importance of the
bilateral relationship.
Chairman Shaw noted that expanding free trade will be important to
all of the Americas, and in listening to Ecuador's deputies, he heard
many of the same arguments about protecting or shielding particular
sensitive industries that he has heard in the U.S. Congress. While it
would not be easy for either country to push forward with an FTA, he
believes strongly in leading the way.
Congressman Weller, noting his work as the Vice Chair of the
Western Hemisphere Subcommittee of the International Relations
Committee, stated that one of the two countries' common values is
democracy. He asked for clarification and thoughts from the President
on recent comments from Ecuador's Foreign Minister that indicate that
Ecuador is neutral in the ongoing conflict within Colombia. President
Palacio said he does not believe that the people of Ecuador should
refer to the conflict in Colombia as a ``civil war'' because this
implies that there are two equally democratic sides. He stated that
those who oppose the current government of Colombia are not democratic;
they are paramilitaries and narco-traffickers. When the Foreign
Minister spoke of neutrality, the President indicated that he was not
speaking of treating the groups in Colombia as two equally democratic
sides. Ecuador has a policy of not intervening in Colombia, and this is
the policy to which the Foreign Minister was referring. Nevertheless,
the Ecuadorian government opposes terrorism and narco-terrorism. The
President stated that he remains very concerned about Ecuador's
Northern Border and when individuals have been killed in border
clashes, he has mourned with President Uribe and offered to send senior
military officials to work with the Colombians. Ecuador has eight
thousand men along the border to help stop infiltration, and the border
is an issue of on-going concern.
Congressman Nunes noted that the delegation has heard deep concerns
expressed from the business community about making any future
investment in Ecuador. He asked the President to reflect on this and to
describe what is being done to address investment disputes. President
Palacio said the question raises many underlying political and economic
issues. For a long time Ecuador had problems that eroded its democratic
institutions. These problems have a much longer history than the last
two years, but some of them worsened during that time, and it became
difficult for the executive branch to govern other than to survive over
short periods of time. It is now time to strengthen democratic
institutions in a way that is more responsive to the people. Ecuador is
moving toward a more representative democracy, he said, and the people
want more direct information on policies such as how oil revenue is
spent, social security, and the FTA. Oil revenue provides billions to
Ecuador's economy but not in a way that allows the country to develop,
as it is simply exported with no value added. The budget remains
billions of dollars in debt. Subtracting oil revenues, economic growth
is minimal and non-oil production is tiny. To reverse this trend,
President Palacio believes that Ecuador must have a social policy that
invests in heath, medicine, and social protection. President Palacio
stated that he became Vice President for one reason, to promote
universal health insurance, although budget tightening has made this
difficult. As President he has pledged to continue to work to build
democratic institutions and improve Ecuador's social policy. President
Palacio said he has the advantage of being independent, and he does not
answer to any special political interests.
In closing, Chairman Thomas stated that the members of the
delegation leave Ecuador feeling better about the prospects for moving
forward. The United States itself has great resources, but all
democracies know that people are the greatest resource. Knowledge and
transparency are critical for democracy, and those that oppose
democracy know this, which is why they strive to limit knowledge and
transparency. The FTA will help build the economy, and President
Palacio's plans can help plant the seeds of development. Chairman
Thomas concluded that he hopes these seeds will grow so that tomorrow
will be better and Ecuador's people, many of whom have sought
opportunities in foreign lands, will experience stable democracy and
economic opportunity in Ecuador.
FUNDEPORTE Peace Corps Site Visit (Congresswoman Tubbs Jones and Spouse
Program)
Congresswoman Tubbs Jones and the spouses visited FUNDEPORTE, a
Peace Corps site in southern Quito. During the visit, Ms. Claire
Lederman, a volunteer at FUNDEPORTE and a constituent in Congresswoman
Tubbs Jones' district in Ohio, briefed the group on the extreme poverty
that exists in many areas of Quito and the foundation's efforts to
provide assistance to at-risk youth in the area. Ms. Lederman stated
that FUNDEPORTE is a foundation that provides traditional schooling and
sports training to over 400 at-risk children, many of whom lived or
worked on the streets prior to participating in the program. The
organization emphasizes the use of sports as a tool to increase self-
esteem and life skills.
PERU
Country Team Briefing with U.S. Ambassador J. Curtis Struble and U.S.
Embassy Staff
Ambassador Struble gave the delegation a briefing on the political
and economic issues currently facing Peru. The Ambassador began by
discussing the fluctuation in Peru's GDP over the past 25 years. He
noted that GDP growth has been strong under President Toledo, reaching
4.8 percent in 2004. However, there has been very little progress in
alleviating poverty in the country. More than 50 percent of the
Peruvian population lives in poverty, including more than 20 percent
who live in extreme poverty.
