TRADE AND EMPLOYMENT
EFFECTS OF THE ANDEAN TRADE
PREFERENCE ACT
Fifth 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, 1998
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 1997
U.S. Import and Domestic Employment Trends in Selected Industrial
Sectors Receiving Significant Benefits Provided under the ATPA in 1997
Vegetables and melons
Horticultural specialties
Industrial inorganic chemicals
Primary nonferrous metals
Nonferrous rolled and drawn products
Update on industries with ATPA duty-free imports from previous
reports
Conclusions
Executive Summary
During 1997, $1.3 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 (54 percent or $717 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 46 percent ($600 million)
of these duty-free entries represent the unique benefits of the ATPA
to the ATPA-beneficiary nations. These unique ATPA benefits
represented 6.9 percent of total U.S. imports from the ATPA
beneficiary nations and 0.07 percent of total U.S. imports from all
nations in 1997.
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, standard and 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 fifth 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
1997.
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 4,750 tariff items from
over 140 designated beneficiary developing countries and territories;
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. More 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 1997
accounted for 1.0 percent of total U.S. merchandise imports from all
countries and amounted to $8.7 billion, an 10.2 percent increase over
their level in 1996. U.S. exports to the ATPA beneficiaries in 1997
accounted for 1.3 percent of all U.S. merchandise exports to the
world and amounted to $8.7 billion, a 12.5 percent increase over
their level in 1996.
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 of $8 million in 1997. Both U.S. exports to and
imports from the ATPA beneficiaries have increased each year since
1991 except for a small export decline in 1996. In nominal (current
dollar) terms, U.S. exports to the ATPA beneficiaries in 1997 were
128.6 percent above their 1991 level, while U.S. imports from the
ATPA beneficiaries in 1997 were 74.5 percent above their 1991 level.
By broad industrial division, 32 percent of U.S. imports from the
ATPA beneficiaries in 1997 were agricultural and fishery products, 35
percent were crude and refined petroleum and minerals, 30 percent
were manufactures, and 3 percent were miscellaneous items. During
1997, U.S. imports of crude and refined petroleum products from the
ATPA beneficiary countries decreased by 6.7 percent, while U.S.
imports of non-petroleum products from the ATPA beneficiary nations
increased from their 1996 level of $4.7 billion to $5.7 billion in
1997, a 21.5 percent increase.
Leading industrial categories of U.S. imports from the ATPA
beneficiary nations in 1997 included: agricultural products ($1,982
million); crude petroleum ($1,879 million); refined petroleum
products ($1,048 million); fishery products ($756 million); primary
metal products ($712 million); apparel ($585 million); food products
($361 million); miscellaneous manufactures ($293 million); chemicals
($221 million); and miscellaneous commodities ($153 million). These
top-ten categories, based on the 2-digit Standard Industrial
Classification system, accounted for 92.1 percent of all U.S. imports
from the ATPA beneficiaries in 1997.
Leading industrial categories of U.S. exports to the ATPA
beneficiary nations in 1997 included: nonelectrical machinery ($2,249
million); chemicals ($1,404 million); electrical machinery ($1,096
million); transportation equipment ($560 million); agricultural
products ($524 million); food products ($404 million); paper products
($335 million); scientific and professional instruments ($324
million); miscellaneous manufactures, not specifically provided for
($248 million); and refined petroleum ($246 million). These top-ten
categories, based on the 2-digit Standard Industrial Classification
system, accounted for 85.1 percent of all U.S. exports to the ATPA
beneficiaries in 1997.
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 1997,
6.1 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 9.9 percent over the
1991-97 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 1997, over $4.0 billion (or 46 percent) of the $8.7 billion in
total U.S. imports from the ATPA beneficiary countries was imported
normal trade relations (NTR) (formerly known as most-favored-nation
(MFN)) duty-free. Of the remaining $4.7 billion which was subject to
duty (i.e., not NTR duty-free), U.S. import duties were assessed on
almost $2.9 billion, while almost $1.8 billion entered duty-free
under one of the special U.S. tariff preference programs.
