Peru-United States Free Trade Agreement

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The Peru-United States Free Trade Agreement (FTA or PFTA), also known as the United States-Peru Trade Promotion Agreement (TPA), was signed on April 12, 2006 by President George W. Bush, and won Congressional approval on December 4, 2007, as required by the Constitution. Bush and congressional Democratic leaders negotiated changes to the agreement in May 2007, including stricter environmental and workers' rights protections. According to the United States Trade Representative, the agreement would make "eighty percent of U.S. exports of consumer and industrial goods to Peru and more than two-thirds of current U.S. farm exports to Peru" duty-free immediately.

Several large environmental organizations, including the Sierra Club, harshly criticized the original agreement out of concern for environmental and labor issues. After the May 2007 changes, however, many of these groups lauded the environmental improvements while still expressing concerns over jobs lost to offshoring and provisions allowing corporations to challenge domestic laws in trade tribunals.

Current status

The Peru-United States Free Trade Agreement was signed in April 2006, approved by the House on November 8, 2007, and was passed by the Senate on December 4, 2007.

History

Agreement signed in 2006 but stalls in Congress

The Peru-United States Free Trade Agreement was signed in April 2006, but got bogged down in the last months of the Republican-controlled 109th Congress.

Agreement revived after deal between House Dem leaders and Bush

The Democratic-controlled congress took no action on the agreement in the first months of 2007. Then, on May 10, 2007, Democratic congressional leaders, including House Speaker Nancy Pelosi and House Committee on Ways and Means Chair Charles Rangel (D-N.Y.), struck a deal with President Bush that secured their support for the Peru-U.S. agreement in exchange for inserting provisions that protected workers' rights to organize and bargain collectively and guaranteed that both countries would abide by international environmental treaties. The Peruvian government would also have to agree to the changes before Congress could consider the agreement.

Main article: Trade policy (U.S.)#Deal between congressional Democratic leaders and President Bush

On June 25, 2007, United States Trade Representative Susan Schwab announced that an agreement had been reached between the governments of Peru and the United States regarding amendments to the United States-Peru Trade Promotion Agreement in compliance with the May 10 agreement between the Bush administration and Democratic congressional leaders. The new version of the bill, which still required congressional approval to be ratified, included changes to the TPA's provisions on labor and the environment.

Agreement ratification postponed in June 2006

In a joint statement released with House Majority Leader Steny Hoyer (D-Md.), Ways and Means Committee Chairman Charles Rangel, and Rep. Sandy Levin (D-Mich.) on June 29, House Speaker Nancy Pelosi indicated that the PFTA would not be taken up by the House for consideration until after the summer, contrary to the urging of the president and business groups. The congressional leaders stated that Peru would have to change its domestic laws to comply with the May 10 trade agreement between President Bush and Congress. It was also revealed that Chairman Rangel would lead a congressional delegation to Peru in August to address the issue.

Consideration in the Senate

Passes the Senate Finance Committee

On September 21, 2007, the Senate Finance Committee approved the Peru-United States Free Trade Agreement in a vote of 18-3. Finance Committee Chairman Max Baucus (D-Mont.) attributed the passage to the inclusion of strong environmental and labor standards. The agreement would make 80 percent of American exports of consumer and industrial products, and two-thirds of farm exports, duty free.

While the bill is expected to get congressional approval, some environmental and labor groups still oppose the bill, questioning if the new labor standards would be enforced.

Consideration in the House

On November 8, 2007, the House approved the trade agreement, sending the measure to the full Senate for consideration. Even after requiring concessions from Peru, Democratic leaders faced dissent within their caucus. House Speaker Nancy Pelosi said concerns over the impacts of trade exist, but "we cannot turn our backs on it."

Labor groups continued to speak out against the bill. Teamsters president James Hoffa said the number of Democrats voting against the agreement was an indication that the pact is bad for workers. Meanwhile, trade supporters hailed the vote, with Nicole Venable, a U.S. Chamber of Commerce lobbyist, calling it "historic."

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Senate Passage

On December 4, 2007, the Senate passed the trade agreement. As in the House, Democrats remained divided on the measure, with 29 voting for the agreement and 16 against it. According to the New York Times, "Democratic supporters said they were comfortable with the deal because the House speaker, Nancy Pelosi, negotiated concessions from President Bush in May extending protections for workers and the environment in Peru. Democratic supporters also said that the deal opened up markets for American exports."

Support, opposition and critiques of original agreement

These critiques are in response to the changes negotiated to the agreement between the Bush administration and several congressional Democratic leaders. See below for critiques of the original agreement, which remains largely intact.

Response from environmental groups

After congressional Democrats negotiated changes to the agreement with President Bush in May 2007, the Center for International Environmental Law, Defenders of Wildlife, Earthjustice, Environmental Investigation Agency, Friends of the Earth, Natural Resources Defense Council, and Sierra Club noted that the environmental provisions of the agreement marked a significant step forward. The FTA now includes provisions that could help stop the flow of illegally logged timber from Peru. In addition, there are requirements for countries to fulfill their obligations under a selected set of Multilateral Environmental Agreements. The groups warned, however, against using the Peru FTA as a template for future trade deals since several problematic provisions, especially in the investment chapter, have not been improved.

