PERU-U.S. FREE-TRADE AGREEMENT SIGNED INTO LAW AFTER U.S. CONGRESS APPROVES.

A free-trade agreement (FTA) between the US and Peru passed through both houses of the US Congress and became law with the signatures of the two nations' presidents in the final months of 2007. The pact, know as the US-Peru Trade Promotion Agreement (PTPA), received support from the relevant congressional committees--controlled by members of the Democratic Party--ensuring its passage through the main chambers of Congress. US President George W. Bush praised the opposition-controlled Congress for its cooperation and urged it to pass similar pending FTAs with Colombia and Panama. By signing the PTPA, Peru's President Alan Garcia cemented his reputation as a neoliberal and turned his back on the more populist policies of his first term as president in the 1980s.

The agreement began as a package deal, with Colombia, Ecuador and Peru negotiating together with the US to set up the Andean FTA (AFTA), but Peru broke with the Andean pack at the end of 2005 to conclude an bilateral deal with the US (see NotiSur, 2006-01-13). Negotiations with Colombia have concluded and the Colombia FTA is awaiting approval in the US Congress. Ecuador permanently suspended FTA talks after the US government condemned Ecuadoran legal sanctions against US-based oil corporation Occidental (see NotiSur, 2006-06-02), and President Rafael Correa has expressed no interest in renewing talks.

Peru's Congress approved the pact in mid-2007 although opposition groups protested it (see NotiSur, 2006-07-21). Peruvian farm unions, health care advocates, and labor groups have tended to predict harm from the agreement, while many business sectors, particularly exporters, have clamored for it. Patent protections for US pharmaceutical corporations in the ostensible free-trade deal have led health care advocates, for example, to complain that those terms could price medicine out of the market for many poor Peruvians.

About 80% of duties immediately eliminated

The new trade deal "levels the playing field" between the world's largest economy and one barely the size of that of Arkansas, with an annual GDP of around US$90 billion.

The agreement will go into effect as soon as the two countries adjust laws needed to abide by it, a process expected to take up to eight months. It is the first bilateral trade deal under a new agreement between Democrats and the Bush administration that requires negotiators to put labor rights and environmental standards on par with tariff reductions, investor protections, and other key elements of the accord.

It would immediately eliminate duties on 80% of US consumer and industrial product sales to Peru and on most agriculture goods, and gradually phase out all tariffs. Almost all Peruvian goods already enjoy duty-free status under trade breaks the US extends to Andean nations to boost their economies and provide alternatives to illicit-drug production. Thus, the deal will more immediately affect US sales, opening opportunities for US investors and service industries and protecting intellectual property rights.