The Ambassador noted that political institutions in Peru need
strengthening. There are 27 political parties, most of which have a
very limited presence. Additionally, there is little public confidence
in the government. Recent polls indicate that public support in Lima
for the President, Prime Minister, Congress, and the Judiciary is below
20 percent.
With respect to trade, the Ambassador stated that Peru has
benefited more than any other country from the provisions of the Andean
Trade Preference Act and the Andean Trade Promotion and Drug
Eradication Act (ATPDEA). Peru's exports to the United States have
grown from $716 million in 1993, when it first became eligible for ATPA
benefits, to $3.587 billion in 2004. According to Ambassador Struble,
the economic growth generated by such exports has contributed to
broader political and public support in Peru for a free trade agreement
(FTA) with the United States than in other countries in the region. For
example, a recent DATUM International poll suggests that 64 percent of
Peruvians are in favor of an FTA with the United States, while only 24
percent are opposed.
Ambassador Struble stated U.S. exports to Peru exceeded $2 billion
in 2004. Leading exports included nuclear reactor supplies, boilers,
machinery parts, electronic machinery, and plastics. According to the
Ambassador, U.S. exports of mining equipment, machinery, information
technology, electronic equipment, cotton, corn, rice, deciduous fruit,
and soybeans would increase if an FTA with Peru is concluded.
The Ambassador stated that an important benefit of an FTA with Peru
is that it would provide greater protections for U.S. investors in the
region. In 2004, total U.S. foreign direct investment in the country
reached $10 billion (current value).
Ambassador Struble noted that in order to remain eligible for
ATPDEA benefits, the Peruvian government committed in 2002 to resolving
nine outstanding commercial disputes involving U.S. companies. However,
four of the nine disputes remain. The Ambassador stated that he has
emphasized to the Government of Peru that the remaining cases must be
resolved before the United States will conclude an FTA with Peru.
Ambassador Struble also noted that an FTA with Peru would help
promote protection for intellectual property rights, which remains a
serious problem in the country. In 2004, IPR losses totaled almost $200
million, with pharmaceutical losses of $63 million and optical disc
losses of $118 million. He noted that an FTA will combat optical disc
piracy and ensure data and patent protections for medicines. Ambassador
Struble said that Peruvian negotiators understand the importance of
intellectual property rights protections in the FTA, but at the same
time, he said that some government officials are concerned about the
inclusion in the FTA of data protections for data relied on in
obtaining marketing approvals for drugs. He indicated that these
concerns were fueled by recent studies by two government agencies that
suggested that the price of medicines could increase under an FTA.
For Peru, agriculture is a sensitive issue in the negotiations.
According to the Ambassador, producers of dairy, rice, sugar, meat,
poultry, corn, wheat, and cotton in Peru are pressuring the Government
of Peru not to fully eliminate tariffs on their products. However, Peru
does not produce enough of these products to satisfy domestic demand,
and most Peruvian imports of these products (except cotton and wheat)
come from countries other than the United States such as Bolivia and
Argentina.
Finally, the Ambassador discussed coca production in Peru. The
country is the second largest cocaine producer in the world and
received $114 million in counter-narcotics assistance from the United
States in 2004. Approximately 80 percent of the coca leaf harvested in
Peru goes to narco-trafficking, with the rest being used for industrial
or traditional purposes. Peru exports 120 metric tons of coca leaf
annually to satisfy world demand for licit coca. Meanwhile, an
estimated 43,760 metric tons of coca goes to narco-trafficking each
year. The United States and Peru cooperate on counter-narcotics
objectives, and there is a four-prong approach to the problem: promote
alternative development, interdict to reduce flow of illegal drugs from
Peru, eradicate illegal coca, and promote prevention and treatment
programs. The Ambassador noted that all eradication efforts in Peru are
done by hand as it is illegal in Peru to spray chemicals to kill coca.
Ambassador Struble noted that one of the difficulties in combating
illicit coca production and trafficking is the Peruvian public's
perception of coca growth. According to a recent poll, 44 percent of
Peruvians believe coca is good, primarily because it generates revenue
and is a traditional crop.
Meeting with First Vice President of Congress, Natale Aprimo
The First Vice President of the Peruvian Congress Natale Aprimo
opened the meeting by noting the importance of the Andean FTA. He
stated that the FTA is not a panacea but is a positive step. He noted
that agriculture and pharmaceuticals are areas of difficulty for Peru
in the negotiations. He expressed hope that U.S. and Peruvian
negotiators could find common ground on these issues to foster support
for the agreement.
