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Farm tariffs, IPRs seen as main obstacles to US-Andean FTA

International Trade Daily | July 30, 2004

Farm Tariffs, Intellectual Property Rights
Seen as Main Obstacles to U.S.-Andean FTA

By Lucien O. Chauvin

LIMA, Peru—Tariffs on agricultural products and definitions of intellectual property rights, particularly for pharmaceuticals, are shaping up as the most contentious issues in the free trade negotiations between the United States and three Andean nations, Colombia, Ecuador, and Peru.

The third round of free trade talks for the U.S.-Andean trade pact was held in the Peruvian capital, Lima, July 26-30. Negotiations are expected to eventually include a fourth Andean nation, Bolivia.

Peru on July 28 presented U.S. negotiators with a list of products on which it would eliminate or reduce tariffs over the coming years. The Peruvian team announced that it would eliminate import tariffs on 2,868 items immediately after the trade pact was signed. Nearly all remaining tariffs would be eliminated within 10 years. In all, Peru offered to eliminate tariffs on 6,992 items within a decade.

In a surprise move, Peru’s chief negotiator, Pablo de la Flor, announced that sugar would be included on the list of agricultural products that would see an immediate elimination of import tariffs. The announcement included the caveat that the United States has not historically exported sugar to Peru. On the flip side, Peru exports approximately 40 tons of sugar annually to the United States.

The decision to include sugar on the list varies from the Agriculture Ministry’s list of "sensitive products" that need to be negotiated on a case-by-case basis.

"The free trade agreement will be beneficial for Peru and for Peruvian agriculture, but we need to ensure that sensitive products are not affected by subsidies granted by other countries in the negotiations," said Agriculture Minister Alvaro Quijandria.

Quijandria originally proposed a list of nine items, several of which he said could even be excluded from the free trade discussions, such as potatoes. Potatoes were first domesticated in Peru and the country has more than 4,000 varieties.

The fourth round of talks is scheduled for Sept. 13-17 in Chicago. Two additional negotiating rounds are scheduled for later this year—one in the United States and one in Ecuador. While talks are scheduled to conclude in December at a meeting in Miami, delegations from the four countries expect them to extend into early 2005.

Internal Andean Divisions

While the three Andean countries are striving to present a unified block in the talks, frictions arose during the Lima meeting over the speed with which to proceed.

Juan Carlos Elorza, representing Colombia’s business sector, said that Peru was pressuring too hard to conclude the talks by early next year. "The issues on the table are extremely delicate and need to be examined carefully. We must be careful not to move ahead too quickly," said Elorza.

In a July 28 news conference, De la Flor rejected the idea that Peru is attempting to move too fast. "Peru is following the set schedule for the negotiations during the six rounds, which everyone knows will conclude in a few months."

Farm Groups Oppose Pact

Peru’s Agricultural and Communities Front, which groups together more than a dozen associations of small-scale farmers, opposes plans to reduce import tariffs on agricultural products, arguing that Peru should not offer any reductions until the United States agrees to eliminate agriculture subsidies.

"The free trade agreement is going to destroy traditional agriculture in Peru. Millions of farming families are going to be pushed deeper into poverty by tariff-free imports," said Miguel Palacin, a leader of the front.

The front, as well as Peru’s largest umbrella union, the General Confederation of Peruvian Workers, wants an eventual free trade agreement to be put to a referendum, in which voters and not Congress will decide if the trade pact should be ratified.

IPR Discussions Suspended

Discussions on intellectual property rights were suspended during the Lima round after the U.S. team objected to a Colombian delegate. The U.S. negotiators rejected the participation of Colombia’s Carlos Correa on the negotiation team because he is not a government official.

Colombian representatives had a different opinion. During a press conference, Alberto Bravo, head of the Association of Pharmaceutical Companies of Colombia, said the United States balked at Correa "because he defends the rights of people, not monopolies."

The issue of pharmaceuticals is one of the thorniest problems between the Andean Nations and United States. Local pharmaceutical companies want the negotiations to include provisions established under the Andean Community of Nations (Ancom), which includes Colombia, Ecuador, and Peru, as well as Bolivia and Venezuela. An Ancom norm prohibits member countries from granting "second-use" patents—which allow pharmaceuticals patented for one use to be repatented for a second—a decision the United States argues violates the World Trade Organization’s Trade Related Aspects of Intellectual Property Rights (TRIPs). The United States defends second-use patents, arguing that companies have the right to patent and protect new uses. The WTO agrees.

The Ancom nations have been arguing over the issue internally, with Peru defending the right to grant second-use patents under TRIPs.

The debate on intellectual property rights has veered off the traditional path, with the Andean nations proposing that any agreement on property rights also deal with the issue of "biopiracy."

Luis Angel Madrid, an official in Colombia’s Foreign Ministry and Peru’s De la Flor argued in negotiations held in June in Atlanta that property rights should be extended to biodiversity to protect genetic resources and traditional indigenous knowledge.

The draft text on intellectual property rights states in Article 8 that each country would permit patents, including those on plants and animals. That provision contradicts a 1996 Ancom norm that prohibits patenting plants and animals.