TRADE AND EMPLOYMENT EFFECTS OF THE ANDEAN TRADE
PREFERENCE ACT
Fourth Annual Report to the Congress Pursuant to Section
207 of the Andean Trade Preference Act
Submitted by The U.S. Department of Labor Bureau of
International Labor Affairs
December 1997
Table of Contents
Executive Summary
Introduction
U.S. Trade with the ATPA Beneficiary Countries
U.S. Imports under the ATPA and Other Special Tariff Rate
Provisions and Trade Preference Programs
U.S. Trade Preferences Uniquely Provided by the ATPA
U.S. Employment and Trade with the Andean Nations
The U.S. Employment Situation in 1996
U.S. Import and Domestic Employment Trends in Selected Industria l
Sectors Receiving Significant Benefits Provided under the ATPA in
1996
Vegetables and melons
Horticultural specialties
Sugar and confectionery products
Miscellaneous food products
Secondary nonferrous metals
Nonferrous rolled and drawn products
Jewelry and silverware
Conclusions
Executive Summary
During 1996, $1.2 billion in U.S. imports from the four Andean
Trade Preference Act (ATPA) beneficiary countries entered the United
States duty-free under provisions in the ATPA; however, a significant
portion of these duty-free entries (62 percent or $787 million)
probably would have qualified for duty-free entry under other
existing U.S. trade preference programs such as the Generalized
System of Preferences. Thus, approximately 38 percent ($458 million)
of these duty-free entries represent the unique benefits of the ATPA
to the ATPA-beneficiary nations. These unique ATPA benefits
represented 9.3 percent of total U.S. imports subject to duty from
the ATPA beneficiary nations and 0.06 percent of total U.S. imports
from all nations in 1996.
The main finding of this report is: Preferential tariff treatment
under the ATPA does not appear to have had an adverse impact on, or
have constituted a significant threat to, U.S. employment. While
declines in production and possibly employment in some cut flower
industries (standard carnations, pompon chrysanthemums, and roses)
may have been affected to some extent by the tariff preferences
granted under the ATPA program, other factors may also have
contributed to production and employment declines. Introduction
The Andean Trade Preference Act (ATPA), which was enacted on
December 4, 1991 (Public Law 102-182, title II), contains the trade
component of the President's Andean Initiative that was launched in
1991 to expand private sector opportunities and investment in
nontraditional sectors of the Andean countries as an alternative to
production of illegal drugs and to help them to diversify their
economies and expand their exports. The ATPA authorized the President
to proclaim duty-free treatment for eligible articles from Bolivia,
Colombia, Ecuador, and Peru. The President proclaimed duty-free
treatment of certain eligible articles for Bolivia and Colombia on
July 2, 1992, for Ecuador on April 13, 1993, and for Peru on August
11, 1993. ATPA preferential duty treatment is scheduled to terminate
on December 4, 2001.
Section 207 of the ATPA requires the Secretary of Labor, in
consultation with other appropriate federal agencies, to undertake a
continuing review and analysis of the impact of the implementation of
the ATPA on U.S. labor. The legislation also directs the Secretary to
submit an annual report to the Congress presenting a summary of the
results of the review and analysis. This report is the fourth in a
series of annual reports to the Congress pursuant to Section 207 of
the ATPA. It presents a summary of the analysis of the impact of
duty-free treatment of certain U.S. imports from beneficiary Andean
nations under the ATPA on U.S. trade and employment during calendar
1996.
First, this report reviews trends in U.S. trade with the four ATPA
beneficiary nations, and identifies the leading items in U.S. trade
(imports and exports) with those nations. Next, U.S. imports from the
ATPA beneficiary nations are examined with regard to the various U.S.
trade preference programs (e.g., the ATPA; the Generalized System of
Preferences (GSP), a U.S. program initiated in 1975 that provides for
duty-free treatment of nearly 4,500 tariff items from over 150
designated beneficiary developing countries; and a U.S. harmonized
tariff schedule provision for the duty-free entry of U.S. components
and materials incorporated in offshore assembly of items imported
into the United States--HTS 9802.0080). The report then attempts to
identify U.S. trade preferences which are uniquely available to the
beneficiary countries under the ATPA. Finally, domestic employment
trends are reviewed for those domestic industries that produce goods
like or similar to those of U.S. imports from the ATPA beneficiaries
which have experienced significant growth and established significant
U.S. market share as the result of ATPA benefits. The report closes
with some general conclusions on the impact of the ATPA on U.S.
employment.
U.S. import (customs value of imports for consumption) and export
(f.a.s. value of domestic exports) data used in this report are based
upon compilations of official statistics from the U.S. Department of
Commerce, Bureau of the Census; U.S. nonfarm employment data (annual
averages of monthly establishment employment) are tabulated from
establishment payroll employment survey data from the U.S. Department
of Labor, Bureau of Labor Statistics. Further details and analysis
concerning the ATPA as well as detailed tabulations of U.S. trade
with the ATPA beneficiary nations are available in more comprehensive
annual reports (for this year as well as for prior years) which are
prepared by the U.S. Department of Labor and are available from the
Department's Bureau of International Labor Affairs, Office of
International Economic Affairs, 200 Constitution Avenue, N.W., Room
S-5325, Washington, DC 20210 (telephone: 202-219-7610) or the
National Technical Information Service (NTIS), 5285 Port Royal Road,
Springfield, Virginia 22161 (telephone: 703-487-4690).
U.S. Trade with the ATPA Beneficiary Countries
U.S. imports from the four ATPA beneficiary nations in 1996
accounted for 1.0 percent of total U.S. merchandise imports from all
countries and amounted to $7.9 billion, an 12.9 percent increase over
their level in 1995. U.S. exports to the ATPA beneficiaries in 1996
accounted for 1.3 percent of all U.S. merchandise exports to the
world and amounted to $7.7 billion, a 1.3 percent decrease over their
level in 1995.