Of the almost $1.8 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 1997, $1,317 million
entered duty-free under the ATPA, $254 million entered duty-free
under the GSP, $165 million (U.S.-content value) entered duty-free
under the 9802.00.80 provision, and $53 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 1997, 98 percent of the
value of these items entered duty-free (78 percent under ATPA and 20
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 1997. Thus most items that are eligible for
duty-free treatment under either the ATPA or the GSP, are actually
imported duty-free.
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 from 28 percent in 1992 to 35 percent in 1997; most of
the items eligible for ATPA duty-free treatment were already eligible
for GSP duty-free treatment. U.S. imports from the ATPA
beneficiaries of items eligible for duty-free treatment only under
the ATPA have increased at an average annual rate of 22.9 percent
since 1991.
Leading industrial categories of ATPA duty-free U.S. imports (some
of which would have been eligible for GSP duty-free entry) in 1997
included: horticultural specialties ($445 million); primary
nonferrous metal products ($185 million); jewelry and silverware
($157 million); nonferrous rolled and drawn products ($93 million);
industrial inorganic chemicals ($72 million); miscellaneous food
products ($52 million); miscellaneous plastic products ($37 million);
sugar and confectionery products ($35 million); vegetables and melons
($32 million); and prepared fruits and vegetables ($28 million).
These top-ten categories, based on the 3-digit Standard Industrial
Classification system, accounted for 86.2 percent of total ATPA
duty-free U.S. imports in 1997.
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) increased in 1997 after a significant decrease during
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 in
1996 and then increased to $286 million (or 6.1 percent of all U.S.
imports subject to duty from the ATPA beneficiaries) in 1997. U.S.
components comprised 57.8 percent of the value of these items in
1997. 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 ($272 million with 57 percent U.S.-content
value) accounted for over 95 percent of the value of U.S. imports
from ATPA beneficiaries under HTS item 9802.00.80 in 1997; two other
industrial groups with appreciable amounts were textile mill products
($11 million with 68 percent U.S.-content value) and miscellaneous
manufactures ($3 million with 87 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 1997, the United States imported
$28.4 million of these eligible leather products from the ATPA
beneficiaries, $27.2 million of which was subject to lower duties, $3
thousand was U.S. content entered under 9802, and the balance ($1.2
million) was subject to full duty. The value of leather products
imports from the ATPA beneficiaries eligible for reduced duties in
1997 was approximately the same as it was in 1991, the year before
the reduced duties program began.
In addition to receiving ATPA duty-free benefits, Colombia is
eligible (as of August 24, 1995) for the Special Access Program (SAP)
which was established in 1986 and sets liberal quotas (guaranteed
access levels, GALs) for textile and apparel items assembled in
eligible CBERA beneficiaries from fabric formed and cut to pattern in
the United States; the other ATPA beneficiaries are not subject to
textile and apparel quotas. In 1997, U.S. textile and apparel
imports from Colombia under the SAP program amounted to $25.9
million, or about 10 percent of all U.S. imports of assembled apparel
items under the HTS 9802 provisions from Colombia.
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 1997 in the
following cases: products eligible for ATPA duty-free entry, but not
eligible for duty-free entry under GSP ($341 million, of which $329
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 ($288 million,
of which $271 million entered ATPA duty-free).
The total unique ATPA benefits of $600 million in 1997 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 $142
million or 30.9 percent more than they were in 1996 (68.4 percent
more than in 1995) and represented 6.9 percent of total U.S. imports
from the ATPA-beneficiary nations (but only 0.07 percent of total
U.S. imports from all sources) in 1997.
The top-ten tariff schedule categories of items receiving
duty-free treatment unique to the ATPA in 1997 included: fresh cut
roses ($184.1 million), fresh cut chrysanthemums, standard
carnations, anthuriums, and orchids ($143.4 million), cathodes
($104.0 million); tuna and skipjack not in airtight containers ($47.3
million), nonpure nonmonetary gold ($41.3 million), fresh or chilled
asparagus entered from November 15 to September 15 ($19.8 million),
zinc plates ($7.7 million), fresh or chilled asparagus entered from
September 15 to November 15 ($7.0 million), oil well tubing of iron
($6.8 million), and glazed ceramic flags and tiles ($5.6 million).
