President Notifies Congress of His Intent to Sign a Free Trade Agreement with Peru
On December 7, 2005, the Office of the U.S. Trade Representative (USTR) announced that the U.S. and Peru had completed a comprehensive free trade agreement (FTA).
On January 6, 2006, the President notified Congress of his intent to sign an FTA with Peru. (Under the provisions of the Trade Act of 2002's Bipartisan Trade Promotion Authority Act of 2002, the President is required to notify Congress at least 90 days in advance of signing an FTA with Peru.)
According to President Bush, the U.S.-Peru Trade Promotion Agreement will generate export opportunities for U.S. farmers, ranchers, and companies, help create jobs in the U.S., and help American consumers save money while offering them more choices. The Agreement will also benefit the people of Peru by providing economic opportunity and by strengthening democracy.
When announcing the completion of the U.S.-Peru FTA, the USTR noted that in May 2004, the U.S. initiated FTA negotiations with three Andean countries - Peru, Colombia, and Ecuador. The USTR stated that negotiations with Colombia and Ecuador will resume early in 2006 and that Bolivia had participated as an observer and could become part of the agreement at a later stage.
After FTA is Signed, Next Step Expected to be Enactment of Implementing Legislation
Once the FTA with Peru is signed, the next step is expected to be for the President to formally submit the U.S.-Peru FTA implementing legislation package (U.S.-Peru FTA, implementing legislation, and statement of administrative action) to Congress. Congress would then have 90 legislative days to consider the U.S.-Peru FTA implementing legislation, which cannot be amended.
It is expected that if the U.S.-Peru FTA 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 U.S.-Peru FTA.
Highlights of U.S.-Peru FTA
According to a summary by the USTR, the following are highlights of the U.S.-Peru FTA (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 7% 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 U.S.-Peru FTA 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 Peru FTA also includes a special textile safeguard that will provide for temporary tariff relief, if imports under the FTA prove to be damaging to domestic producers.
Comprehensive rules of origin. The Peru FTA provides comprehensive rules of origin in order to ensure that only U.S. and Peruvian goods benefit from the FTA. The rules of origin are designed to provide clarity, predictability and certainty to the private sector and customs administrations.
(See ITT's Online Archives or 12/13/05 news, 05121305, for BP summary of the USTR notice announcing that the U.S. and Peru had concluded a FTA.)
President's notification to Congress (FR Pub 01/10/06) available at
http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/06-261.pdf.
BP Note
In its January 5-6, 2006 edition, Washington Trade Daily reported that the Chairman of the Senate Finance Committee recently urged the Administration to send the Peru FTA to Congress and not to wait for completion of negotiations with Colombia and Ecuador. The article also notes that with Congressional elections coming up in November 2006, lawmakers are likely to prefer dealing with trade agreements as early in the year as possible.