On a bilateral basis, U.S. trade with the ATPA beneficiary nations
has moved from a merchandise trade deficit of just under $1.2 billion
in 1991 to a surplus during 1992-95 and back to a deficit of $149
million in 1996. Both U.S. exports to and imports from the ATPA
beneficiaries have increased each year since 1991 except for the
export decline in 1996. In nominal (current dollar) terms, U.S.
exports to the ATPA beneficiaries in 1996 were 103.2 percent above
their 1991 level, while U.S. imports from the ATPA beneficiaries in
1996 were 58.3 percent above their 1991 level.
By broad industrial division, 27 percent of U.S. imports from the
ATPA beneficiaries in 1996 were agricultural and fishery products, 41
percent were crude and refined petroleum and minerals, 29 percent
were manufactures, and 3 percent were miscellaneous items. During
1996, U.S. imports of crude and refined petroleum products from the
ATPA beneficiary countries increased by 32.8 percent, while U.S.
imports of non-petroleum products from the ATPA beneficiary nations
increased from their 1995 level of $4.6 billion to $4.7 billion in
1996, a 2.7 percent increase.
Leading industrial categories of U.S. imports from the ATPA
beneficiary nations in 1996 included: crude petroleum ($2,359
million); agricultural products ($1,573 million); refined petroleum
products ($780 million); primary metal products ($666 million);
fishery products ($507 million); apparel ($496 million); food
products ($335 million); miscellaneous manufactures ($305 million);
miscellaneous commodities ($138 million); and chemicals ($138
million). These top-ten categories, based on the 2-digit Standard
Industrial Classification system, accounted for 92.7 percent of all
U.S. imports from the ATPA beneficiaries in 1996.
Leading industrial categories of U.S. exports to the ATPA
beneficiary nations in 1996 included: nonelectrical machinery ($1,932
million); chemicals ($1,318 million); electrical machinery ($774
million); agricultural products ($716 million); transportation
equipment ($461 million); food products ($384 million); paper
products ($296 million); scientific and professional instruments
($265 million); miscellaneous manufactures, not specifically provided
for ($218 million); and primary metals ($176 million). These top-ten
categories, based on the 2-digit Standard Industrial Classification
system, accounted for 84.7 percent of all U.S. exports to the ATPA
beneficiaries in 1996.
Several of the leading categories of U.S. exports to the Andean
region are also among the leading import categories, indicating a
moderate two-way flow of trade. In part, this results from the trade
under provision 9802.00.80 in the harmonized tariff schedule
(HTS)--formerly item 807.00 in the Tariff Schedules of the United
States--that assesses U.S. import duties only on the foreign
value-added in offshore assembly or further processing of U.S.-made
components which are then imported into the United States. In 1996,
4.8 percent of the total value of all U.S. imports subject to duty
from the ATPA beneficiary nations entered the United States under
this provision.
U.S. Imports under the ATPA and Other Special Tariff Rate
Provisions and Trade Preference Programs
Products specifically excluded from ATPA duty-free treatment
include most textile and apparel items; certain footwear; canned
tuna; petroleum and petroleum products; certain sugar, syrup, and
molasses products; rum and tafia; and certain watches and watch
parts. Beginning in 1992, reduced rates of duty were applied to
handbags, luggage, flat goods, work gloves, and leather wearing
apparel from the ATPA beneficiaries; duties on these items were
reduced by a maximum of 20 percent over the following five-year
period. U.S. imports of ATPA-beneficiary non-petroleum products
subject to duty and excluded from ATPA (primarily wearing apparel)
have increased at an average annual rate of 8.7 percent over the
1991-96 period.
To be eligible for duty-free treatment under the ATPA, all
products unless specifically excluded must meet one of these
conditions: (1) be wholly grown, produced, or manufactured in a
ATPA-beneficiary country; or (2) have at least 35 percent of the
direct processing costs and materials produced in any one or more of
the ATPA beneficiaries, any of the 24 Caribbean Basin Economic
Recovery Act (CBERA) beneficiaries, Puerto Rico, or the U.S. Virgin
Islands--inputs from the United States (up to 15 percent of the
value) are allowed to account for a portion of the 35 percent content
rule. In addition, the articles must be exported directly to the
customs territory of the United States.
All of the ATPA beneficiaries are also eligible for the tariff
preferences provided by the GSP. The ATPA differs from the GSP
program in three significant ways: 1) the number of items eligible
for the duty-free entry is greater under the ATPA, 2) the percentage
of value-added that must be produced in the exporting country is
lower under the ATPA, and 3) there are no dollar limits in the amount
of an item that can enter duty-free from a beneficiary country under
the ATPA program while there are limits (referred to as competitive
need limits) under the GSP program.
In 1996, over $2.9 billion (or 37 percent) of the $7.9 billion in
total U.S. imports from the ATPA beneficiary countries was imported
most-favored-nation (MFN) duty-free. Of the remaining $4.9 billion
which was subject to duty (i.e., not MFN duty-free), U.S. import
duties were assessed on almost $3.4 billion, while over $1.5 billion
entered duty-free under one of the special U.S. tariff preference
programs.
Of the over $1.5 billion in U.S. imports subject to duty from the
ATPA beneficiaries that entered duty-free under one of the special
U.S. tariff preference programs in 1996, $1,245 million entered
duty-free under the ATPA; $127 million entered duty-free under the
GSP; $130 million (U.S.-content value) entered duty-free under the
9802.00.80 provision; and $42 million entered duty-free under other
special rate provisions (mostly temporary rate provisions).
