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US-Peru economic relations and the US-Peru Trade Promotion Agreement

CRS Report for Congress

U.S.-Peru Economic Relations and the U.S.-Peru Trade Promotion Agreement

July 27, 2007

M. Angeles Villarreal

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On December 7, 2005, the United States and Peru concluded negotiations on the U.S.-Peru Trade Promotion Agreement (PTPA). President Bush notified the Congress of the United States’ intention to enter into the PTPA on January 6, 2006, and the agreement was signed on April 12, 2006 by U.S. Trade Representative Rob Portman and Peruvian Minister of Foreign Trade and Tourism Alfredo Ferrero Diez. The PTPA is a comprehensive trade agreement that, if approved by Congress, would eliminate tariffs and other barriers in goods and services trade between the United States and Peru. The approval and implementation of a PTPA is a high priority for the Peruvian government. Peruvian President Alan Garc�a has met with President Bush and Members of Congress on several occasions in the United States to stress the importance of the agreement for Peru.

The pending PTPA would likely have a small net economic effect on the United States because U.S. trade with Peru accounts for a small percent of total U.S. trade. For Peru, the impact would be more significant because the United States is Peru’s leading trade partner. In 2006, 23% of Peru’s exports went to the United States, and 16% of Peru’s imports were supplied by the United States. In that same year, Peru accounted for 0.5% of total U.S. trade. Peru ranks 43rd among U.S. export markets and 42nd as a source of U.S. imports. The dominant U.S. import item from Peru is gold (24% in 2006) and the leading U.S. export items to Peru are petroleum oils and related products (9% in 2006).

Upon implementation, a PTPA would eliminate duties on 80% of U.S. exports of consumer and industrial products to Peru. An additional 7% of U.S. exports would receive duty-free treatment within five years of implementation. Remaining tariffs would be eliminated ten years after implementation. A PTPA would make the preferential duty treatment for selected U.S. imports from Peru permanent. The United States currently extends duty-free treatment to imports from Peru under the Andean Trade Preference Act (ATPA; Title II of P.L. 102-182), enacted on December 4, 1991 and reauthorized under the Andean Trade Promotion and Drug Eradication Act (ATPDEA; Title XXXI of P.L. 107-210). The preference program is scheduled to expire on February 29, 2008. Implementing legislation for a PTPA may be considered by the U.S. Congress under Title XXI (Bipartisan Trade Promotion Authority Act of 2002) of the Trade Act of 2002 (P.L. 107-210), which requires an expedited process with limited debate and an up or down vote.

Implementing legislation has not been introduced. On June 28, 2006, the Peruvian Congress voted 79 to 14 to approve the PTPA. On May 10, 2007, Congress and the Administration reached an agreement on a new bipartisan trade framework that calls for the inclusion of core labor and environmental standards in the text of pending and future trade agreements. On June 25, 2007, the United States reached an agreement with Peru on legally-binding amendments to the PTPA on labor, the environment, and other matters to reflect the bipartisan agreement of May 10. On June 27, 2007, Peru’s Congress voted 70 to 38 in favor of the amendments to the PTPA. This report will be updated as events warrant.

 source: Open CRS