These ten items accounted for 94.5 percent ($567.0 million) of the
duty-free entries unique to the ATPA in 1997. Four of the top-ten
items are items normally eligible for GSP but at least one of the
ATPA beneficiaries had lost its GSP eligibility for the item by
exceeding that program's competitive need limitation. These four
items were fresh cut chrysanthemums, standard carnations, anthuriums,
and orchids from Colombia, cathodes from Peru, zinc plates from
Peru, and fresh asparagus entered from 9/15 to 11/15 from Peru. The
remaining six 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 1997, Colombia accounted for 51 percent ($303 million) of total
ATPA duty-free imports unique to the ATPA, Peru for 32 percent ($192
million), Ecuador for 17 percent ($104 million), and Bolivia for less
than one-tenth of one percent ($390 thousand).
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, 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
1997.
Five 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 1997 and these imports
accounted for at least one percent of total U.S. imports of that SIC
group. These five groups were: vegetables and melons, horticultural
specialties, industrial inorganic chemicals, primary nonferrous
metals, and nonferrous rolled and drawn products. All of these except
industrial inorganic chemicals 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 five 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 1997 is discussed first.
The U.S. Employment Situation in 1997
During 1997, the overall employment situation in the United States
remained strong. The U.S. economy added 3.1 million jobs during
1997; employment has increased by 14.4 million since 1991. Total
nonfarm employment in 1997 (122.7 million) was 13.3 million (or 12.1
percent) above the previous cyclical high recorded in 1990. The job
gains during 1997 occurred in both the service-producing and
goods-producing sectors. Within the goods-producing sector, there
were job gains in construction, manufacturing and mining. With these
gains, employment in the goods-producing sector in 1997 (24.9
million) was slightly above that in 1990 by 29,000. The
manufacturing sector gained 162,000 jobs in 1997 (although the sector
still has 419,000 jobs fewer than in 1990). The U.S. manufacturing
sector, with employment of 18.7 million in 1997, has lost 2.4 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 1997
Vegetables and melons: The ATPA nations' exports of
vegetables and melons (SIC 016) to the United States increased to
$32.3 million in 1997, a 6.6 percent increase compared to 43.4
percent and 33.9 percent increases in 1995 and 1996. These exports
represented 1.8 percent of total U.S. imports of vegetables and
melons, and almost all entered duty-free under the ATPA. Of the $31.9
million which entered ATPA duty free, $30.2 million were items not
eligible for the GSP; these items accounted for 1.7 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 85
percent of the ATPA duty-free imports in this group and 82 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, Peru was
not eligible for GSP for this item because they had exceeded the
program's competitive need limits. During 1997, total U.S. imports
of fresh asparagus increased by 19.0 percent, while ATPA imports
increased by 25.2 percent. ATPA duty-free imports of fresh asparagus
accounted for 38.8 percent of total U.S. asparagus imports in 1997.
Most of the remaining U.S. imports of asparagus enter NAFTA duty-free
from Mexico or GSP duty-free from Chile; duties are paid on only one
percent of total U.S. asparagus imports. Thus the duty-free
provisions of the ATPA provide the Andean nations parity with the
other asparagus exporting nations instead of providing them a
preference.
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 has decreased steadily from 109,850 tons
in 1994, to 99,450 tons in 1996, and to 98,970 tons in 1997. The
dollar value of U.S. production declined from $178 million in 1994,
to $156 million in 1996, but increased in 1997 to $181 million due
largely to an increase in the price of fresh asparagus. 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. It is possible that imports of fresh asparagus during
the winter months reduce the demand for U.S. processed asparagus,
however, 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. In 1997, fresh asparagus accounted for 61 percent and
processed (canned or frozen) for 39 percent of total U.S. production
by weight, while fresh asparagus accounted for 74 percent and
processed for 26 percent by value. U.S. production tonnage of fresh
asparagus increased by 8 percent between 1996 and 1997, while U.S.
production of processed asparagus decreased by 11 percent in 1997.
