LATIN AMERICAN TRADE BI-ANNUAL - Free trade spreading through Latin America

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Peru, Colombia are next on listBy Peter A. Buxbaum, AJOTThe United States Congress is considering two more free trade agreements with Latin American countries: Peru and Colombia. This continues the trend of opening Latin American countries to free trade. Congress passed DR-CAFTA, a free trade agreement with the Dominican Republic and Central American countries, last year, and a free trade agreement with Chile the year before.
Tom Mouhsian, associate director for western hemisphere affairs at the US Chamber of Commerce in Washington is looking forward to the passage and implementation of these new agreements. He points with pride to the increased exports the US has enjoyed since the implementation of the US Chile free trade agreement. While DR-CAFTA has yet to be fully implemented, Mouhsian expects similar gains from that agreement as well.
“The Peru free trade agreement was voted on favorably in committee in both the House and the Senate,” he noted. “Then Congress recessed, but we expect a vote in both chambers when Congress returns in September.
“The entire business community is behind this free trade agreement,” he added. “This time there is no opposition.”
When DR-CAFTA passed the Congress last year, it enjoyed only slim margins, thanks to strong lobbying efforts by sugar interests, and, to a lesser extent, from the textile industry. “There was wide support for DR-CAFTA among the business community,” Mouhsian said. “But sugar growers were having a problem due to increases in sugar quotas from the Dominican Republic.”
The textile sector also voiced opposition to DR-CAFTA due to technical objections to certain rules of origin, but these were worked out before passage of the agreement, according to Mouhsian. DR-CAFTA supporters also had to beat back opposition from labor groups, a constituency that may also cause some political problems for the Peru and Colombia FTAs.
Peru represents a smaller market than that covered by DR-CAFTA. The latter conducts $32 billion in annual trade with the US while the Peru market is on the order of $7.5 billion, including $5 billion in imports and $2.5 billion in exports. But the Peru FTA will create a good deal of opportunity for US exporters, according to Mouhsian.
Some Peruvian producers already enjoy duty-free access to US markets, thanks to the Andean Trade Preference and Drug Eradication Act of 2002. That measure eliminated duties for certain Peruvian commodities such as textiles, asparagus, fish, flowers, and jewelry. “They built up their industries in those niche areas and it was not hurting our economy because we were not producing those products in significant quantities,” Mouhsian explained. “But their market is still largely closed to the US.”
The booming mining sector in Peru has created strong demand for US manufacturing products, according to Mouhsian. US manufacturers of nuclear boilers and heavy construction equipment will see their products become all the more competitive, he said. “With what they earn from trading with us, they have money to spend on US products,” Mouhsian contended.
Besides manufactured goods, Mouhsian expects the Peru FTA to contribute to significant gains for US exports of corn, beef, pork, dairy products, poultry, and wheat. “US wheat faces a 56% tariff in Peru,” said Mouhsian. “With this agreement it will be going down to zero and will help us to compete with Argentinean wheat.”
The free trade agreement with Colombia was concluded in February and will soon be forwarded for work on Capitol Hill, according to Mouhsian. Some points of contention include health standards for food and live animals. “The US asked, and Colombia agreed, to accept the US Department of Agriculture’s certification process,” he said. “It’s great that they were able to work that out.”
Colombia offers a much bigger market than Peru for US exporters and the free trade agreement with Colombia also embodies strategic priorities related to the war on drugs. “It provides the economic impetus for farmers and agr

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Peter Buxbaum has been writing about international trade and transportation, as well as security, defense, technology, and foreign policy, for over 20 years. Besides contributing to the AJOT, Buxbaum's work has appeared in such leading publications as [em]Fortune, Forbes, Chief Executive, Computerworld, and Jane's Defence Weekly[/em]. He was educated at Columbia University.