Statements by Sens. Bob Graham (D-Florida) and John McCain (R-Arizona) upon introduction of the Andean Trade Preference Expansion Act, March 13, 2001

Statements by Sens. Bob Graham (D-Florida) and John McCain (R-Arizona) upon introduction of the Andean Trade Preference Expansion Act, March 13, 2001

By Mr. GRAHAM (for himself, Mr. DEWINE, Mr. HAGEL, Mr. BREAUX, Mr. MCCAIN, Mr. DODD, Mr. THOMPSON, Mr. BIDEN, and Mr. NELSON of Nebraska):

S. 525. A bill to expand trade benefits to certain Andean countries, and for other purposes; to the Committee on Finance.

Mr. GRAHAM. Mr. President, today I introduce a bill along with my colleagues Senators DEWINE, HAGEL, BREAUX, MCCAIN, DODD, THOMPSON, BIDEN, and BEN NELSON to introduce the ``Andean Trade Preference Expansion Acts,'' a bill that would provide additional trade benefits to the countries of Bolivia, Colombia, Ecuador, and Peru.

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The Andean Trade Preference Act, commonly known as ATPA, was passed in 1991. That legislation is set to expire. If we are serious about halting the flow of drugs into this country, we must not let this happen. If we are committed to stabilizing the situation in Colombia, we must act this year, to both extend and expand those trade benefits.

The office of the United States Trade Representative recently published a report assessing the operation of the Andean trade agreement so far. The report concluded that this agreement is strengthening the legitimate economies of countries in the region and is an important component of our efforts to contain the spread of illicit activities. Export diversification in beneficiary countries is increasing, net coca cultivation has declined slightly. Although there is still progress to be made, these countries are working constructively with the United States on issues of concern including working conditions and intellectual property protection.

Despite this success, renewal of ATPA in its current form is not our goal. The landscape has changed since 1991.

Perhaps the most significant alteration was last year's passage of the ``Trade and Development Act of 2000,'' which provided significant new trade benefits to countries of the Caribbean Basin Initiative. As a result of enhanced trade benefits to these countries, the Andean region stands to lose a substantial number of apparel industry jobs--up to 100,000 jobs in Colombia alone. At least 10 U.S.-based companies that purchase apparel from Colombian garment manufacturers have already indicated their near-term intentions to shift production to Caribbean countries due to the significant cost savings associated with the new trade benefits afforded the region. Some of these U.S. companies have utilized Colombia as a manufacturing base for more than 10 years, providing desperately needed legitimate employment to the Colombian economy.

The immediate reaction of these companies to enhanced Caribbean trade benefits creates a dilemma. Clearly, it does not make sense for Congress to provide foreign aid on the one hand, and implement trade legislation that puts tens of thousands of people out of work on the other. This bill will address that critical, unintended contradiction by harmonizing the trade benefits of the Caribbean and Andean nations.

Specifically, our bill would extend duty-free, quota-free treatment to apparel articles assembled, cut or knit in Andean beneficiary nations using yarns and fabric wholly formed in the United States, and provide benefits to non-apparel items that were previously excluded from the Andean trade preferences package. These new benefits will create parity with the Caribbean Basin Initiative nations as well as expand an important source of economic and employment growth for the U.S. textile and apparel industry.

The United States is at now a critical juncture with its neighbors in the Andean region.

Last year, the United States government responded generously to Colombia's needs by providing a supplemental appropriations package of more than $1.6 billion dollars to help the country in its time of crisis. These funds were in addition to over $4.0 billion being spent by Colombia itself.

Fundamental to Plan Colombia, and to the government's ability to succeed in its efforts to safeguard the country, will be efforts to encourage economic growth and provide jobs to the Colombian people. Today in Colombia more than one million people are displaced, the unemployment rate is nearly 20 percent and Colombia is experiencing the worst recession in 70 years. Without new economic opportunities, more and more Colombians will turn to illicit activities to support their families or seek to join the growing numbers of people who are leaving the country to find a better, safer future for their families.

This ``trade plus aid'' approach to stabilizing the Andean region has been widely embraced. In its March 2000 report. ``First Steps Toward a Constructive U.S. Policy in Colombia,'' a Task Force I co-chair with General Brent Scowcroft recommended the extension of the ATPA, to include the same benefits as those contained under the Caribbean Basin Initiative.

Although this bill provides benefits to all ATPA beneficiaries, it is particularly critical to Colombia, which in 1998 exported 59 percent of all textiles and apparel from the Andean region to the U.S., two-thirds of which were assembled and/or cut from U.S. yarns and fabric. Colombian President Pastrana recognizes this. In his visit to Washington last week he stressed that access to U.S. markets was among the top priorities.

