San Jose Mercury News (US) - Fri, Jul. 14, 2006
Venezuela’s Chavez looms large over U.S. vote on Peru trade pact
By Pablo Bachelet
WASHINGTON - Free-trade agreements generally set tariffs on beef and commodities and deal with government procurement contracts and labor provisions. But as Congress prepares to vote on a contentious free-trade accord with Peru, the figure of Venezuelan President Hugo Chavez is looming large.
Supporters are casting the Peru trade agreement — which could come up for a vote by the end of the month and is the first such pact with a South American nation since a deal with Chile in 2003 — as a virtual referendum on Chavez, a virulent critic of President Bush.
Chavez says free-trade agreements with the United States are instruments used by Washington to subjugate the region’s poor.
Supporters of the Peru pact, which is facing strong opposition from congressional Democrats, say its rejection would not only be a victory for Chavez but also a blow to other allies in the hemisphere that aspire to closer ties with Washington.
"The agreement is a symbol of what other Latin American countries can achieve if they reject the demagogic policies of Mr. Chavez,’’ Rep. Clay Shaw, R-Fla., warned his colleagues at a July 12 hearing of the House Ways & Means Committee, which oversees trade issues.
"I hope that one day this agreement will be expanded to other Andean countries, such as Colombia and Ecuador,’’ he added. "What message would we send to those countries if, after all the positive actions taken by Peru, members pull the rug out from beneath them by rejecting this agreement?’’
Administration officials defend the pact, saying Peru already enjoys duty-free access to the U.S. market under a 1991 trade preference agreement that sought to encourage a non-drug-trafficking economy. Now key lawmakers and the Bush administration want to extend those unilateral preferences to free-trade deals that also benefit U.S. producers.
Rep. Jerry Weller, R-Ill., says U.S. corn farmers pay a 17 percent tariff when they export to Peru, whereas Argentine competitors pay only 3.4 percent. Under the agreement, the U.S. rate would go down to zero.
But the Peru deal has broader implications for Bush’s hemispheric agenda. A defeat would virtually doom a similar pact with Colombia, expected to go before Congress later this year, and would send a chilling message to the Caribbean Community and Uruguay, which have expressed interest in free trade arrangements with Washington. Ecuador’s free trade arrangement is on hold until the government resolves a conflict with a U.S. oil firm whose assets have been seized.
"We can turn our back on Peru by rejecting this agreement,’’ said Everett Eissenstat, the assistant U.S. trade representative for the Americas, "or we can seize this opportunity to strengthen our partnership with Peru and help promote economic growth, prosperity and political stability in Peru and throughout the Andean region.’’
This is not the first time the Bush administration and its congressional allies are underscoring the geopolitical implications behind trade deals. Last year, Bush argued that a free trade deal with five Central American countries and the Dominican Republic - known as CAFTA - would shore up the fragile pro-U.S. democracies recovering from decades of bloody civil wars. CAFTA passed by a two-vote margin in the House.
The Peruvians also have played the Chavez card. The country’s ambassador to the United States, Eduardo Ferrero, told Dow Jones news service that if the American Congress doesn’t support the agreement, they are going to be supporting Chavez’s position.
And Peruvian President-elect Alan Garcia, a moderate leftist, is credited with winning the presidency last month partly by portraying his opponent, Ollanta Humala, as a Chavez stooge. Garcia takes over July 28 from President Alejandro Toledo, who was in Washington this week lobbying for the pact.
Peru’s Congress already has approved the Peru FTA by a 79-14 vote.
Even business leaders are warning about Chavez.
``(Approval) will send a strong message that the U.S. stands by its friends and allies in regions where leaders like Hugo Chavez and Evo Morales are vying for influence,’’ Leon Trammell, the founder and chairman of conveyer belt builder Tramco, told a Senate panel. He was referring to Bolivian President Morales, a Chavez ally who in early May nationalized the oil and gas industry.
The Chavez threat doesn’t seem to be swaying key Democrats.
Rep. Sander Levin, a Michigan Democrat, said Chavez came to power because free trade deals fail to ensure that the poor get the benefits of globalization, because labor provisions fall short.
"You need to look at why he’s there,’’ he said.
Democrats want tough labor standards included in the text of the agreement.
Supporters say labor standards have improved under Toledo and they are confident they can secure enough Republican lawmakers to overcome Democrats’ reservations. Unlike CAFTA, the Peru free trade arrangement does not affect many powerful corporate constituencies such as U.S. sugar producers and textile groups.
Toledo, after speaking to lawmakers on both sides of the aisle, hopes there will be a vote before the House goes into summer recess. If not, he was still confident the pact would pass.
"We have a majority,’’ he said.
THE U.S.-PERU FREE TRADE AGREEMENT
• Peru would be the 10th nation in the hemisphere to have a free trade agreement with the United States, joining Mexico, Canada, Chile, Honduras, Nicaragua, Costa Rica, El Salvador, Guatemala and the Dominican Republic.
• The U.S. government has completed negotiations with Colombia and is still negotiating with Panama. Ecuador is on hold because of a dispute with a U.S. oil company. Uruguay and Caribbean Community have expressed interest in starting talks.
• More than 90 percent of current U.S. agricultural exports to Peru, and 80 percent of all U.S. industrial products, will enter Peru duty-free immediately. All duties eliminated within 17 years.
• Under the Andean Trade Promotion and Drug Eradication Act, Peruvian exports already enter the United States duty-free. Enacted in 1991 and renewed in 2002, the law expires at the end of the year.
Peru must "effectively'' enforce its labor laws. Failure could lead to $15 million fine.