Nearly all products eligible for GSP duty-free entry are also
eligible for duty-free entry under the ATPA. For products that were
already eligible for GSP treatment when the ATPA came into effect in
1992, the ATPA beneficiaries have increased their utilization of
available U.S. tariff preferences (i.e., the percentage of eligible
products that actually entered duty-free under either GSP or ATPA has
risen moderately). In 1991, 75 percent of the value of items eligible
for both GSP and ATPA (had the latter been in effect) entered
duty-free under GSP; in 1992, 83 percent of the value of items
eligible for both GSP and ATPA entered duty-free (9 percent under
ATPA and 74 percent under GSP); and by 1996, 96 percent of the value
of these items entered duty-free (85 percent under ATPA and 11
percent under GSP). For products eligible for ATPA, but not GSP,
utilization has increased even more substantially from 29 percent in
1992 to 97 percent in 1996.
There has been a 25.5 percent average annual increase since 1991
in U.S. imports of items eligible for duty-free treatment only under
the ATPA. However, the share of U.S. imports subject to duty from the
ATPA beneficiaries that is eligible for duty-free treatment under the
ATPA has increased only slightly from 28 percent in 1992 to 29
percent in 1996 since most of the items eligible for ATPA duty-free
treatment were already eligible for GSP duty-free treatment.
Leading industrial categories of ATPA duty-free U.S. imports (some
of which would have been eligible for GSP duty-free entry) in 1996
included: horticultural specialties ($436 million); jewelry and
silverware ($202 million); primary nonferrous metal products ($113
million); sugar and confectionery products ($77 million);
miscellaneous food products ($65 million); nonferrous rolled and
drawn products ($62 million); miscellaneous plastic products ($38
million); vegetables and melons ($30 million); prepared fruits and
vegetables ($27 million); and secondary nonferrous metals ($22
million). These top-ten categories, based on the 3-digit Standard
Industrial Classification system, accounted for 86.1 percent of the
total ATPA duty-free value of U.S. imports in 1996.
Assembly of U.S.-made parts or materials by the ATPA beneficiaries
(primarily into products ineligible for ATPA duty-free entry or into
ATPA-eligible products that did not meet ATPA or GSP rules-of-origin
requirements) decreased significantly in 1996. The value of U.S.
imports from the ATPA-beneficiary nations of assembled items entered
under HTS item 9802.00.80 rose from $175 million in 1991 to $280
million in 1995, but fell to $234 million (or 4.8 percent of all U.S.
imports subject to duty from the ATPA beneficiaries) in 1996. U.S.
components comprised 55.7 percent of the value of these items in
1996. The U.S. tariff provision covering the assembly of articles
made from U.S.-made parts and materials is available generally for
U.S. imports from any country. Assembled apparel items ($228 million
with 55 percent U.S.-content value) accounted for over 97 percent of
the value of U.S. imports from ATPA beneficiaries under HTS item
9802.00.80 in 1996; two other industrial groups with appreciable
amounts were textile mill products ($4 million with 87 percent
U.S.-content value) and miscellaneous manufactures ($2 million with
88 percent U.S.-content value).
In addition to receiving ATPA benefits, the ATPA beneficiary
countries are eligible for reduced duties on certain leather products
(including handbags, luggage, work gloves, and leather wearing
apparel, but not footwear). In 1996, the United States imported $26.9
million of these eligible leather products from the ATPA
beneficiaries, $25.2 million of which was subject to lower duties, $3
thousand was U.S. content entered under 9802, and the balance ($1.7
million) was subject to full duty. The value of leather products
imports from the ATPA beneficiaries eligible for reduced duties in
1996 was lower than it was in 1991, the year before the reduced
program began.
U.S. Trade Preferences Uniquely Provided by the ATPA
The ATPA provided the beneficiary nations unique duty-free
treatment of their exports to the United States in 1996 in the
following cases: products eligible for ATPA duty-free entry, but not
eligible for duty-free entry under GSP ($308 million, of which $298
million entered ATPA duty-free) and products eligible for both ATPA
and GSP duty-free entry which were imported from ATPA beneficiary
countries that had lost their GSP product eligibility due to
exceeding that program's competitive-need limitations ($161 million,
virtually all of which entered ATPA duty-free).
The total unique ATPA benefits of $458 million in 1996 represented
the amount of ATPA duty-free imports that would not have received
duty-free treatment under the GSP program and would have been subject
to duty in the absence of the ATPA program. These benefits were $102
million (or 28.7 percent) more than they were in 1995 and represented
5.8 percent of total U.S. imports from the ATPA-beneficiary nations
(but only 0.06 percent of total U.S. imports from all sources) in
1996.
The top-ten tariff schedule categories of items receiving
duty-free treatment unique to the ATPA in 1996 included: fresh cut
chrysanthemums, standard carnations, anthuriums, and orchids ($158.4
million), fresh cut roses ($156.0 million), tuna and skipjack not in
airtight containers ($57.9 million), nonmonetary gold ($18.7
million), fresh or chilled asparagus entered from November 15 to
September 15 ($15.3 million), nonpure nonmonetary gold ($10.9
million), glazed ceramic flags and tiles ($5.5 million), onions ($4.8
million), prepared or preserved mushrooms ($3.1 million), and nails
and tacks ($2.7 million). These ten items accounted for 94.5 percent
($435.3 million) of the duty-free entries unique to the ATPA in 1996.
The top item (fresh cut chrysanthemums, standard carnations,
anthuriums, and orchids), which accounted for 35 percent of the
duty-free benefits unique to the ATPA, would normally have been
eligible for duty-free entry under the GSP program, except that
Colombia has lost its GSP eligibility for the item by exceeding that
program's competitive need limitation. All of the other top-ten items
were items that ATPA beneficiaries benefitted from due to these items
being eligible for duty-free entry under the ATPA but not under the
GSP program.
