May 17, 2007

The Andean Trade Preference Act (ATPA) and Bolivia

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The Bolivian Government is currently lobbying the US Government for the extension of the ATPA. An official delegation is in Washington, DC talking to congressmen to convince them to vote for an extension of that program. However, the Bolivians are finding difficulties in doing their job. According to reports, they have found missinformation as well as outright opposition. An outspoken opponent has been Sen. Charles Grassley (R), the Iowa Senator and Ranking Member of the powerful Committee on Finance, who said the following as he was speaking on the floor of the Senate yesterday:

"As for Bolivia and Ecuador, I see no reason to further extend ATPA benefits. In fact, it boggles my mind that the governments of Ecuador and Bolivia would even ask us for extensions of these trade preferences. After all, the current leaders of those two countries have based their careers on attacking U.S. policies—our trade policies in particular. Yet, ironically, they wrap their arms around one U.S. trade law, the ATPA. Why? Because under this program they can sit back and receive duty-free access to our market no matter how irresponsibly they act. Apparently, it doesn’t matter to them that Ecuador expropriated the assets of its largest foreign investor, a U.S. company, and subsequently sent in troops to guard the facilities that it seized. Apparently, it doesn’t matter that President Morales of Bolivia nationalized Bolivia’s hydrocarbon sector and ordered the Bolivian military to occupy gas fields. President Morales also threatened to evict foreign companies, including U.S. companies, unless they turned the titles to their properties over to the state. Well, the fact is, those actions matter to me. We should not reward the bad behavior of those two governments by maintaining unilateral trade preferences on their exports to the United States. We should not let ATPA evolve into an entitlement program. Instead, we should allow ATPA to lapse, and then see what type of economic relationships the governments of Bolivia and Ecuador want to establish with the United States. For starters, those relationships must be based on a genuine respect for the rule of law."

The remarks of the Senator from IA could signal a problem for the Morales government. Bolivia is relying more and more on this program to increase employment, trade, growth and economic stability. A recent report by the IMF is very optimist on the performance of the Bolivian economy.

"These are historical times for Bolivia and I feel privileged for the opportunity to observe these developments closely. The country faces today both opportunities and challenges—the opportunity of taking advantage of vast natural resources; and the challenge of managing those resources efficiently to promote growth, employment, and social inclusion. Bolivia is well placed to address these challenges. The macroeconomic context is relatively strong, the external conditions favorable, and debt relief has helped significantly reduce the constraints from this source. Bolivian policy makers have incorporated many lessons from the country's history—in particular the importance of economic stability as a necessary condition for progress towards those broader objectives. While ownership of a home-grown strategy for the future is of paramount importance, lessons and experiences from other countries and regions that have made this transformation may also be extremely useful for Bolivia at this time. In particular, attracting new and highly productive investments from the public and private sectors should be one of the highest policy priorities for the coming years."

The newpaper La Razon published the following graph depicting the increased dependence of the Bolivian economy on the ATPA program.



Furthermore, the Third Report to the Congress on the Operation of the Andean Trade Preference Act as Amended April 30, 2007 says:

"U.S. imports under the ATPA from Bolivia rose 6 percent, from $157 million in 2005 to $166 million in 2006. The top U.S. import under ATPA/ATPDEA from Bolivia was jewelry (primarily gold) and parts, which accounted for 28 percent of ATPA/ATPDEA entries in 2006. U.S. imports of jewelry and parts from Bolivia increased 16 percent, from $65 million in 2005 to $75 million in 2006. The second largest ATPA/ATPDEA entry was apparel ($31 million), which accounted for 21 percent of ATPA/ATPDEA entries from Bolivia in 2006. Apparel imports under ATPA/ATPDEA fell 12 percent from 2005 to 2006. Other leading ATPA/ATPDEA entries in 2006 were petroleum products ($27 million), tungsten concentrates ($17 million), and raw cane sugar ($7 million)."
I think it is undisputable that the benefits of the ATPA are having a significant effect on the Bolivian economy. If the US Congress decides to agree with Sen. Grassley, it would be a big blow for the Bolivian economy and it would have many ripples in the political arena as well. Many of the people who are benefiting from this program are people working in the textile industry in the difficult city of El Alto.

Links:

Latin America: Building on Recent Trend and Sustaining Rising Prosperity

Floor Statement of Senator Chuck Grassley on May 16th, 2007

Third Report to the Congress on the Operation of the Andean Trade Preference Act as Amended