The price of fresh asparagus increased by 19 percent in 1997 but this
simply reversed an 18 percent decrease during 1996. The price of
processed asparagus has remained relatively stable during the 1995 to
1997 period. Processed asparagus generally sells for slightly more
than one-half the price of fresh asparagus. In dollar value terms,
U.S. imports from all sources of fresh asparagus were equal to 53
percent of U.S. production of fresh asparagus; ATPA duty-free
imports were equal to 21 percent of U.S. production in 1997. Thus
the decrease in U.S. production of asparagus over the last several
years slowed in 1997, and the domestic prices of fresh and processed
asparagus were similar in 1997 to their level in 1995. Therefore the
sizable (and moderately increasing) amounts of ATPA duty-free imports
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 $8.9
million (or 2.0 percent) to $447 million in 1997. Almost all of this
($445 million) entered ATPA duty-free, and these duty-free imports
accounted for 37.3 percent of total U.S. imports of horticultural
specialties. A very large share of these duty-free imports ($328
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 24.9 percent of all ATPA duty-free entries and 54.6
percent of the duty-free entries that were unique to the ATPA in
1997. 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 decreased by 3 percent to $117 million during
1997.
U.S. imports of ATPA fresh cut roses (HTS 0603.10.60) increased by
$27.8 million (or 17.8 percent) to $184.3 million in 1997; over 99
percent of these imports entered ATPA duty-free. U.S. imports of
fresh cut roses from the Andean beneficiaries have increased
consistently over the last several years with increases of 22
percent in 1996 and 22 percent in 1995 and 16 percent in 1994.
During 1997, over 89 percent of total U.S. imports of fresh roses
entered ATPA duty-free with most of the remainder from other nations
entering duty free under the NAFTA and the CBERA. Colombia accounted
for 64 percent and Ecuador 25 percent (Bolivia accounted for less
than one percent) of total U.S. imports of fresh roses. This tariff
item is not eligible for GSP duty-free entry, and had the largest
amount of duty-free imports during 1997 which were unique to the
ATPA; the ATPA allows the beneficiaries to avoid a 7.8 percent
tariff. According to the U.S. International Trade Commission
(USITC), U.S. imports of roses from the ATPA beneficiaries accounted
for an increased share of apparent domestic consumption (imports plus
domestic production, less exports), growing from 34 percent in 1993
to 57 percent in 1996. According to the U.S. Department of
Agriculture, domestic production of roses (in blooms) declined by 34
percent between 1989 and 1995, and declined by 11.8 percent in 1996;
during 1997, domestic production increased by 2.8 percent in terms of
blooms but decreased by 1.1 percent in terms of value. The USITC
estimates (based on 1996 data) that 14.1 percent of domestic fresh
cut rose shipments may have been displaced by increased imports due
to the duty provisions of the ATPA.
U.S. imports of ATPA duty-free chrysanthemums and standard
carnations (HTS 0603.10.70) from Colombia, which had lost eligibility
for GSP by exceeding the competitive need limits in previous years,
decreased by 9.5 percent to $143 million in 1997. Chrysanthemums and
standard carnations from Colombia received the second largest unique
benefits under the ATPA of any eight-digit HTS item. Colombia
accounted for 89 percent of all U.S. imports of this tariff item from
all sources. Ecuador accounted for almost 3 percent of total U.S.
imports (or $4 million) of this item and almost all of these entered
ATPA duty-free although imports from Ecuador remain eligible for GSP
duty-free treatment. Approximately 51 percent of U.S. imports from
Colombia of this tariff item was composed of carnations (HTS
0603.10.7030) and 49 percent was chrysanthemums (HTS 0603.10.7010 and
0603.10.7020), with the very small remaining balance being composed
of orchids. According to the USITC, U.S. imports from Colombia under
this tariff item accounted for approximately three-fourths of
apparent domestic consumption during 1996. 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 relatively stable in 1995. In 1996, domestic production of
standard chrysanthemums decreased by 1.5 percent and during 1997
domestic production of standard chrysanthemums decreased 20.4 percent
in terms of blooms and 31.3 percent in terms of value. Domestic
production of pompon chrysanthemums decreased 11.7 percent in 1996
and decreased in 1997 by 1.0 percent in terms of bunches (but
increased by 2.3 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 and in 1997 production declined by 33.4
percent in terms of blooms and 28.0 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 during 1996 and declined by 16.4 percent to
$30.9 million in 1997. 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.