In 1996, Colombia accounted for 67 percent ($305 million) of total
ATPA duty-free imports unique to the ATPA, Ecuador for 22 percent
($99 million), Peru for 12 percent ($53 million), and Bolivia for
less than one percent ($1.6 million).
U.S. Employment and Trade with the Andean Nations
If there are any adverse U.S. employment effects due to the tariff
preferences of the ATPA, these will result from increased imports of
items due to these tariff preferences. Given the availability to the
ATPA beneficiaries of several U.S. trade preference programs with
different requirements (and particularly the uncertainty surrounding
the GSP program), it is often not clear how to isolate the effects of
the ATPA. The analysis in this report used two measures of duty-free
entries under the ATPA to assess the impact of the ATPA on U.S.
employment: 1) the total amount that entered ATPA duty free, and 2)
the amount that entered ATPA duty free uniquely to the ATPA (i.e.,
items entered ATPA duty free that were not eligible for duty-free
entry under the GSP program). Using these two measures, attention is
focused on the import groups which showed significant growth and
represented a significant share of total U.S. imports in 1996. Seven
import groups based on the 3-digit Standard Industrial Classification
(SIC) system were identified in which ATPA duty-free imports
increased by over $2 million during 1996 and these imports accounted
for at least one percent of total U.S. imports of that SIC group.
These seven groups were: vegetables and melons, horticultural
specialties, miscellaneous food products, sugar and confectionery
products, secondary nonferrous metals, nonferrous rolled and drawn
products, and jewelry and silverware. Three of these (vegetables and
melons, horticultural specialties, and miscellaneous food products)
also had an increase in duty-free imports unique to the ATPA of over
$1 million and accounted for at least one-half of one percent of
total U.S. imports of that SIC group.
U.S. import trends in these seven product groups and employment
trends in each of the U.S. industries producing products like those
in these import groups is examined below. Significant increases in
U.S. imports of these products from the ATPA beneficiaries may, in
part, reflect the availability of duty-free treatment under the ATPA.
To place the analysis of domestic employment trends in perspective,
the overall U.S. employment situation in 1996 is discussed first.
The U.S. Employment Situation in 1996
During 1996, the overall employment situation in the United States
remained strong. The U.S. economy added 2.3 million jobs during 1996;
employment has increased by 11.3 million since 1991. Total nonfarm
employment in 1996 (119.5 million) was 10.1 million (or 9.2 percent)
above the previous cyclical high recorded in 1990. The job gains
during 1996 occurred in both the service-producing and
goods-producing sectors. Within the goods-producing sector, there
were job gains in construction, but job losses in mining and
manufacturing. Despite overall gains, employment in the
goods-producing sector in 1996 (24.4 million) was 474,000 below that
in 1990. The manufacturing sector lost 67,000 jobs in 1996 (leaving
the sector with 619,000 jobs fewer than in 1990). The U.S.
manufacturing sector, with employment of 18.5 million in 1996, has
lost 2.6 million jobs since its peak in employment in 1979, although
real manufacturing GDP has increased substantially since 1979. Most
economists agree that many of these employment losses partially
reflect growth in productivity and changes in technology; there is
disagreement amongst economists over the relative importance of trade
deficits and increased openness as a cause of these losses.
U.S. Import and Domestic Employment Trends in Selected
Industrial Sectors Receiving Significant Benefits Provided under the
ATPA in 1996
Vegetables and melons: The ATPA nations increased their
exports of vegetables and melons (SIC 016) to the United States to
$30.3 million in 1996, a 33.9 percent increase compared to a 43.4
percent increase in 1995. These exports represented 1.8 percent of
total U.S. imports of vegetables and melons, and almost entered
duty-free under the ATPA. Of the $29.6 million which entered ATPA
duty free, $22.1 million were items not eligible for the GSP; these
items accounted for 1.3 percent of total U.S. imports of this SIC
group. The major item not eligible for GSP was asparagus.
The import category of vegetable and melons is composed of a large
number of different crops, but fresh asparagus accounted for 74
percent of the ATPA duty-free imports in this group and almost 85
percent of this was imported from Peru. Normally, asparagus imported
between November 15 and September 15 is not eligible for GSP, while
imports between September 15 and November 15 are eligible for GSP.
However, Peru was not eligible for GSP from July 1, 1995 to October
1, 1996 because they had exceeded the program's competitive need
limits. During 1996, total U.S. imports of fresh asparagus increased
by 32.4 percent, while ATPA imports increased by 14.8 percent. ATPA
duty-free imports of fresh asparagus accounted for 36.8 percent of
total U.S. asparagus imports in 1996.
Adequate U.S. employment data for asparagus farming or the
vegetables and melons industry are not available; however the U.S.
Department of Agriculture (USDA) makes estimates of annual domestic
production of asparagus. According to USDA, domestic production of
fresh and prepared asparagus decreased steadily from 109,850 tons in
1994, to 101,200 tons in 1995, and to 99,450 tons in 1996. The dollar
value of U.S. production also declined from $178 million in 1994, to
$177 million in 1995, and to $156 million in 1996. The 12 percent
reduction in production value from 1995 to 1996 was due largely to a
10 percent reduction in the price of asparagus although there was
also a 2 percent fall in output. Since U.S. production of asparagus
occurs primarily between February and June and most of the imports
from the ATPA nations enter between August and January, the degree to
which fresh asparagus imports from the ATPA countries compete with
fresh U.S. production, as opposed to U.S. processed (frozen and
canned) production, cannot be determined precisely. It is possible
that imports of fresh asparagus during the winter months reduce the
demand for U.S. processed asparagus. In 1996, fresh asparagus
accounted for 56 percent and processed (canned or frozen) for 44
percent of total U.S. production by weight, while fresh asparagus
accounted for 66 percent and processed for 34 percent by value. U.S.
production tonnage of fresh asparagus decreased by 16 percent between
1994 and 1995 but remained stable during 1996, while U.S. production
of processed asparagus increased by 4 percent in 1995 but declined by
6 percent in 1996. The price of fresh asparagus fell by 18 percent in
1996 while the price of processed asparagus increased by 5 percent,
although the price of frozen asparagus fell by 25 percent. In dollar
value terms, U.S. imports from all sources of fresh asparagus were
equal to 57 percent of U.S. production of fresh asparagus; ATPA
duty-free imports were equal to 21 percent of U.S. production in
1996. The decrease in U.S. production of asparagus over the last two
years, the significant fall in domestic prices of fresh and frozen
asparagus during 1996, and the sizable amount (and moderately
increasing) of ATPA duty-free imports suggest that trends in
asparagus imports will need to be monitored. However, at this time,
the duty-free provisions of the ATPA for this item do not appear to
have created a significant adjustment problem for this industry.
