Michigan Farm Bureau appreciates the opportunity to present this written testimony on the impact the Andean Trade Preference Act (ATPA) has had on our domestic asparagus industry. Michigan Farm Bureau is the state’s largest general farm organization, representing more than 45,000 farmer member families.

The ATPA provides the four Andean countries of Bolivia, Columbia, Ecuador and Peru with duty free and reduced duty access to our market. ATPA was enacted to assist those countries in their fight against narcotics trafficking. The extent to which the ATPA has advanced narcotics eradication in Peru, however, is highly questionable largely because cultivation of asparagus and other crops in Peru occurs in the desert region along Peru’s coastline, not in the foothills and mountains where Peruvian drug cultivation is known to exist.

Providing this duty free and reduced duty treatment to imports from these countries has measurably affected trade in certain horticultural products and has had a significant impact on domestic production of these commodities.

The duty free treatment provided to asparagus growers in Peru has further enhanced an already competitive industry that existed in Peru prior to enactment of the ATPA. Once a small industry in the early 1980’s, Peru has become the world’s largest producer and exporter of asparagus. Asparagus is Peru’s second largest agricultural export item with about $150 million in annual export earnings. Export production is for two different markets: green asparagus (primarily fresh) for export to the United States, and processed white asparagus for the European market. Peruvian cultivation of asparagus occurs year round with very high yields per acre experienced by its growers.

The U.S. market consumes 75% of the fresh asparagus produced in Peru. Peru's fresh exports to the U.S. market have increased by 10-fold in the last decade, doubling in just the last two years. Peru ranks second to Mexico in fresh asparagus sales to the U.S.

As the Peruvian industry has matured they have also begun to ship larger quantities of processed asparagus to the U.S. In 2000, Peru shipped 813 metric tons of canned asparagus and 1,560 metric tons of frozen asparagus to the United States. Processed asparagus imports from Peru in 2000 were almost eight times greater than the amount shipped in 1994. Peru is the largest offshore source of processed asparagus with a total volume exceeding the amounts imported from all other sources combined.

U.S. industry sources indicate that five to ten million pounds of Peruvian frozen asparagus have been made available to the U.S. market in the past year. Imports of this magnitude are significant because the total U.S. market for frozen asparagus is only ten million pounds annually. Duty free access for Peruvian frozen asparagus has exacerbated the situation. Peruvian imports are displacing U.S. asparagus production at an alarming rate.

Asparagus production in the U.S. is centered in California, Washington and Michigan. These three states make up over 95% of annual production. Minor production is found in New Jersey, Illinois, Indiana, Maryland, Minnesota and Oregon. Over the past decade U.S. asparagus acreage has declined by 17%, while production has deceased 7%. Per capita consumption of asparagus in the U.S. has increased slightly in recent years.

In recent reports to Congress, the U.S. International Trade Commission¹ and the U.S. General Accounting Office² concluded the following about ATPA and the asparagus industry:

• The ATPA has encouraged the production of nontraditional agricultural commodities, such as asparagus, in Peru (ITC).
• The Peruvian asparagus industry has dramatically increased production in the past decade and is projected to increase as much as 40% from 1999 to 2000 (ITC).
• Peru’s substantial increase in asparagus production has allowed them to become a major exporter of frozen product, complementing their already strong position in canned and fresh asparagus (GAO).
• As U.S. imports of asparagus have increased, demand for domestic processed asparagus has declined (GAO).
• Imports of ATPA-exclusive products were estimated to have had a potentially significant effect on a number of domestic industries, including asparagus (ITC).
• Asparagus production in the U.S., particularly processed production, has been displaced by duty-free imports from Peru under ATPA, and reauthorization of ATPA will result in continued displacement of domestic producers (GAO).
• A portion of this displacement will continue even without reauthorization of ATPA, due to Peru’s climate and cost advantages (GAO).
• Asparagus is not listed as one of the crops that provide an alternative to the production of coca in Peru’s major drug producing areas. However, asparagus production was found in areas adjacent to coca producing regions (ITC).
• Farmers and pro-coca local officials in Peru’s coca areas have actively resisted coca eradication efforts and have shunned the development of alternative crops (ITC).

For the reasons noted above, Michigan Farm Bureau requests that significant modifications be made to the ATPA should it be renewed at all. First, we request that duty free treatment not be accorded for specific commodities wherein a country is deemed economically competitive. The determination of economic competitiveness should follow the criteria now used in the Generalized System of Preferences (GSP) program requirements. Once a country has reached the established level of economic competitiveness, it would no longer be eligible for duty-free access to the U.S. market for that commodity. Instead, the tariff for that product would revert to the MFN level.

Instituting this change would support the objective of the ATPA of providing economic alternatives to narcotics production, but would not allow foreign imports to put U.S. producers out of business in the process. We do not oppose competition with foreign imports, but we do oppose providing trade preferences to countries to the extent that such preferences result in the elimination of otherwise competitive U.S. production.

Second, a safeguard mechanism should be instituted to address import surges of perishable agricultural commodities. Import surges can be extremely disruptive to U.S. agricultural markets, especially considering seasonality concerns and the price variability of perishable agricultural products. Criteria now exist in the NAFTA and the WTO agreement on agriculture that enable safeguard actions to be taken under specified conditions. Certain trade remedies, such as the U.S. 201 law, allow the administration to take action to mitigate import surges when they are determined to be causing or threatening injury to U.S. producers. However, imports from ATPA and other countries are exempt from consideration in the investigation of 201 cases.

In order to address the often-irreparable damage caused to U.S. producers of perishable products due to import surges, we request that any extension or renewal of the ATPA include an automatic, transparent, and temporary safeguard mechanism. The safeguard mechanism would provide much needed import relief to U.S. producers being injured by an import surge and would still provide market access for ATPA beneficiary countries during the remedy phase.