Mr. Aprimo informed the delegation that although the Peruvian
constitution gives primary authority for negotiating trade agreements
to the executive branch of the government, the Peruvian Congress has
the power to approve or disapprove the agreement. He noted that
representatives from the Congress have been present during each of the
rounds of FTA negotiations. Mr. Aprimo stated that while he is not a
supporter of President Toledo, the FTA is a national issue.
Mr. Aprimo thanked the U.S. delegation for the support of the
United States in fighting against coca production and in helping to
promote alternative crops.
Chairman Thomas responded by stating that working with Peru on
programs to combat narco-trafficking is in the best interests of the
United States. With regard to the Andean FTA, Chairman Thomas
emphasized that the rapid conclusion of the negotiations is critical.
He stated that he does not expect Congress to extend ATPDEA unilateral
benefits to the Andean countries. Additionally, Chairman Thomas stated
that passage of the agreement in both Peru and the United States is
likely to become more difficult as the April 2006 presidential and
congressional elections in Peru and November 2006 congressional
elections in the United States approach.
Chairman Thomas and Chairman Shaw also noted that Peru is in a
position to play a leadership role in the FTA negotiations and can work
with Colombia and Ecuador to create greater momentum in the ongoing
talks.
Meeting with Peruvian Congressional Leaders (Luis Iberico, Rosa
Yanarico, Fabiola Morales, Jorge Mera Ramirez, and Mercedes
Cabanillas)
Peruvian Congressman Luis Iberico opened the meeting by
acknowledging the cooperative relationship between the United States
and Peru and thanking the United States for providing ATPDEA trade
benefits to Peru. ATPDEA has provided great benefits and opportunities
for Peru, including for poor peasants who found new opportunities in
modern agriculture. The success of ATPDEA shows the potential of an FTA
in promoting alternatives to growing coca. Congressman Iberico stated
that he believes an FTA with the United States is important for reasons
beyond trade, including security. At the same time, he noted that the
agreement is likely to meet some opposition and that some farming
sectors already are mobilizing against it.
Chairman Thomas remarked that he traveled to the region because he
believes it is important for him to convey his expectation that the
U.S. Congress will not extend the ATPDEA benefits when they expire in
December 2006. He said the Andean nations are important U.S. allies,
and he doesn't want to see ATPDEA expire without an FTA to replace it.
He also expressed hope that Peru will play more of a leadership role in
the Andean FTA negotiations, working with Colombia and Ecuador to move
the talks forward.
Peruvian Congresswoman Rosa Yanarico expressed her support for the
FTA. She said she represents very poor regions in Peru, and her
constituents need opportunities. Some of her constituents have
emigrated to the United States, and she would instead like to create
jobs for them at home. She also emphasized that it will be important
that officials in Peru and the United States work to educate their
populations about the agreement.
Peruvian Congresswoman Fabiola Morales and others stated that they
are excited by the prospect of an FTA with the United States. In
particular, Congresswoman Morales hopes the agreement would bring
additional foreign investment and jobs to the country to encourage
Peruvian youth and professionals to stay in Peru. She also believes an
FTA will help Peru to improve education, health, and tourism.
Congresswoman Tubbs Jones noted that the promotion of adequate
labor standards and their effective enforcement by Peru would be
important factors in securing support for the Andean FTA among many of
her colleagues in Congress, and she urged the Peruvian Congress to
focus on these issues, noting that she is ``not so sure'' she supports
an FTA.
Meeting with President Alejandro Toledo, Foreign Affairs Minister
Manuel Rodriguez, Finance Minister Pedro Pablo Kuczynski, Trade
Minister Alfredo Ferrero, Production Minister David Lemor,
Peru's Chief FTA Negotiator Pablo de la Flor, Foreign Ministry
Undersecretary for the Americas Pablo Portugal, FTA Coordinator
Eduardo Ferreyros, Peru's Ambassador to Spain Fernando Olivera,
Peru's Ambassador to the United States Eduardo Ferrero, and
Congressman Luis Iberico
President Toledo opened the meeting by stating that Peru is in a
state of transition. After 10 years of dictatorship and corruption, the
country is making progress, both socially and economically. President
Toledo stated that part of the country's current strength comes from
its diversity and policy of social inclusion, noting that he is the
first democratically-elected president of indigenous background in 500
years.