Support

In a press release by the U.S. Trade Representative, the Peru Free Trade Agreement (PFTA) was promoted as providing the following:

• "A predictable legal framework for U.S. investors."
• "Enforcement of labor and environmental laws."
• "Protection of intellectual property."
• "An effective system to settle disputes."
• "A strengthening of Peru’s "ability to effectively counter narco-terrorism."

Opposition

• Presbyterian Church (USA)

Peru is engaged in a delicate reconciliation process after decades of armed conflict and the country remains burdened by high levels of poverty. In a desperate attempt to gain support for the U.S.-Peru FTA, the U.S. Trade Representative is claiming the trade pact will lead to increased democratic stability in the region and curbed cultivation of coca and trafficking of cocaine.

Based on the results of North American Free Trade Agreement (NAFTA), we think the opposite is true. Some of the major problems in NAFTA’s model are replicated in the Peru FTA. This model is a “one-size-fits-all” approach to economic development for poor nations that does not live up to the principles of fair trade. The US-Peru FTA will cause lost livelihoods in rural communities, reduced access to life-saving medicines and perpetuate the global “race to the bottom” for workers and environmental protections. The US-Peru FTA will not bring stability or development to the region!

Organizations opposition

Critics of the original agreement included groups such as Public Citizen, which argued that it promotes "the 'race to the bottom' in labor and environmental standards [as well as the] privatization and deregulation of key public services."

Other organizations opposing the original agreement included:

• Sierra Club
• Center for Biological Diversity
• Center for International Environmental Law
• Defenders of Wildlife
• Earthjustice
• Endangered Species Coalition
• Friends of the Earth
• Greenpeace
• League of Conservation Voters "Letter to Members of Congress," Center for Biological Diversity, Center for International Environmental Law, Defenders of Wildlife, Earthjustice, Endangered Species Coalition, Friends of the Earth, Greenpeace, League of Conservation Voters, and the Sierra Club, February 28, 2007.</ref>

Environmental criticism

Peru, part of the tropical Andes, is one of the most biologically rich and most diverse ecosystems on the planet. The region contains one-sixth of all the planet's plant life in one percent of the world's land area. Half of all species found there are found no where else on earth. Peru is also home to hundreds of endangered species. Prior to the adoption of certain amendments to the deal in June 2007, a number of environmental and social justice organizations came out against the Peru-U.S. Free Trade Agreement, citing that it did not do enough to protect this unique and irreplaceable environment. They found the original measure to lack adequate environmental safeguards, to too easily allow for harmful anti-environment lawsuits, and to present a threat to biodiversity.

According to environmental organizations against the U.S.-Peru Free Trade Agreement (FTA), such as the Sierra Club, the original agreement did not include adequate and enforceable environmental provisions. Specifically, the agreement:

• Did not require either Peru or the U.S. to maintain or enforce a clear set of environmental regulations.
• Obliged both countries to comply with their own environmental standards, something considered worthless by opponents if the country does not have adequate environmental laws.
• Did not set up a punishment or enforcement mechanism for violating environmental standards.
• Did not require the adoption of pre-existing international environmental agreements.
• Did not include parity of enforcement for dispute settlement between commercial and environmental provisions.
• Set a maximum fine of only $15 million for violation of the FTA's environmental provisions.
• Did not establish an effective structure and funding for implementation of the environmental provisions.

According to these groups, in regards to environmental safeguards, the FTA should:

• Require full implementation of international environmental agreements, including the Convention on International Trade in Endangered Species (CITES). Peru had previously been found not to have enacted appropriate measures to comply with its provisions, specifically in regard to illegal logging and trade in mahogany, of which the U.S. is the largest importer.
• Include a specific provision prohibiting the trade of illegally logged timber and wood products, which harm local communities who depend on the forests for their livelihoods, as well as the economy of timber-producing regions in the United States.
• Provide parity of enforcement for environmental and commercial provisions, establishing an effective punishment system for environmental violations, modeled after the Jordan FTA, "which put environmental and commercial provisions on a level playing field."

The environmental groups opposed to the initial agreement also noted that it included measures that allowed for harmful anti-environmental lawsuits. Specifically, the agreement:

• "Contains provisions like those in CAFTA and NAFTA that would allow foreign investors to challenge health and environmental regulations for compensation before international tribunals, bypassing domestic courts."
• Provided foreign investors even greater rights to challenge environmental laws than did CAFTA, which "would enable multinational corporations to attack legitimate attempts by communities to protect their health and environment even if their activities are only tangentially related to natural resource extraction."
• Gave foreign corporations the right to challenge U.S. government decisions concerning oil and gas royalties and other domestic regulations.