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 USITC determined in March 1995 that the U.S. domestic
rose industry had not been injured by imports of roses from Colombia
and Ecuador, the USITC determination is not particularly relevant to
the analysis of this report. The USITC determination was based on
trade and production data covering 1991 through 1994 and therefore
does not cover developments since 1994 which is the primary focus of
this report. In addition, the USITC 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).
On January 7, 1997, Congressman Sam Farr (D-CA) introduced a bill
(H.R. 54) in the House of Representatives to remove flowers from the
list of eligible ATPA products. The Floral Trade Council claims that
ATPA duty-free imports of fresh cut flowers has significantly reduced
the number of domestic fresh cut flower growers.
The continual increase in U.S. imports from the ATPA nations and
the continual decrease in domestic production of chrysanthemums,
carnations, and cut roses over the last several years 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 85 percent of
floriculture operations used hired workers. The peak number of hired
workers in floriculture crops decreased from 114,372 in 1996 to
109,934 in 1997; 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 but did decrease by 4 percent during
1997. These numbers do not include workers at the wholesale and
retail level. The wholesale value of all domestically produced cut
flowers increased by 5.8 percent in 1997 after increasing by 5.4
percent in 1996. Roses, standard carnations, standard and pompon
chrysanthemums account for approximately one-third of total cut
flower production and these flowers are grown primarily in California
as are cut flowers generally. Thus total cut flower sales have shown
modest growth over the last several years, while domestic employment
in the floriculture industry has been relatively stable until the
decreases experienced in 1997. Thus any workers released by the
reduced production of these selected cut flowers may experience
difficulties in finding employment in another segment of the cut
flower industry in their current geographic location.
Therefore trends in domestic production in 1997 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. Although the number of negatively impacted workers was likely
to have been small, it is difficult to determine the degree of
adjustment difficulty faced by these displaced workers. Although
employment opportunities for these displaced workers were probably
limited in the floriculture industry, the overall health of the U.S.
economy would tend to minimize the adjustment costs for these
workers.
Industrial inorganic chemicals: U.S. imports from the ATPA
countries of industrial inorganic chemicals (SIC 281) increased by
206 percent to $90.7 million in 1997. Of this amount, $72.3 million
entered ATPA duty-free and all of this were items which were also
eligible for duty-free treatment under the GSP. These ATPA duty-free
imports consisted largely of gold compounds (HTS 2843.30.00.00) from
Colombia ($66 million) and Peru ($5 million). Although ATPA duty-free
imports accounted for only 1.0 percent of total U.S. imports of
industrial inorganic chemicals, ATPA duty-free imports of gold
compounds accounted for 96.6 percent of total U.S. imports of gold
compounds.
U.S. employment in the industrial inorganic chemicals industry
decreased by 2,000 to 117,200 in 1997; employment in this industry
has fallen significantly from its previous cyclical peaks of 162,300
in 1979 and 138,100 in 1990. However, since U.S. imports from the
ATPA beneficiaries are concentrated in a small segment of this
industry, overall employment conditions in the industry are of only
minor significance in appraising any adjustment problem created by
ATPA duty-free imports. Given that gold compounds are eligible for
duty-free treatment under the GSP, the provisions of the ATPA do not
appear to be creating any additional adjustment problem for this
industry.
Primary nonferrous metals: U.S. imports of primary
nonferrous metals (SIC 333) from the ATPA nations decreased by 6.0
percent to $513.3 million in 1997. However, ATPA duty-free imports
increased from $112.5 million in 1996 to $184.9 million in 1997.
There was a 78.4 percent increase to $221.9 million of imports of
items generally eligible for the ATPA but not the GSP. However there
was a very large increase from $2.0 million in 1996 to $107.1 million
in 1997 of ATPA duty-free imports which were not eligible for the GSP
at the time they were imported due to Peru's loss of GSP eligibility
for refined copper cathodes (HTS 7403.11.00.00) and refined copper
bars (HTS 7403.12.00.00) after July 1, 1997 due to competitive need
considerations. ATPA duty-free imports whose duty-free status was
unique to the ATPA represented 0.8 percent of total U.S. imports of
primary nonferrous metals. However, ATPA duty-free imports of refined
copper cathodes from Peru have increased twelve-fold since 1995 and
accounted for 11.8 percent of total U.S. imports of this item during
1997.
