U.S. and Peru Sign Free Trade Agreement (Congressional Approval, Etc. Still Required)

International Trade Commission (ITC) sources have previously stated that the term "trade promotion agreement" (TPA) is essentially interchangeable with the term "free trade agreement" (FTA). These sources stated that the term TPA is being used for the agreement with Peru and with other Andean countries such as Colombia and Ecuador, so that a future Andean FTA (i.e., AFTA) would not be confused with the existing Australia FTA (which is abbreviated as "AFTA").

In May 2004, the U.S. initiated FTA negotiations with three Andean nations (Peru, Colombia, and Ecuador). In February 2006, the U.S. announced that it had concluded negotiations with Colombia. The USTR states that discussions are ongoing with Ecuador and Bolivia has participated as an observer and could become part of the agreement at a later stage. (See ITT's Online Archives or 03/01/06 news, 06030105, for BP summary of the conclusion of negotiations with Colombia.)

Next Step in Implementing PTPA is Congressional Approval

BP has previously reported that now that the PTPA is signed, the next step is expected to be for the President to formally submit the PTPA implementing legislation package (PTPA, implementing legislation, and statement of administrative action) to Congress. Congress would then have 90 legislative days to consider the PTPA implementing legislation, which cannot be amended.

It is expected that if the PTPA implementing legislation is passed by Congress (both House and Senate), it could then be signed into law by the President, who would subsequently issue a proclamation implementing the PTPA.

Highlights of PTPA

According to an earlier summary by the USTR, the following are highlights of the PTPA (partial list):

80% of U.S. exports of consumer and industrial products to become duty-free immediately. The USTR states that 80% of U.S. exports of consumer and industrial products to Peru will be duty-free immediately upon entry into force of the agreement, and an additional seven percent will be duty free within five years. All remaining tariffs will be eliminated within ten years.

2/3 of U.S. farm exports will become duty-free immediately. More than two-thirds of current U.S. farms exports to Peru will become duty-free immediately. Items that will receive immediate duty-free treatment include high qualify beef, cotton, wheat, soybeans, soybean meal and crude soybean oil; key fruits and vegetables including apples, pears, peaches, and cherries; almonds, and many processed food products including frozen French fries, cookies, and snack foods.

The USTR notes that tariffs on most remaining U.S. farm products will be phased out within 15 years, with all tariffs eliminated in 18 years. U.S. farm products that will benefit from improved market access include pork, beef, corn, poultry, rice, fruits and vegetables, processed products and dairy products.

Duty-free treatment for qualifying textiles and apparel. The USTR's fact sheet also states that textiles and apparel will be duty-free and quota-free immediately if the products meet the agreement's rule of origin, promoting new opportunities for U.S. and Peruvian fiber, yarn, fabric and apparel manufacturing.

De minimis provision for limited amounts of third-country apparel content. The PTPA includes a "de minimis" provision that will allow limited amounts of specified third-country content to go into U.S. and Peruvian apparel, giving producers in both countries needed flexibility.

Textile safeguard provision. The PTPA also includes a special textile safeguard that will provide for temporary tariff relief, if imports under the TPA prove to be damaging to domestic producers.

Comprehensive rules of origin. The PTPA provides comprehensive rules of origin in order to ensure that only U.S. and Peruvian goods benefit from the TPA. The rules of origin are designed to provide clarity, predictability and certainty to the private sector and customs administrations.

Transparent and efficient customs procedures. The PTPA requires transparency and efficiency in administering customs procedures, including the TPAs rules of origin. Peru commits to publish laws and regulations on the Internet, and will ensure procedural certainty and fairness.

(See ITT's Online Archives or 12/13/05 news, 05121305, for BP summary of the conclusion of the PTPA. See ITT's Online Archives or 01/11/06 news, 06011105, for BP summary of the President's notification to Congress that he intended to sign the PTPA.)

USTR Press Release (dated 04/12/06) available athttp://www.ustr.gov/Document_Library/Press_Releases/2006/April/United_States_Peru_Sign_Trade_Promotion_Agreement.html