Trade Preference Extension for Andean Countries Crucial for Development

International aid agency Oxfam America welcomed action today by the House of Representatives to extend US trade preference programs with the Andean countries of Bolivia, Colombia, Ecuador and Peru, but expressed disappointment that the extension is only for eight months. Oxfam called on the US Senate to follow suit in order to prevent the programs from expiring on June 30th.

“Congress did the right thing today in extending trade preferences for Andean countries, but a permanent extension of these programs is needed,” said Raymond C. Offenheiser, President of Oxfam America. “In a region where half of the population lives in poverty, trade preferences have created millions of jobs and made it possible for Andean countries to export products like clothing and jewelry, cut flowers and asparagus to the United States duty-free for more than 15 years.”

Andean and other developing countries have held preferential duty-free market access to the US as a means of stimulating economic growth and poverty reduction. These preference programs have contributed to the development of manufacturing and agricultural sectors in many developing countries. They have also helped create jobs, in many cases for women, who have relatively few economic alternatives. Businesses in the US have also benefited from preferences, relying on goods imported duty-free to be used as inputs into products that are manufactured here. Furthermore, requirements for participation preference programs have been used to bring about greater respect for workers’ rights.

“Continuation of the preference programs will support additional growth and further stimulate export diversification in these growing economies, harnessing the opportunity of trade as a way of achieving sustained economic growth and poverty reduction,” said Offenheiser.

The United States is the Andean countries’ most important trading partner. Over half of Andean country exports to the United States now enter under the Andean Trade Preference Act (ATPA). An estimated 2.3 million jobs in the Andean countries depend on these exports under ATPA. For example, two-thirds of Bolivia’s exports under ATPA are manufactured products such as jewelry, apparel, and wooden furniture, and the vast majority of companies involved in their manufacture are small and micro-enterprises that provide decent, formal-sector jobs. Non-traditional exports like cut flowers and asparagus have grown particularly rapidly in Andean countries under ATPA, even though petroleum-based products still make up about two-thirds of the value of exports that benefit from this preference program.

Poverty and inequality continue to be pervasive in Andean countries, with the richest 10 percent of the population taking home over 40 percent of national income, while the poorest 10 percent survive on less than 1.4 percent. Poverty in rural areas has been the driver of continued illicit crop cultivation in the Andean region, where more than 98 percent of the world’s coca leaf is cultivated. As long as poverty persists in these countries, farmers will continue to turn to illicit coca cultivation to help pay for basic essentials.

“Poverty and inequality continue to be pervasive in Andean countries, a situation that can generate social unrest, spur migration, and encourage illicit crop cultivation,” continued Offenheiser. “These problems need to be addressed through US foreign policy and counter-narcotics strategy, but alternative development efforts and preferential access to the US market will continue to play a pivotal role.”