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U.S. trade issue looms over Colombia and Peru

Houston Chronicle, USA

U.S. trade issue looms over Colombia and Peru

Renewal of special preferences waits on Congress

By Joshua Goodman, Associated Press

26 August 2006

BOGOTÁ, COLOMBIA - Major exporters from Colombia fear being blindsided by tariffs up to 20 percent on key exports to the United States unless special trade preferences designed to wean the Andean nations off of cocaine production are renewed before their expiration Jan. 1.

Trade negotiators say their country is being unfairly punished because of the White House’s reluctance to push a bilateral free trade deal through Congress ahead of November’s midterm elections.

However, President Bush said last week in a letter to Congress that he wants the agreement with Colombia.

Neighboring Peru is also anxiously watching the clock tick down, hoping for U.S. legislative approval on its own pending free trade pact before the end of the year.

The deal with Colombia would be Washington’s biggest in the hemisphere since the 1994 North American Free Trade Agreement. It’s also a unique test of Washington’s leadership in a region where trade deals that lock in billion-dollar subsidies for U.S. farmers have been sharply criticized.

"For us it’s a question of life or death," said Ivan Amaya, leader of Colombia’s Association of Textile Manufacturers.

Washington granted the privileges covering thousands of products in 1991 to help four Andean countries - Colombia, Peru, Ecuador and Bolivia - diversify their economies away from production of coca, the base ingredient of cocaine.

Against stiff competition from Chinese and other manufacturers, Colombia’s textile industry last year exported $600 million worth of clothing duty-free to the United States - a third of its total production. But the industry now stands to lose millions of dollars when unilateral trade privileges expire and 18 percent tariffs are restored.

The situation is similarly desperate for other major exporters like Colombia’s flower industry, the bulk of whose $758 million in U.S. sales take place the weeks before Valentine’s Day in February.

President Alvaro Uribe, the United States’ staunchest ally in Latin America, has bet heavily on a trade agreement to replace expiring privileges.

In February, Uribe risked his own re-election chances and traveled to Washington to conclude talks over a deal that eliminated overnight all but a fraction of tariffs on the $14.3 billion in goods traded annually between the two countries.

The deal was widely criticized as one-sided because, by locking in current trade preferences, Colombia was effectively turning a blind eye to the $17 billion that U.S. farmers receive annually in government subsidies, making it extremely tough for farmers to compete.

Key U.S. congressmen attending Uribe’s inauguration Aug. 7 for a second four-year term told Colombians to expect no action this year on the deal.

Unlike Colombia, Peru is cautiously optimistic that its free trade agreement will be approved by U.S. lawmakers before Dec. 31.

But South American negotiators and Capitol Hill staffers worry about a possible November victory by Democrats that would coincide with another looming deadline: the expiration in July 2007 of legislation that gives the White House "fast-track" authority to negotiate trade deals with minimal interference - a take it or leave it vote - from Congress.