GAO-01-315

Report to Congressional

Subcommittees

United States General Accounting Office

GAO

March 2001 AGRICULTURAL

TRADE

Impacts of the Andean

Trade Preference Act

on Asparagus

Producers and

Consumers
Page i GAO-01-315 Agricultural Trade

Letter 1

Appendix I Scope and Methodology 23

Appendix II Tariff Rates on Asparagus Imported from Mexico

Under the North American Free Trade Agreement,

1999-2008 24

Appendix III Comments From the U.S. Department of Agriculture’s

Foreign Agricultural Service 25

Figures

Figure 1: Quantity of Fresh and Processed Asparagus Production in

the United States, 1990-2000 5

Figure 2: U.S. Imports of Fresh Asparagus by Country, 1990-99 7

Figure 3: Shipments of Domestic Fresh Asparagus and Imports

From Mexico and Peru, 1999 10

Figure 4: Per Capita Consumption of Fresh and Processed

Asparagus, 1980-99 11

Figure 5: Season-Average Prices for Fresh and Processed

Asparagus, 1990-2000 13

Figure 6: U.S. Consumption of Fresh and Processed Asparagus,

1990-99 15

Contents
Page ii GAO-01-315 Agricultural Trade

Abbreviations

ATPA Andean Trade Preference Act

GAO General Accounting Office

ITC U.S. International Trade Commission

NAFTA North American Free Trade Agreement

USDA U.S. Department of Agriculture

USTR U.S. Trade Representative
Page 1 GAO-01-315 Agricultural Trade

March 15, 2001

Congressional Subcommittees

U.S. asparagus imports increased by over 215 percent in the 1990s and

now comprise nearly one-half of the asparagus consumed in the United

States. Peru is the second largest source of imported asparagus and

benefits from duty-free treatment under the Andean Trade Preference Act

(ATPA) of 1991, as amended.1

 Asparagus imported from Peru accounted

for 34 percent of U.S. imports in 1999. ATPA was designed to promote the

production of non-drug-related crops and to increase the economic

development of four South American countries involved in the drug trade,

including Peru.2

 During the 1990s, Peru substantially increased its

production of asparagus and became a major exporter of frozen

asparagus, complementing its already strong position in the canned

market. Imports of Peruvian asparagus have made fresh asparagus

available in the United States from August through December—months

that domestic fresh asparagus had generally been unavailable.

ATPA expires in December 2001, and legislation to extend the act is likely

to be proposed in 2001. While imports of fresh and frozen asparagus and

domestic production of fresh asparagus have increased, the production of

domestic processed (canned and frozen) asparagus has declined. For

example, the value of U.S. fresh asparagus production increased from $117

million in 1990 to $172 million in 2000. However, the value of processed

asparagus declined from $60 million to $44 million during this period.

Industry representatives attribute this decline to increasing Peruvian

imports.

In this context, the Subcommittee on Agriculture, Rural Development and

Related Agencies, Senate Committee on Appropriations, and the

Subcommittee on Agriculture, Rural Development, Food and Drug

Administration, and Related Agencies, House Committee on

Appropriations, asked us to (1) review the impact that asparagus imported

from Peru under ATPA has had on domestic asparagus producers and

 1

Mexico is the leading source of imported asparagus and benefits from reduced tariffs

under the North American Free Trade Agreement. Tariffs under the Agreement are shown

in app. II.

2

ATPA covers Bolivia, Colombia, Ecuador, and Peru. These countries are the source of

coca plants from which most of the world’s cocaine is produced or are major transit areas

for cocaine.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-315 Agricultural Trade

consumers, (2) review ATPA’s likely impact on domestic asparagus

producers and consumers if the act is reauthorized in December 2001, and

(3) describe the remedies available to domestic industries adversely

affected by imports under ATPA.

The Andean Trade Preference Act is estimated to have displaced between

2 to 8 percent of the total value of domestic fresh asparagus production

from what it would have been without the act, according to the U.S.

International Trade Commission’s most recent study.3

 U.S. consumers,

however, benefited from the availability of fresh asparagus from Peru

during the months when fresh asparagus is not generally available from

domestic producers—August through December. While the supply of fresh

asparagus from imports has increased since the trade act became law,

consumer demand has been strong and prices have risen. In addition, an

apparent increase in consumer preference for fresh asparagus contributed

to a downward shift in the domestic demand for processed asparagus. For

example, our analysis shows that production for processing decreased

from 42 percent of domestic production in 1990 to 34 percent in 2000. Most

of the decline in the production of processed asparagus occurred in

Washington, one of the two states that produce the majority of canned and

frozen asparagus.