On a more comprehensive scale, passage of this legislation is critical to ensure that all nations in the Western Hemisphere can maintain their long-term competitiveness with Asian nations, particularly in the textile industry. At present, the textile products of most Asian nations are subject to quotas imposed by the Multi-Fiber Agreement, now known as the Agreement on Textiles and Clothing. This restriction on Asian textiles has enabled the nations of the Western Hemisphere to remain competitive, and further, the Andean region--specifically Colombia--has become a significant market for fabric woven in U.S. mills from yarn spun in the U.S. originating from U.S. cotton growers.

However, in 2005, these Asian import quotas will be phased out. At that time, textile production in both the Andean region and the Caribbean basin will be placed at a distinct and growing disadvantage. Disinvestment in the region will occur, reducing the incentive to use any material from U.S. textile mills or cotton grown in the United States.

The Congress must act this year to renew and expand trade benefits for the Andean countries. If we do not move forward, the current benefits will expire and these countries will lose an important means of developing legitimate industries and employment.

Mr. DeWINE. Mr. President, the illicit drug trade in the Andean region of South America is thriving. Lagging economies, weak law enforcement, and corrupt judiciary systems among many countries in the region have created an environment ideal for drug trafficking.

The chaotic situation in Colombia illustrates this. The nation is suffering its worst recession in over 70 years. The unemployment rate is at nearly 20 percent. Not surprisingly, as the Colombian economy has worsened, the country's coca cultivation has skyrocketed, becoming the source of nearly 80 percent of the cocaine consumed in the United States. To make matters worse, as the illicit drug money has poured in, violent insurgent groups in Colombia have used it to fund their guerilla movements, movements creating instability not only within Colombia, but also across the entire Andean Region.

Because of the dangerous and increasingly chaotic situation in the region, my colleagues--Senators GRAHAM, MCCAIN, HAGEL, BREAUX, DODD, and THOMPSON--and I are introducing the ``Andean Trade Preference Expansion Act,'' a bill that will help establish much-needed stability and security in the Andean Region by promoting a strong economic environment for enhanced trade throughout the Western Hemisphere.

This legislation is timely and important. The current Andean Trade Preference Act, which authorizes the President to grant certain unilateral preferential tariff benefits to Bolivia, Colombia, Ecuador, and Peru, is set to expire on December 4, 2001. We need to renew and expand this trade act not only because of its benefits for U.S. companies trading in the region, but also because it encourages economic development in Andean countries and economic alternatives to drug production and trafficking. I fear, Mr. President, that if the Andean Trade Preferences Act is not renewed by the end of this year, the economic and political situation in the Andean Region likely will destabilize further, threatening to expand an already booming illicit drug trade.

The economic situation in the Andean Region is growing worse by the day. The nations within the region have been struggling to pull themselves out of one of the worst economic crises in decades. The recession has been more severe than anticipated, and the Andean Development Corporation recently forecast negative rates of growth for next year in Colombia, Ecuador and

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Venezuela. Only Peru and Bolivia will grow at all, and marginally at best.
The Colombian civil war and its spillover effect have further weakened domestic economies. Political instability has deterred foreign investment, and increased capital flight has put pressure on domestic currencies. While there are a few signs of possible recovery--including an increase in oil prices that will be helpful for Ecuador, Colombia and Venezuela--there is concern that the Andean region could experience a destabilizing financial crisis similar to the recent one in Asia.

Last year, Congress and the Clinton Administration tried to address political instability in the Andean region through passage of ``Plan Colombia''--the emergency supplemental plan developed to address the political and social instability in the Andean region. The Plan established programs to strengthen Colombian government institutions and promote alternative crop development programs throughout the region. A key element of Plan Colombia is that it recognizes that if we fight only the Colombian drug problem, we risk creating a ``spillover'' effect, where Colombia's drug trade shifts to adjacent countries in the region.

For Plan Colombia to succeed, it is crucial that we help bolster the faltering economies of the Andean countries--namely Colombia, Peru, Bolivia, and Ecuador--so they don't turn to the drug trade as an means for economic livelihood. The legislation we are introducing today--the Andean Trade Preference Expansion Act--will help embolden Plan Colombia and will help it succeed by increasing trade and economic opportunities within the region. Let me explain.

The recent implementation of the Caribbean Basin Initiative, which provides enhanced trade benefits to nations trading with Caribbean countries, is having the unintended consequence of shifting economic opportunities away from the Andean Region to the Caribbean Basin. Such a shift is further shrinking the economies within the Andean Region. Colombia, for example, stands to lose up to 100,000 jobs in the apparel industry because of the CBI. The simple fact is that companies, including U.S.-based businesses, are moving production to the Caribbean Basin to capitalize on the significant cost savings associated with the new CBI law. Already, at least 10 U.S.-based companies that purchase apparel from Colombian garment manufacturers have indicated their intentions to shift production to the Caribbean.

Our Andean Trade Preference Expansion Act would help correct for this unintended economic displacement by working in tandem with the CBI, so that we don't rob one region in our hemisphere to pay another. Specifically, our bill extends duty-free, quota-free treatment to apparel articles knit, assembled, or cut in an ATPA beneficiary nation that use yarns and fabrics wholly formed in the United States. This creates a measure of parity with Caribbean nations that currently receive trade preferences under the CBI. In addition, goods other than apparel that previously were not eligible for trade preferences under the current Andean Trade Preference Act would receive the NAFTA tariff rate.

