Statement of the Hon. Ellen O. Tauscher, M.C., California

Testimony Before the Subcommittee on Trade
of the House Committee on Ways and Means

Hearing on Summit of the Americas and Prospects for Free Trade in the Hemisphere

May 8, 2001

Through my role on the House Armed Services Committee, I have been deeply involved in U.S. operations in Central and South America, especially in terms of U.S. development and support of "Plan Colombia". I recently traveled to this region and met the fine men and women of the U.S. armed forces who are working diligently to achieve the goals that the Congress set when this body passed legislation to provide assistance in this most difficult of battles: the war on drugs. I met with the commanding generals in Southern Command, the troops in field, the special operations community, and the Colombian military. Their morale is high, their missions are clear, and their work to achieve these goals continues as we speak. We have every right to be proud of our military and must strive to provide them the best support possible.

I have also met with the Colombian leadership, President Pastrana, Minister Ramirez, the Colombian Trade Minister, Mr. Urrutia, the Head of the Colombian Central Bank, and other cabinet-level leaders in Colombia. One constant through all of the discussion on how to win this war on drugs is this central thesis: to move a population from an industry of drug cultivation, production, transportation, and dissemination, there must be gainful employment elsewhere. The only true and proven method of increasing opportunities in an emerging economy is to open trade. There are no alternatives in a democratic society.

The existing ATPA arrangement has been a positive influence towards this end, but it needs substantial expansion of trade benefits. Colombian President Pastrana clearly stated his desire for expanded trade opportunities when he visited with President Bush here in February. Two weeks ago in Quebec City, he again declared his country's need for enhanced trade with the United States. While less than 1% of total US imports of apparel come from ATPA beneficiaries, the U.S. exports approximately $10 billion in goods to these nations. Between 1992 and 1999, the industries in Colombia favored by ATPA generated $1.2 billion in output and approximately 140,000 jobs. It is also important to note that a 1999 Department of Labor report shows that preferential tariff treatment under ATPA does not appear to have had an adverse impact on, or have constituted a significant threat to U.S. employment.

As you know, last year the United States formalized our commitment to the Colombian Government in the form of $1.3 billion in assistance. Plan Colombia includes assistance in the peace process, counter-drug efforts, reform of the justice system with attention to human rights, enhanced efforts toward democratization and social development, and support of the Colombian economy. The Colombian government has committed $4 billion to this program, which is expected to cost $7.5 billion over a six-year period. Of the $1.3 billion U.S. dollars sent to the region, approximately $147 million is programmed for alternate economic development; this is far below what we need to do in this area. All the pillars of the program are critical, but the concept of "weaning" the Andean economies off of drugs as an industry is intrinsically linked to the development of industries that engage in conventional trade.

The most un-asked question in the War on Drugs is "What if the plan succeeds?" A couple of numbers clearly illustrate how unprepared we, as a hemispheric community, are for the best case scenario: The World Bank estimates that the combined GDP of the four Andean nations involved in ATPA is approximately $200 billion. The Office of the National Drug Control Policy estimates that annual exports of cocaine from the Andean region are approximately $12 billion. A very cursory, macro examination quickly reveals that if tomorrow, all of the drug industries were crushed and drug money disappeared from this region, the Andean nations would experience a 6% drop in GDP. For comparison's sake, you most likely remember one of our worst economic crises in recent times, the Arab Oil embargo in the early 1970's. That difficult time caused only a 3.5% drop in GDP. Whether instantaneous or over the next 5 years, this region is clearly not prepared to replace drug money with wages and other sources of revenue that are derived from standard business practices. We must open up the doors of trade to speed the transition of these economies away from drug money.

This is a multi-dimensional problem that we are deeply involved in: we are part of the problem and need to be part of the solution. To date, we have made a "bet" that a $1.3B American assistance program can help solve this problem. I believe that if we truly want to shape the environment to ensure our success, we must "protect our bet" with a trade package that sets the conditions to change their earnings source from drug money to industries that are a part of the 21^st century economy.

Thank you, Mr. Chairman, for inviting me to speak to you today on the issues of Andean trade. It is my hope that we can develop an effective Andean Trade Preference bill with strong bipartisan support that expands the trade preferences and extends the timeline well into the future. Thank you.