If the Andean Trade Preference Act is reauthorized, domestic producers of

asparagus and, in particular, asparagus for processing, will likely face

continued displacement, but consumers can expect continued benefits

from the year-round availability of fresh asparagus. However, some of this

displacement will likely occur even if the trade act is not reauthorized and

the normal tariff is restored—5 percent in 2 of the 5 months when the

majority of Peru’s fresh asparagus is imported and 21.3 percent in the

other 3 months. U.S. consumers prefer fresh asparagus and therefore will

likely continue to consume it instead of processed asparagus, and Peru

has advantages in climate and labor costs that should enable it to continue

its exports. In addition, if the trade act is not reauthorized, consumers

would likely have decreased availability of fresh asparagus from Peru and

pay higher prices to the extent that tariff increases reduce Peruvian

asparagus imports and, hence, total asparagus supplies. U.S. asparagus

 3

The International Trade Commission is an independent, quasi-judicial federal agency that,

among other responsibilities, provides the President and Congress with objective trade

expertise and determines the impact of imports on U.S. industries. The Commission’s most

recent study is Andean Trade Preference Act: Impact on U.S. Industries and Consumers

and on Drug Crop Eradication and Crop Substitution (USITC Publication 3358, Sept. 2000).

Results in Brief
Page 3 GAO-01-315 Agricultural Trade

producers also face increasing competition from Mexican imports because

of declining tariffs under the North American Free Trade Agreement. In

the longer term, a new trade agreement called the Free Trade Area of the

Americas, currently being negotiated, could go beyond both the North

American Free Trade Agreement and the Andean Trade Preference Act by

creating a duty-free trade zone in the Western Hemisphere for many

products, including asparagus.

Relief measures are available under U.S. trade law to industries that are

harmed as a result of foreign imports. Domestic industries can petition the

U.S. International Trade Commission to investigate whether increased

imports have caused them serious injury or threat of serious injury. If the

Commission finds serious injury, it may recommend relief options to the

President, including increased tariffs or quotas on imports. If the petition

involves a perishable agricultural product, U.S. trade law and the Andean

Trade Preference Act allow the petitioning industry to request provisional

relief, pending completion of the Commission’s investigation. According to

asparagus industry representatives, asparagus producers have not pursued

these remedies because they regard the filing of a petition and pursuit of

relief to be too costly for such a small industry. Instead, in its comments to

the Office of the U.S. Trade Representative on the operation of the Andean

Trade Preference Act, the industry is seeking to remove asparagus from

eligibility under the trade act.4

In commenting on a draft of our report, the U.S. Department of

Agriculture’s Economic Research Service, staff from the U.S. International

Trade Commission, and the U.S. Trade Representative generally agreed

with the substance of the report and provided technical and clarifying

comments that we have incorporated as appropriate. The Department of

Agriculture’s Foreign Agricultural Service stated that (1) our draft did not

adequately address the rationale for including asparagus imports under the

Andean Trade Preference Act and (2) the data we used in the report were

not current. While the scope of our review did not specifically include an

analysis of the rationale for providing duty-free status for asparagus under

the trade act, we did address the use of asparagus to promote Peru’s

economic development. Additionally, we updated the report to reflect

recently released production data for 2000.

 4

The Office of the U.S. Trade Representative is a cabinet agency responsible for developing

and coordinating U.S. international trade policy.
Page 4 GAO-01-315 Agricultural Trade

Asparagus is a perennial crop that has a relatively long life expectancy of

up to 20 years in commercial plantings. Since the crop is not usually

harvested for the first 3 years, asparagus production represents a

significant long-term investment for growers. In addition, since the time

from planting to the first harvest takes 3 years, producers cannot quickly

increase production in response to market demand. While asparagus is a

native of temperate regions, its cultivation is most successful in locations

where either extreme temperature or drought stops the growth of the

plant, providing it with a rest period. Asparagus is produced and sold

either as fresh, uncooked whole spears or processed (heat-treated canned

or frozen) whole spears or cut pieces.