U.S. employment in the primary nonferrous metals industry fell by
200 to 39,300 during 1997. Employment in this industry has declined
by 46 percent since 1979 and 14 percent since 1990, although
employment has declined by less than 2 percent since 1995. Clearly
any adjustment problem created by the provisions of the ATPA would be
concentrated in a small specific sector of this industry, i.e., the
copper cathode industry. Duty-free imports unique to the ATPA of
copper cathodes accounted for less than 2 percent of U.S. apparent
consumption of this item (based on 1996 USITC estimates of apparent
consumption). In addition, the USITC estimated (using 1996 data)
that less than one-tenth of one percent of the equivalent U.S.
domestic industry had been displaced by increased imports of copper
cathodes due to the duty-free provisions of the ATPA. Thus, 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 and to $125.9 million in
1997 (a 2,579 percent increase over two years). Over $93 million
entered ATPA duty-free and more than half of this ($54.3 million) was
not eligible for GSP duty-free treatment. ATPA duty-free imports
accounted for 1.3 percent of total U.S. imports of these items during
1997. The primary items entered ATPA duty-free, which were also
eligible for GSP duty-free treatment, were insulated electric
conductors and gold articles. The primary items entered ATPA
duty-free that were not eligible for GSP duty-free treatment were
zinc plates and sheets from Peru (which lost GSP eligibility July 1,
1997) and semi-manufactured gold.
U.S. employment in the nonferrous rolled and drawn products
industry increased by 600 during 1997 to 168,400; although employment
in 1997 was 1,200 above its level in 1991, this industry has lost
51,600 jobs since 1979 and 3,900 since 1990. Thus although ATPA
duty-free imports have increased quite significantly during 1996 and
1997, they remained a small portion of total U.S. imports of this
industry, and employment in this industry has 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.
Update on industries with significant ATPA duty-free imports
from previous reports: Several industries which were analyzed
more fully in last year's report are not considered in this year's
report because the growth of ATPA duty-free imports subsided during
1997. ATPA duty-free imports of sugar and confectionary products (SIC
206) fell significantly as importers switched back to using the GSP
provision to enter these products duty free in 1997; ATPA duty-free
imports of sugar products not eligible under the GSP were negligible.
In the miscellaneous food products industry (SIC 209), ATPA duty-free
imports fell by 20 percent to $51.7 million, while ATPA duty-free
imports of items not eligible under the GSP fell by 19 percent to
$47.4 million. Most of the ATPA duty-free imports in the
miscellaneous food products industry were tuna loins; ATPA duty-free
imports increased by 905 percent between 1993 and 1996, but fell by
18.4 percent during 1997--nevertheless they remain 29.5 percent above
the level in 1995. U.S. imports of secondary nonferrous metals (SIC
334) from the ATPA beneficiaries decreased by 4.8 percent during 1997
while most of these items which had entered duty-free under the ATPA
during 1996 entered duty-free under the GSP during 1997. U.S.
imports of jewelry and silverware (SIC 391) from the Andean
beneficiaries decreased by 4.7 percent to $276 million in 1997. ATPA
duty-free imports of these items fell by 22.5 percent; only a
negligible portion of these ATPA duty-free imports were items not
eligible under the GSP program.
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 1.0
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 38 percent in 1997. 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.
Five 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), and three metal-related manufactures
(industrial inorganic chemicals -- primarily gold compounds; primary
nonferrous metals --refined copper cathodes; and nonferrous rolled
and drawn products--semi-manufactured gold) received substantial
benefits in 1997 from duty-free treatment under the ATPA. For
industrial inorganic chemicals, 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 five groups accounted for 63
percent of all ATPA duty-free imports and 87 percent of all duty-free
imports in 1997 that were unique to the ATPA. For each of the U.S.
industries that produced products similar to the five 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,
pompon chrysanthemums, standard chrysanthemums, and standard
carnations in the United States, and any employment declines
associated with it, may be due in part to imports of these cut
flowers from the 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 (normal-trade-relations) trading
partners.
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