Horticultural specialties: U.S. imports of horticultural specialties
(SIC 018) from the ATPA beneficiaries increased $65 million (or 17.3
percent) to $438 million in 1996. Almost all of this ($436 million)
entered ATPA duty-free, and these duty-free imports accounted for
38.9 percent of total U.S. imports of horticultural specialties. A
very large share of these duty-free imports ($314 million) was
composed of items not eligible for the GSP and consisted primarily of
fresh cut chrysanthemums and standard carnations from Colombia and
fresh cut roses (largely from Colombia but also Bolivia and Ecuador).
ATPA duty-free entries under these two tariff items accounted for
25.3 percent of all ATPA duty-free entries and 68.6 percent of the
duty-free entries that were unique to the ATPA in 1996. Over one-half
of the ATPA duty-free imports not eligible for GSP were
chrysanthemums and standard carnations from Colombia which had lost
eligibility for GSP by exceeding the competitive need limits in
previous years; U.S. imports of this item from Colombia increased by
8.7 percent to $158 million in 1996. Chrysanthemums and standard
carnations from Colombia received the largest unique benefits under
the ATPA of any eight-digit HTS item. The remainder of the ATPA
duty-free items not eligible for GSP were largely fresh cut roses.
ATPA duty-free imports which were also eligible for the GSP consisted
primarily of miniature (spray) carnations and ornamental cut flowers
(except roses, carnations, orchids, and chrysanthemums); these
duty-free imports increased by 22.7 percent during 1996.
U.S. imports of fresh cut chrysanthemums and carnations (HTS
0603.10.70) from Colombia which are not eligible for GSP increased by
$12.7 million (or 8.7 percent) during 1996. Colombia accounted for 90
percent of all U.S. imports of this tariff item from all sources.
Approximately 54 percent of this tariff item was composed of
carnations (HTS 0603.10.7030) and 46 percent was chrysanthemums (HTS
0603.10.7010 and 0603.10.7020), with the small remaining balance
being composed of orchids. According to the U.S. International Trade
Commission, U.S. imports from Colombia under this tariff item
accounted for approximately two-thirds of apparent domestic
consumption (imports plus domestic production, less exports).
According to the U.S. Department of Agriculture, U.S. domestic
production (in blooms) of chrysanthemums declined by 50 percent
between 1989 and 1994 and remained stable in 1995; during 1996,
domestic production of standard chrysanthemums increased (1.5 percent
in terms of blooms and 4.6 percent in terms of value) while domestic
production of pompon chrysanthemums decreased (11.7 percent in terms
of bunches and 12.4 percent in value terms). Domestic production of
standard carnation blooms declined by 32 percent from 1989 to 1994
and declined by 2 percent in 1995; during 1996, domestic production
declined by 18.8 percent in terms of blooms and 24.9 percent in terms
of value. Overall, U.S. domestic production (by value) of pompon
chrysanthemums, standard chrysanthemums, and standard carnations
declined by 14.3 percent from $42.3 million in 1995 to $36.2 million
in 1996. With imports increasing and domestic production decreasing
for these items over the last several years, U.S. growers' domestic
market share for chrysanthemums and standard carnations has fallen
significantly.
U.S. imports of fresh cut roses (HTS 0603.10.60) from the Andean
beneficiaries were $28.7 million (or 22 percent) higher in 1996 than
1995; this came on top of a 22 percent in 1995 and a 16 percent
increase in 1994. Over 99 percent of these imports entered ATPA
duty-free in 1996. This tariff item is not eligible for GSP duty-free
entry, and the ATPA allows the beneficiaries to avoid a 7.8 percent
tariff. In 1996, the Andean beneficiaries accounted for 87 percent of
all U.S. imports of fresh roses from all sources. Colombia accounted
for 76 percent of ATPA fresh rose exports to the United States while
Ecuador accounted for 23 percent (Bolivia accounted for less than one
percent). According to the U.S. International Trade Commission, U.S.
imports of roses from the ATPA beneficiaries accounted for an
increased share of apparent domestic consumption, growing from 34
percent in 1993 to 43 percent in 1994. According to the U.S.
Department of Agriculture, domestic production of roses (in blooms)
declined by 21 percent between 1989 and 1994 and declined by 16
percent in 1995; during 1996, domestic production declined by 11.8
percent in terms of blooms and 6.0 percent in terms of value. The
increase in the dollar value of U.S. cut rose imports from the ATPA
nations of $28.7 million in 1996 was significantly more than the
decline in domestic production of $7.5 million.
Fresh cut flowers from the major Andean producer nations are
subject to several additional restrictions and duties as the result
of actions taken under U.S. laws concerning unfair trade practices.