Although our bill provides benefits to all ATPA beneficiaries, it is particularly critical to Colombia, which, in 1998, exported to the United States 59 percent of all textiles and apparel from the Andean region. Two-thirds of those exports were assembled and/or cut from U.S. yarns and fabrics. We cannot allow Colombia's economy to take this kind of hit. Plan Colombia simply cannot be effective unless Colombia can improve its economy and create and maintain job opportunities. I believe that our new legislation will help prevent further economic destabilization and stands to promote future economic growth.

Ultimately, we--as a nation--stand to lose or gain, depending on the economic health of our hemispheric neighbors. A more aggressive trade policy in the hemisphere is not only important for increasing markets for U.S. companies, but it also enhances stability and promotes security in the hemisphere. It is important to remember that a strong, and free, and prosperous hemisphere means a strong, and free, and prosperous United States. It is in our national interest to pursue an aggressive trade agenda in the Western Hemisphere to combat growing threats and promote prosperity.

I urge my colleagues to join us in support of the Andean Trade Preference Expansion Act. It is the right thing to do for our neighbors and for our businesses here at home.

Mr. McCAIN. Mr. President, I would like to join with Senators GRAHAM, HAGEL, DEWINE, DODD, BIDEN, BREAUX, and THOMPSON today in introducing this important legislation to reauthorize the Andean Trade Preference Act. This legislation will renew and expand duty-free tariff treatment to our important trade partners: Bolivia, Colombia, Ecuador, and Peru. I would like to emphasize to my colleagues the importance of acting on this legislation, because the existing Andean Trade Preference Act will expire on December 4.

Having recently visited the region, I would like to assure my colleagues that this program plays an important role in aiding the economic development of our Andean allies, and stabilizing fragile democracies in the region. The existing Andean Trade Preference Act has helped two-way trade between the United States and the region to nearly double in the 1990s. During this time, U.S. exports grew 65 percent and U.S. imports increased 98 percent. In addition, the program is responsible for an increase in industrial and agricultural imports from the Andean beneficiary countries. This economic diversification is beneficial for economic growth in the Andean region, and will reduce pressure for the citizens of the region to become involved in the drug trade.

However, this program must be expanded to be truly effective. According to a recent study by the Congressional Research Service, only 10 percent of the imports from the Andean region enter the United States exclusively under the provisions of the existing Andean Trade Preference Act. I join with my colleagues in supporting Senator Graham's legislation, because it plays an important first step in the reauthorization process by extending to the Andean region similar trade benefits to what the Congress voted to give the Caribbean region last year. During his confirmation hearing earlier this year, Ambassador Zoellick called for a ``renewed and robust Andean Trade Preference Act.'' I hope that my colleagues in the Senate will consider the United States Trade Representative's recommendations, and those of our allies in the Andean region, who have proven that they need expanded duty and quota-free treatment for their imports.

Many of us have had the benefit of traveling to Colombia over the past few months to observe the American-funded drug eradication efforts there, and to discuss Plan Colombia with the region's leaders. During my visit to Colombia in February, President Andres Pastrana made clear that liberalized trade with the United States, in the form of renewal and expansion of the Andean Trade Preference Act, was a critical pillar of his strategy to promote alternatives to the drug trade in his country. Plan Colombia is premised upon reducing the power and allure of the narco-traffickers and their rebel supporters who threaten America's interest in a democratic, prosperous, and stable Western Hemisphere. While the military component of America's assistance package remains controversial at home, expanding our trade relationship with Colombia, a nation of industrious people and vast natural resources, is a logical extension of our compelling interest in strengthening the Colombian state and providing its people with rewarding economic opportunities in the legitimate economy.

It is also important to view renewal and expansion of the Andean Trade Preference Act in terms of our larger trade agenda with our Latin American neighbors. Early reauthorization of this program will show our trade partners that the United States is seriously engaged in strengthening our trade relations and promoting interdependence in the region. It is my belief that the United States should pursue four policies this year in order to accomplish our mutually beneficial trade objectives with our Latin American partners:

1. Early renewal of the Andean Trade Preference Act;

2. Passage of trade promotion authority for the President;

3. Completion of negotiations on a free trade agreement with Chile; and

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4. Accomplishment of serious progress on the Free Trade Area of the Americas negotiations in order to meet an early conclusion of these negotiations in 2003.

I look forward to working with the President and my colleagues in the Senate to pass this legislation in a timely manner before the December expiration. It is in our nation's economic and national security interests to reauthorize and expand trade benefits for the Andean region.

As of March 13, 2001, this document was also available online at http://thomas.loc.gov/cgi-bin/query/B?r107:@FIELD(FLD003+s)+@FIELD(DDATE+20010313)