President Toledo stated that one of the most pressing questions for
Peru today is how can it best benefit from globalization--both in terms
of spreading the benefits of globalization to all the people of Peru
and maintaining respect for Peru's diversity. President Toledo cited a
troubling survey in which 54 percent of the Latin American population
said it would prefer an authoritarian regime over a democratic one if
that regime could ensure economic growth, showing that Latin Americans
are desperate for jobs. President Toledo believes that trade is
synonymous with jobs, and this is why he wants to conclude an FTA with
the United States as quickly as possible.
Chairman Thomas stated that he believes the United States and its
neighbors should work to ensure that the democratically elected nations
of the Western Hemisphere, and not just China, prosper in the 21st
century. He stated that knowledge and transparency in business and
government are critical for such prosperity. Chairman Thomas also
emphasized that Peru's ATPDEA benefits will end in December 2006, and
therefore it is important to replace the unilateral program with a
quality, permanent free trade agreement.
President Toledo noted that Peru has experienced 47 months of
sustained economic growth, and in 2004, its GDP grew by 4.5 percent.
However, he stated that 23 percent of the country's population
continues to live in extreme poverty, earning less than $1 per day. As
one of sixteen children, seven of whom died before their first
birthday, President Toledo emphasized that he feels strongly about
helping the nation's poor.
President Toledo stated that trade is linked with job growth and
the fight against narco-trafficking in Peru. He urged his Minister of
Trade to conclude the FTA with the United States by the end of
September and asked for the delegation's help in meeting this goal.
President Toledo expressed concern that the longer the delay in
concluding an agreement, the more politicized the issue would become.
President Toledo also noted that he would not be President after July
2006, so he could sow the seeds of Peru's future development only by
promoting the FTA and other pro-growth economic policies.
Chairman Thomas welcomed President Toledo's ambitious goal of
concluding the FTA in September. Chairman Thomas stated that the United
States is prepared to conclude an FTA with any Andean country with
which it can come to agreement, although it would prefer that the final
agreement include at least Colombia, Peru, and Ecuador. He noted that
based on his conversations with President Toledo and other officials in
Peru, Peru appeared much more prepared to conclude an FTA with the
United States than either Colombia or Ecuador. Chairman Thomas asked
President Toledo to urge Colombia and Ecuador to move more quickly to
bring the negotiations to a conclusion.
President Toledo responded that he would do everything he could to
work with Colombia and Ecuador to conclude a cohesive Andean FTA. He
also noted that if a broader Andean FTA is not possible, Peru is
prepared to sign a U.S.-Peru FTA.
Congresswoman Tubbs Jones stated that her biggest concern is labor
conditions in Peru. She urged President Toledo to bear in mind that the
views of many Democratic Members of Congress concerning an FTA with
Peru would be heavily influenced by the country's labor laws and the
labor provisions included in the FTA.
Chairman Shaw noted that U.S. and Andean negotiators would soon be
meeting in Miami for the 11th round of trade negotiations. He urged
President Toledo to work with the other Andean countries so that they
could speak with one voice during the talks, which would help the
negotiations progress more rapidly.
Congressman Weller congratulated President Toledo on Peru's
economic growth and the completion of the Camisea liquefied natural gas
export plant. He expressed support and appreciation for the help of
Peruvian troops in Haiti, as well as Peru's cooperation with the
International Law Enforcement Academy to strengthen the effort against
narco-trafficking and criminal gangs.
Finance Minister Kuczynski stated that the Government of Peru is
trying to spread the message that Peru is moving forward and wants to
maintain this momentum. The FTA is a key element of this strategy and
the fight against poverty. He stated that Peru has doubled its exports
in the last four years and created thousands of new jobs. Minister
Kuczynski stated that ATPDEA benefits are not sufficient to secure
future growth, and Peru is looking to the FTA as a way to better foster
investment and security.
Minister Kuczynski also stated that Peru has high labor standards,
despite a decline in the size of the formal workforce and labor union
participation during the Fujimori government. The Minister stated that
the Toledo government is focusing on increasing the number of formal
jobs; currently more than 60 percent of workers operate in the informal
economy. Minister Kuczynski stated that the ATPDEA program has helped
to promote more jobs in the formal economy, and he cited the example of
one agricultural facility, the Campo Sol operation, which he visited in
the northern city of Trujillo. The facility has hired an additional
6,000 workers in the last year, each of whom receives social security
and pension benefits.
Peru's Chief FTA Negotiator Pablo de la Flor stated that Peru would
like to conclude the FTA in September, but some difficult issues,
particularly related to agriculture, still need to be resolved. He
noted that Peru has only a few sensitive agricultural products: corn,
rice, chicken hind-quarters, and certain dairy products. He indicated
that Peru would need flexibility in these areas in the FTA.