U.S. antidumping law provides relief in the form of additional
special duties that is intended to offset margins of dumping (imports
sold at less than fair market value in the United States), while U.S.
countervailing-duty law provides relief (additional special duties)
that is intended to offset foreign subsidies on products imported
into the United States. Since 1987, there have been outstanding
antidumping orders and actions on fresh cut flowers from Ecuador and
Colombia, and countervailing-duty orders and actions for pompon
chrysanthemums from Peru and fresh cut flowers from Ecuador. In
addition, suspension agreements for countervailing-duty actions (an
agreement with the exporting country to eliminate or completely
offset the offending subsidy) were in place for miniature carnations
and cut flowers from Colombia.
Although the U.S. International Trade Commission (ITC) had
determined in a preliminary investigation that the U.S. rose industry
was likely to be materially injured by rose imports from Colombia and
Ecuador, the Commission determined in March 1995 that the U.S.
domestic industry had not been injured by imports of roses from these
countries. The ITC determination, however, was not unanimous as two
of the commissioners dissented. The ITC determination was based on
trade and production data covering 1991 through 1994 and therefore
does not cover developments during 1995 and 1996 which is the focus
of this report. In addition, the ITC determination was based on a
more restrictive set of considerations; imports by firms which were
not found to be selling below costs (23 percent of Colombia imports
in 1993) were at times not considered and at least one of the
commissioners evaluated the impact on the domestic industry by
comparing the state of the industry when imports were dumped to the
state of the industry if imports had been priced "fairly" (as opposed
to the impact of these imports generally or the effect of ATPA
preferences). For these reasons, the ITC determination is not
particularly relevant to the analysis of this report. The ITC in its
1996 analysis of the ATPA (ITC investigation 332-352) estimated as an
upper bound that 12.9 percent of the domestic cut rose industry in
1995 may have been displaced by increased imports due to the duty
provisions of the ATPA.
The continual increase in imports from the ATPA nations and the
continual decrease in U.S. production of chrysanthemums, carnations,
and cut roses in 1996 does suggest that ATPA imports may be
negatively affecting U.S. production of these flowers, although other
factors may also be responsible for these output declines.
Although domestic employment data for growers of specific types of
flowers are not available, the U.S. Department of Agriculture does
collect data on the peak number of workers hired by floriculture
establishments--i.e., firms that grow a wide variety of flowers for
cutting, potted plants, and bedding plants. About 84 percent of
floriculture operations used some hired workers. The peak number of
hired workers in floriculture crops increased from 110,041 in 1995 to
113,740 in 1996; in 1993 there were 114,458. Thus at a more
aggregated level, employment in this sector has been relatively
stable over the last few years. These numbers do not include workers
at the wholesale and retail level. The wholesale value of all
domestically produced cut flowers increased by 5.4 percent after
falling 8 percent in 1995 and increasing 4 percent in 1994 (roses,
standard carnations, standard and pompon chrysanthemums account for
approximately one-third of total cut flower production). Both the
changes in employment and the value of all cut flowers suggest that
overall the cut flower industry is relatively stable; in addition,
these selected cut flowers are grown primarily in California as are
cut flowers generally. Thus workers released by the reduced
production of these selected cut flowers may be able to find
employment in another segment of the cut flower industry in their
current geographic location.
Therefore trends in domestic production in 1996 suggest that
increased imports of fresh roses, standard carnations, standard and
pompon chrysanthemums due to the trade preferences in the ATPA may
have displaced some domestic growers or helpers that they might have
hired. However, production and employment in the floriculture
industry remains relatively stable, due to growth in segments other
than cut flowers. Thus it is unlikely that the preferences provided
by the ATPA have created any significant adjustment problem.
Sugar and confectionery products: U.S. imports of sugar and
confectionery products (SIC 206) from the ATPA nations increased by
18.7 percent to $166.8 million during 1996 and accounted for 5.7
percent of U.S. sugar imports. ATPA duty-free imports increased from
$66.4 million in 1995 to $76.8 million in 1996; very few of these
imports (less than $1 million) were items not eligible for the GSP.
U.S. cane sugar imports, however, remain subject to U.S. quota levels
and only a very small amount of sugar products that enter ATPA duty
free are not subject to quotas.
U.S. employment in the sugar and confectionery products industry
has decreased at an annual rate of 0.8 percent over the 1979-96
period and decreased at a 0.1 percent rate over the 1990-96 period;
in 1996, employment decreased by 1,500 jobs. U.S. sugar cane quotas
are set to equate projected U.S. consumption needs with projected
U.S. production. Therefore, duty-free entry of cane sugar under the
ATPA program does not allow the ATPA beneficiaries to increase their
exports of sugar to the United States at the expense of U.S.
production. The ATPA program simply redistributes tariff revenue from
the U.S. Treasury to the ATPA-beneficiary sugar exporters; there is
no effect on U.S. producers or U.S. employment. Only a small portion
of the ATPA duty-free imports in this industry are not covered by
U.S. quotas, and it is possible that duty-free treatment of these
items may have increased ATPA exports of these items. The duty-free
provisions of the ATPA do not appear to have presented any adjustment
problems for this industry.
Miscellaneous food products: U.S. imports of ATPA
miscellaneous food products (SIC 209) increased by 1.4 percent to
$95.4 million in 1996 (compared to a 49.7 percent increase during
1995); these imports accounted for 3.9 percent of total U.S. imports
in this SIC category during 1996. The amount which entered ATPA
duty-free increased by $17.2 million to $64.8 million and $58.5
million of this (2.4 percent of total U.S. imports of this item) were
items not eligible for the GSP. ATPA duty-free imports which were
also eligible for the GSP were primarily sardines and noncorn
cereals, while ATPA duty-free imports not eligible for the GSP were
primarily uncanned skipjack tunas. U.S. employment in the
miscellaneous food products industry increased by 3,900 to 185,400 in
1996. With the increase in 1996, employment in this industry is now
slightly above its level in 1990 (181,800) and 1991 (180,900). Over
the longer term, employment in this industry has been increasing at
an average annual rate of 0.7 percent since 1979. The domestic
miscellaneous food products industry, however, covers a broad mix of
food preparation establishments, including those engaged in canning
and cooking fish and seafood, in preparing fresh or frozen fish and
seafood, in roasting coffee and manufacturing coffee concentrates, in
manufacturing potato and corn chips and other snacks, in
manufacturing ice for sale, in manufacturing dry macaroni, spaghetti,
vermicelli, and noodles, and in manufacturing a wide variety of other
prepared foods and miscellaneous food specialties. Given the
diversity of activities engaged in by establishments in this
industry, industry employment trends at this level of aggregation may
not be particularly meaningful or useful for analysis at a detailed
product level.