Asparagus is a labor-intensive, high-value vegetable crop. For example,

according to the U.S. Department of Agriculture (USDA), in 2000, the

season-average shipping-point price for fresh asparagus was $1.14 per

pound.5

 In comparison, the price for the second and third highest value

vegetables—artichokes and fresh market snap beans—was $0.64 and $0.42

per pound, respectively.

In 2000, the United States produced 227 million pounds of asparagus

having a value of about $217 million.6

 The majority of the asparagus

produced was green asparagus for the fresh market—66 percent was

fresh, while 34 percent was processed (about 28 percent was for canning

and 6 percent for freezing). Figure 1 shows the annual quantity of

domestic production from 1990 to 2000.

 5

The season-average shipping-point price includes the amount received by producers and

some costs of packing and shipping. Therefore, actual prices received by producers were

less.

6

In comparison, the value of U.S. produced tomatoes and green peas is about $1.8 billion

and about $129 million, respectively.

Background
Page 5 GAO-01-315 Agricultural Trade

Figure 1: Quantity of Fresh and Processed Asparagus Production in the United

States, 1990-2000

Source: USDA.

As shown in figure 1, the production of fresh asparagus in the United

States trended downward until 1995, when it reached a low in part due to

poor weather in California. Since then, production has been increasing. In

contrast, the production of asparagus for processing has been steadily

declining.

The major commercial asparagus-producing states are California,

Washington, and Michigan. California, the most important state for fresh

production, has a harvest season from January through May. While

Washington and Michigan produce some asparagus for the fresh market,

the majority of their production is for the processed market. Production

from Michigan occurs from May through June and Washington from May

through July. In recent years, Washington has begun shifting some

production from asparagus for processing to fresh asparagus, although

In millions of pounds

60

70

80

90

100

110

120

130

140

150

160

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year

Fresh

Processed (fresh weight basis)
Page 6 GAO-01-315 Agricultural Trade

doing so is costly for producers.7 Thus, when the three states are

considered, domestically produced fresh asparagus is available from

January through July. At other times of the year, only canned and frozen

production is available from domestic sources.

In recent years, imports have accounted for a growing proportion of the

U.S. fresh asparagus supply and, in 1999, represented 57 percent of fresh

asparagus consumption. In 1999, over 90 percent of total U.S. asparagus

imports were of fresh asparagus. The growth in imports has been made

possible, in part, by the Andean Trade Preference Act and the North

American Free Trade Agreement (NAFTA).

ATPA, which was signed into law in December 1991, eliminates or reduces

U.S. tariffs on eligible products from four Andean countries—Bolivia,

Colombia, Ecuador, and Peru.8

 ATPA’s primary goal is to promote broadbased economic development in these Andean countries and to develop

viable economic alternatives to coca cultivation and cocaine production

by offering Andean products broader access to the U.S. market. The

President proclaimed preferential duty treatment for Peru in 1993. These

preferences are scheduled to end effective December 4, 2001.

NAFTA, which was ratified by the Congress in 1993 and implemented in

January 1994, created a free trade area between Canada, Mexico, and the

United States. NAFTA provides for the gradual elimination of tariffs—from

as high as 25 percent on fresh asparagus—and other trade barriers on

most goods, over a 10- to 15-year period.

As shown in figure 2, asparagus imports were increasing prior to ATPA’s

and NAFTA’s enactment and have continued to increase since that time.

For example, imports grew from 44 million pounds in 1990 to 142 million

pounds in 1999—an average annual rate of increase of 14 percent,

whereby Mexico and Peru provided most of the increase.

 7

To sell fresh market asparagus, producers must use different harvesting techniques;

develop new markets; and have access to packing, chilling, and shipping facilities not

required for processed asparagus.

8

Peru accounted for over 90 percent of total U.S. imports of fresh asparagus from ATPA

countries in 1999.
Page 7 GAO-01-315 Agricultural Trade

Figure 2: U.S. Imports of Fresh Asparagus by Country, 1990-99

Source: GAO’s analysis of USDA’s data.

According to information from the Peruvian Asparagus Institute,9

increases in asparagus production, assisted by the implementation of

ATPA, have resulted in making asparagus Peru’s second largest export

crop, after coffee. Peru has also developed a modern frozen asparagus

industry and has rapidly increased exports of this product to the United

States and U.S. frozen export markets, such as Japan. Asparagus

accounted for 14.1 percent of Peru’s agricultural exports and resulted in

employment for over 20,000 Peruvians in 1999.