Chairman Thomas responded by stating that with its favorable
climate and ability to grow a wide variety of crops, Peru should focus
on specialty market products with high value in the marketplace. He
pointed to the sale of specialty coffees, which have grown dramatically
in the United States, as an example of a niche market.
Meeting with American Chamber of Commerce of Peru (Am Cham Peru)
The delegation met with representatives of Am Cham Peru to learn
about challenges facing U.S. companies operating in Peru. The Am Cham
representatives highlighted the unpredictable judicial system and
constantly changing rules for doing business in the country. The
company representatives noted that an FTA with Peru would bring an
improved investment climate, among other opportunities.
Chairman Thomas thanked the representatives of Am Cham for
providing useful information to U.S. policymakers about the investment
environment in Peru and urged their continued assistance as the FTA
negotiations proceed.
Visit to Iquitos and Briefing by Howell Howard, Deputy Economic
Counselor of U.S. Embassy in Peru, Regarding Peru's Environment
The delegation traveled to Iquitos on the Amazon River in Peru's
northeastern jungle area to view the massive volume of timber logged in
Peru's forests that is transported through Iquitos, the U.S. Naval
Medical Research Center, PetroPeru's oil refinery, and Peruvian Naval
and Police riverine bases along a 40 kilometer stretch of river, part
of a vast area where the Government of Peru has limited resources and
capacity to patrol.
During the visit, Mr. Howard briefed the delegation about the
environmental and economic issues facing the region. Mr. Howard told
the delegation that Peru's forests cover 60 percent of the country.
Eighty-three percent of Peru's forests are tropical and are some of the
most biodiverse areas in the world. Peru is home to 10 percent of the
world's plant species, nearly one-fifth of the world's bird species and
the most varieties of fish of any nation.
Mr. Howard explained that Peru faces several threats to its
biodiversity and lacks the capacity to implement stronger environmental
protections. Environmental government authorities in Peru are weak,
have very limited budgets, and have little influence in regions outside
of Lima.
According to Mr. Howard, the most serious threat to Peru's
biodiversity is deforestation, which is occurring at a rate of 250,000
hectares annually. Thirteen percent of the country's tropical forests
have been deforested. Coca cultivation, urban development, agriculture,
and logging are the major causes of such deforestation. Mr. Howard
stated that the vast majority of logging in the region, including an
estimated 80 percent of mahogany logging, is illegal.
Mr. Howard said that other environmental problems facing Peru
include heavy urban air and water pollution, limited water supplies in
Peru's major coastal cities due to receding snowpacks in the Andean
mountains, ocean pollution, and overfishing. The Governments of Peru
and the United States are working together to address Peru's
environmental problems through aid for capacity building, sustainable
development, combating illegal logging, and forest concessions, and
through the eventual implementation of an FTA.
According to Mr. Howard, Iquitos and the surrounding region known
as the Loreto Department could benefit from an FTA with the United
States because the agreement would promote exports of agricultural
goods and forest products from the area. The primary products harvested
in the region include timber, pijuayo (an Amazon palm), beans, yucca,
and fish.
The delegation learned about U.S. Government assistance to the
Loreto Department through the U.S. Agency for International Development
(USAID). USAID commitments to Loreto for 2002-2008 amount to
approximately $16 million. USAID supports several programs in Peru to
limit coca cultivation; promote additional licit economic opportunities
for marginalized populations, conservation and the sustainable
management of natural resources; and improve the capacity of Peruvian
institutions to enforce existing environmental laws and policies.
USAID also supports the Peru-Ecuador Border Development Program,
which helps to improve the quality of life for more than 50,000
indigenous people living along the Peru-Ecuador border by promoting
more productive agricultural practices, healthy practices such as
boiling water, the establishment of additional medical facilities, and
increased knowledge of human rights, among other things.
The delegation was also briefed on other USAID programs in the
region, including the provision of food for pregnant women and children
pursuant to the P.L. 480 Title II Food Security Program. USAID figures
indicate that the agency has distributed 513 metric tons of food under
this program. Additionally, USAID supports the Parks in Peril Program
in Loreto to promote the protection and appropriate management of
natural resources in Pacaya Samiria National Reserve; and the
Certificacion y Desarrollo Forestal (CEDEFOR) Project, which provides
technical assistance to logging interests and government entities
regarding the bidding process leading to grants of forest concessions,
boundary demarcation, land tenure issues, and forest management.
Finally, the delegation observed the U.S. Naval Medical Research
Facility, which was established in Iquitos in 1983, to conduct research
on infectious diseases that affect human health in Central and South
America. Mr. Howard stated that the Center is particularly important
for researching diseases affecting military personnel stationed in the
region.