ATPA duty-free imports of miscellaneous food products 1996 were
concentrated in one tariff schedule item: HTS 1604.14.40--tuna and
skipjack (in bulk, not in oil) not in airtight containers, with $64.6
million in value, of which $57.9 million entered ATPA duty free. This
item is eligible for ATPA duty-free entry, but not GSP duty-free
entry. The U.S. imports from the ATPA beneficiaries of this item
increased by $8.4 million (or 14.9 percent) in 1996; in 1995 they
increased 120 percent. Imports of this item have increased by 1,800
percent since 1992. A significant percentage of these imports entered
ATPA duty-free; duty-free imports increased $21.4 million (58.6
percent) to $57.9 million during 1996 and have now increased by 905
percent since 1993. In 1996, 91.6 percent of these imports (97.3
percent of the duty-free imports) from the ATPA beneficiaries came
from Ecuador with the remainder from Colombia. U.S. imports from the
ATPA nations represented 63 percent of total U.S. imports from all
sources of this tariff item in 1996, while ATPA duty-free imports
represented 57 percent. ATPA duty-free entries under this item
accounted for 12.6 percent of all duty-free entries that were unique
to the ATPA in 1996.
According to the U.S. International Trade Commission, this product
category (HTS 1604.14.40) comprises the cooked and cleaned meat of
tuna, which in the trade is referred to as loins. Loins represent an
intermediate stage that occurs during the production of canned tuna.
According to the Commission, there is no U.S. production of tuna
loins as a primary product, since most U.S. tuna fishermen are either
employed directly by the canneries or they sell their tuna
unprocessed. Tuna loins generally are produced in foreign tuna
processing plants (which are labor-intensive) and exported to U.S.
tuna canneries where they are further processed into canned tuna
(which is capital-intensive). Imports of canned tuna are not eligible
for duty-free treatment under the ATPA. A reason cited by the
Commission for the recent growth in U.S. imports of tuna loins is the
increased use of tuna loins by U.S. canneries in Puerto Rico to
compensate for traditional supplies from the Eastern Tropical Pacific
that have been restricted due to environmental concerns (a
combination of private-sector "dolphin-safe" initiatives and U.S.
government embargoes under the Marine Mammal Protection Act).
According to the U.S. International Trade Commission, the U.S.
tuna industry is relatively small; in 1991, there were 9,500 workers
in U.S. canneries and 740 commercial U.S. tuna fishermen (excluding
albacore tuna which are caught on multi-species boats). The
commercial fishing segment of the industry went through a significant
restructuring during 1991-92, due to the enactment of "dolphin-safe"
environmental legislation. As a result, the smaller boats that had
fished the eastern Pacific virtually vanished, while the larger boats
moved to the western Pacific. The total catch of light-meat tuna
changed from 45.8 million pounds ($87.9 million) in 1995 to 51.4
million pounds ($80.1 million); thus there was a 19 percent fall in
the price of light meat tuna. In 1994, light meat tuna output was
45.1 million pounds ($81.6 million); thus the price had increased by
6 percent in 1995. The catch of albacore tuna increased to 34.1
million pounds ($30.2 million) in 1996 from 17.2 million pounds
($14.3 million) in 1995 and 25.7 million pounds ($22.2 million) in
1994. Therefore, the albacore segment of the market experienced
significant growth, while the light meat segment had moderate growth
in output but a significant price decline. It is not clear what role
increased imports, and especially the increased duty-free imports
under the ATPA, have had in this price decline for light meat tuna.
However, U.S. commercial tuna fishing output in terms of pounds in
1996 would suggest that the U.S. commercial fishing fleet (and the
employment connected with it) did not appear to have experienced any
adjustment problem as of 1996.
Secondary nonferrous metals: U.S. imports of secondary
nonferrous metals (SIC 334) from the ATPA nations increased by 31.3
percent to $25.6 million in 1996. ATPA duty-free imports amounted to
$22.2 million which accounted for 2.5 percent of total U.S. imports
of secondary nonferrous metals. All of the ATPA duty-free imports
were items also eligible for GSP and were primarily unwrought zinc.
The increase in imports from the ATPA beneficiaries in 1996
represented a partial rebound from their 57 percent decrease in 1995;
U.S. imports of these items from the ATPA nations remained
significantly below their level in 1994. U.S. employment in the
secondary nonferrous metals industry remained stable at 15,900 in
1996. However, employment in this industry has declined by 8,900
since 1979 and 3,200 since 1990. Since the 1996 increase in imports
of nonferrous metals from the ATPA nations represented a recovery
from their significant decrease in 1995, and since U.S. employment in
this industry remained stable during 1996, it does not appear that
the ATPA is responsible for any adjustment problem in this industry.
Nonferrous rolled and drawn products: U.S. imports of
nonferrous rolled and drawn products (SIC 335) increased from $4.7
million in 1995 to $68.3 million in 1996 (a 1,355 percent increase).
Most of this ($61.9 million) entered ATPA duty-free and approximately
half of this ($29.5 million) was not eligible for GSP duty-free
treatment. ATPA duty-free imports accounted for only one percent of
total U.S. imports of these items during 1996. The primary items
entered ATPA duty- free which were also eligible for GSP duty-free
treatment were zinc plates and sheets, and copper bars. The primary
item entered ATPA duty-free that was not eligible for GSP duty-free
treatment was semimanufactured gold.