The groups found that the FTA should:

• Include an across-the-board exception from trade challenges for environmental and public health laws.
• Not include investor-to-state dispute settlement provisions.

The opposition groups also claimed that certain provisions in the original FTA threatened biodiversity in Peru. Specifically, the FTA:

• "Would undermine the right of indigenous and local communities to share in the benefits derived from the vast biodiversity of the region and their own traditional knowledge of that biodiversity."
• Did not "comport with the requirements of the Convention on Biological Diversity (CBD) protecting the rights of indigenous communities to their traditional knowledge in areas such as medicines and seeds," an agreement which may have been violated when the U.S. company PureWorld Botanicals, Inc. patented a plant species native to Peru known as maca, a common aphrodisiac.

The organizations proposed that the FTA should:

• Ensure indigenous communities' right to know if their traditional knowledge is being used by outside parties.
• Allow indigenous communities to share in any benefits derived from that traditional knowledge.

Opposition by Murtha on port security

In February 2007, Rep. John Murtha (D-Pa.) called for revisions of the PFTA, citing national security concerns. The controversy surrounded provisions similar to the 2006 Oman Free-Trade Agreement, when questions concerning the foreign ownership and operation of U.S. ports were asked. The same company (Dubai Ports World) remained a central character in the debate as it had recently purchased 30-year rights to operate a Peruvian port just outside the capital of Lima.

Under the PFTA, this would grant Dubai Ports World the same privileges as a Peruvian firm, including protection against ownership discrimination of U.S. ports except in cases of "essential security." Murtha's objections surrounded whether or not the U.S. may exercise the “essential security” clause without the ruling of the WTO or another international tribunal, thus keeping decisions regarding U.S. ports a domestic issue.

Articles and resources

Related SourceWatch articles

• Economic Policy (U.S.) Portal
• Australia-United States Free Trade Agreement
• U.S.-Central America Free Trade Agreement
• North American Free Trade Agreement
• Free Trade Area of the Americas
• Middle East Free Trade Area
• U.S. Trade Promotion Authority Act

External resources

• Link to the United States Trade Representatives' Peru Trade Promotion Agreement page
• U.S. Trade Representatives, press release December 7, 2005.
• Peruvian Embassy press release
• Sierra Club's page on PFTA
• Public Citizen's page on PFTA and AFTA
• Letter from Members of Congress to U.S. Trade Representative, January 17, 2007.
• Letter from Members of Congress to Chairmen Rangel and Levin, March 7, 2007.
• "Letter to Members of Congress," Center for Biological Diversity, Center for International Environmental Law, Defenders of Wildlife, Earthjustice, Endangered Species Coalition, Friends of the Earth, Greenpeace, League of Conservation Voters, and the Sierra Club, February 28, 2007.
• "The CAFTA Model, Only Worse: Environmental Rules in the Oman and Peru Free Trade Deals," Defenders of Wildlife, Friends of the Earth, and The Sierra Club.
• "Letter: Oppose the United States – Peru Free Trade Agreement," Defenders of Wildlife, Friends of the Earth, The Sierra Club, Center for International Environmental Law, and EarthJustice, March 10, 2006.
• U.S.-Peru Free Trade Agreement: Trading away endangered species
• Press Release: Environmental chapter of the Peru trade agreement marks a significant step forward, Center for International Environmental Law, Defenders of Wildlife, Earthjustice, Environmental

Investigation Agency, Friends of the Earth, Natural Resources Defense Council, and the Sierra Club, June 26, 2007.

• Press Release: Schwab statement on amendments to U.S.-Peru Trade Promotion Agreement, Office of the United States Trade Representative, June 25, 2007.

External articles

• Ian Swanson, "Murtha sees security threat in trade deal," Hill News, February 21, 2007.
• Pete Kasperowicz, "US government told Korea FTA to aid financial services access, telecoms, exports," Thomson Financial (via Forbes), June 20, 2007.
• Philip I. Levy, "Trade in the Twilight of the Bush Administration," American Enterprise Institute, June 18, 2007.
• Simon Kennedy and Mark Drajem, "Protectionism specter looms amid Doha trade talks," International Herald Tribune, June 17, 2007.
• Greg Hitt, "Bush's Shrinking Global Trade Agenda," Wall Street Journal, June 18, 2007.
• "Democrats, Bush reach deal on free trade," Associated Press (via MSNBC), May 10, 2007.
• "New Report Reveals Provisions Buried in Peru Free Trade Agreement that Would Chill Efforts To Reverse Peru’s Failed Social Security Privatization," Public Citizen, June 20, 2007.
• Paul Blustein, "U.S., Peru Strike Free-Trade Agreement," Washington Post, December 8, 2005.
• Eli Noam, "A paradoxical free trade agreement," Financial Times, June 14, 2007.
• Kelly Hearn, "Beans for Lima: Activists are fighting a new agreement between the U.S. and Peru," Grist, May 11, 2006.