Peru-USA Trade Promotion Agreement Signed

Tough Sledding Ahead

April 21, 2006

On April 12th, Peru and the USA signed the US-Peru Trade Promotion Agreement.  Like the Central America/Dominican Republic Free Trade Agreement that was approved by 2 votes in the US House of Representatives, the Peru deal got its title as a "Trade Promotion Agreement" in  anticipation of the difficult road ahead in obtaining approval in both countries.

The agreement was negotiated by outgoing President Alejandro Toledo, a reformer who leaves office in late July.  Peru's election contest offers a choice between Ollanta Humala, a populist who has called for the Agreement to be scrapped or re-bargained, and more liberal candidates who have not committed to a position.  President Toledo hopes to have it approved before he leaves office on July 28th, but the prospects for this are uncertain.

US chances for approval are perhaps no better.  US opponents demand that Peru adopt international labor standards or face rejection of the pact.  Although President Toledo has indicated that Peru could accept International Labor Organization standards, other forces from different extremes within Peru argue this is an infringement of sovereignty.  Once President Bush submits the Agreement to Congress, it will have 90 days for an up-or-down vote, which is predicted to be as difficult as the CAFTA/DR experience.

About 5,000 US companies export goods to Peru, and 80% of these are small or mid-sized businesses.  If the Agreement is implemented, 80% of US consumer and industrial products would become duty-free into Peru.  Over two thirds of US agricultural products would enjoy similar treatment, as compared with current high tariffs into this Andean nation.  By contrast, US tariffs on Peruvian products are already nonexistent or below 5% generally.

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