U.S. employment in the nonferrous rolled and drawn products
industry increased by 100 during 1996 to 167,700; however, this
industry has lost 52,300 jobs since 1979 and 4,600 since 1990,
although employment in 1996 was 500 above its level in 1991. While
employment in this industry decreased considerably between 1979 and
1991, it has been stable since then. Thus although ATPA duty-free
imports increased quite significantly in 1996, they remained a small
portion of total U.S. imports of this industry, and employment in
this industry remained stable. For these reasons the duty-free
benefits of the ATPA program do not appear to have created any
adjustment problem for this industry.
Jewelry and silverware: U.S. imports of jewelry and
silverware (SIC 391) from the ATPA countries totaled $290.2 million
in 1996; this represented a decrease of 11.3 percent from 1995. ATPA
duty-free imports increased from $135.9 million in 1994 to $176.4
million in 1995 and to $202.0 million in 1996. This $66.1 million
increase in ATPA duty-free imports between 1994 and 1996 was matched
by a $76.8 million decrease in GSP duty-free imports of these items
from the ATPA beneficiaries over the same period. Thus the large
increase in ATPA duty-free imports has been the result of importers
switching to the ATPA program from the GSP program, and not the
result of an increase in imports from the ATPA countries. U.S.
imports from the ATPA beneficiaries accounted for 2.5 percent of
total U.S. jewelry and silverware imports in 1996. All the items
which entered ATPA duty-free were also eligible for the GSP; the
major items included gold and platinum necklaces.
U.S. employment in the jewelry and silverware industry has been
relatively stable, with employment totaling 49,100 in 1996, which was
slightly below its 1990 level of 52,000. Employment in this industry
decreased by 1,200 between 1995 and 1996. Jewelry and silverware
imports from the ATPA nations decreased in 1995 and 1996, while U.S.
imports from all sources increased both years. Since jewelry and
silverware imports from ATPA countries have decreased over the last
two years, although ATPA duty-free imports increased substantially
due to importers switching to the ATPA from the GSP program, the
provisions of the ATPA do not appear to be creating any adjustment
problems in this industry.
Conclusions
Although a definitive evaluation of the domestic employment impact
of the ATPA cannot be made since the effects of duty-free provisions
of the ATPA on U.S. imports cannot be completely isolated from the
effects of other trade preference programs such as the GSP and HTS
item 9802.00.80, it is unlikely that the ATPA has had a significant
effect on overall U.S. employment. In addition, U.S. trade flows with
the ATPA beneficiary countries have been small, representing 0.06
percent of total U.S. imports.
Neither the dollar amount nor the rate of increase in U.S. imports
from the ATPA nations has been extraordinary or threatening. The
share of total U.S. imports subject to duty from the ATPA
beneficiaries that received duty-free treatment has risen from 22
percent in 1991 to 31 percent in 1996. This is largely due to
increased utilization of the duty-free benefits under the
ATPA--especially for products not eligible for GSP duty-free
treatment. Nevertheless, the amounts entered duty-free have remained
quite modest, and the ATPA program does not appear to have had a
significant effect in altering the production or export structure of
the ATPA nations.
Seven groups of products, two agricultural product groups
(vegetables and melons--in particular, asparagus; and horticultural
specialties--in particular, fresh cut chrysanthemums, standard
carnations, and roses), two food-related manufactures (sugar and
miscellaneous food products--in particular, tuna), and three
metal-related manufactures (secondary nonferrous metals, nonferrous
rolled and drawn products, and jewelry and silverware) received
substantial benefits in 1996 from duty-free treatment under the ATPA.
For three of these (sugar and confectionery products, secondary
nonferrous metals, and jewelry and silverware) almost all of the ATPA
duty-free imports would have been eligible for duty-free treatment
under the GSP. ATPA duty-free entries of these seven groups accounted
for 72 percent of all ATPA duty-free imports and 93 percent of all
duty-free imports in 1996 that were unique to the ATPA. For each of
the U.S. industries that produced products similar to the seven
import groups, it is difficult to identify major adverse effects on
U.S. employment. It is possible that the decline in the production of
cut roses in the United States, and any employment declines
associated with it, may be due in part to imports of cut roses from
ATPA beneficiaries; it is also possible that other trade or non-trade
factors may also be in part responsible.
Generally, the current level and composition of ATPA beneficiary
exports to the United States do not appear to pose a threat to U.S.
employment. As the Andean region develops, it is anticipated that it
will attract increasing levels of U.S. exports which will generate
additional job opportunities in the United States. On the other hand,
the duty-free benefits of the ATPA offer an incentive for
diversification of production and development of exports to the U.S.
market. Thus, the ATPA could create a more significant impact on U.S.
employment in the future.
While the ATPA may offer the beneficiary nations an incentive to
diversify their export structure and more readily gain access to the
U.S. market, the margin of these benefits has been declining in
recent years. For example, the United States has successfully
negotiated and implemented several comprehensive free trade
agreements (with Israel in 1986; Canada in 1989; and Canada and
Mexico in 1994). In 1984, the United States granted unilateral trade
preferences (which now have no expiration date) to the Caribbean
Basin beneficiaries on many of the same items covered by the ATPA.
Also, as the result of the conclusion and implementation of the
Uruguay Round of multilateral trade negotiations, U.S. trade barriers
in general will be reduced for all (most-favored-nation) trading
partners. Balancing these declines in the margin of benefit is the
uncertain future of the U.S. GSP program; if the GSP program were to
be eliminated in the future, the unique benefits that the ATPA
program provides to the ATPA beneficiaries would be significantly
increased.
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