 9

The Peruvian Asparagus Institute is a nonprofit trade association representing the

Peruvian asparagus industry.

In millions of pounds

0

20

40

60

80

100

120

140

160

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Years

Other

Chile

Peru

Mexico

Preferential duty for Peru under ATPA

NAFTA's enactment
Page 8 GAO-01-315 Agricultural Trade

According to the U.S. International Trade Commission’s (ITC) 1999 study,

ATPA has displaced an estimated 2 to 8 percent of the total value of

domestic fresh asparagus production from what it would have been

without the act. U.S. consumers, however, benefited from the availability

of fresh asparagus from Peru during the months when fresh asparagus is

not generally available from domestic producers—August through

December. In addition, changes in consumer preference contributed to a

downward shift in the domestic demand for processed asparagus.

Using 1999 data, ITC estimated that the total impact of ATPA’s tariff

reductions has been a 2- to 8-percent displacement of the total value of

U.S. fresh asparagus production by Peruvian imports as consumers

substituted asparagus imported from Peru for domestically produced

product. According to ITC, asparagus and cut flowers are the two

industries experiencing potentially significant displacement under ATPA.10

ITC measured the impact of tariff reductions under ATPA by comparing

estimated market conditions under full tariff treatment versus actual

market conditions under duty-free entry.11 A decrease in the price of

imported asparagus caused by tariff reductions results in the substitution

of imported asparagus for domestically produced asparagus, but the

displacement is not one for one because of various reasons, such as a

retailer’s preference for marketing domestically produced product.12

 10Each year since 1994, ITC has issued a report assessing the impact of ATPA. In each

report, ITC estimated the total impact of the trade act using data for that year. The range

reported by ITC is determined by the degree to which imported production is substituted

for domestic. ITC considers displacement of 5 percent or more to be potentially significant.

To the extent that ITC estimates a range of displacement that spans above and below the 5-

percent threshold, estimated displacement may or may not be significant each year.

11ITC conducted a comparative static analysis in which the Commission measured the

welfare effects of the ATPA tariff reductions.

12The amount of the decrease depends on the elasticity of substitution between the

domestic and imported product.

Asparagus Imports

Under ATPA Have

Displaced Some

Domestic Production,

but Consumers Have

Benefited From

Increased Availability

Imports Under ATPA Have

Displaced Some Domestic

Asparagus Production
Page 9 GAO-01-315 Agricultural Trade

Consumers have benefited from ATPA because fresh asparagus is now

available during the months when it is generally unavailable from

domestic producers. This increased availability, combined with

consumers’ preference for fresh asparagus, has contributed to a

downward shift in the consumption of processed asparagus.

Figure 3 shows that the U.S. primarily produces and ships fresh asparagus

during January through July. In contrast, imports from Peru occur nearly

year-round, including months when U.S. fresh production is unavailable.

As the figure shows, the majority of imports from Peru occur from August

through December, when there is virtually no U.S. fresh production. Only

canned or frozen asparagus is available from domestic sources during this

time.

U.S. Consumers Benefited

From Imports Under ATPA

as Consumption Shifted to

Fresh Asparagus
Page 10 GAO-01-315 Agricultural Trade

Figure 3: Shipments of Domestic Fresh Asparagus and Imports From Mexico and

Peru, 1999

Source: GAO’s analysis of USDA’s data.

Fresh asparagus from Peru is available, in part, because the elimination of

tariffs reduced the price of Peruvian asparagus in the United States. While

imports from Peru have increased the supply of fresh asparagus in the

United States, demand has been strong, as demonstrated by the increased

per capita consumption of fresh asparagus.

Peru

Mexico

U.S.

In hundred thousands of pounds

0

100

200

300

400

500

600

Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.

Months
Page 11 GAO-01-315 Agricultural Trade

Figure 4: Per Capita Consumption of Fresh and Processed Asparagus, 1980-99

Source: USDA.

As figure 4 shows, in the mid-1980s, the per capita consumption of

asparagus shifted from processed to fresh asparagus, demonstrating

consumers’ preference for the latter. This shift in consumer preference

In pounds

0

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Years

Fresh

Processed (fresh weight basis)

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0
Page 12 GAO-01-315 Agricultural Trade

accelerated in the mid-1990s, as fresh asparagus became available on a

year-round basis.

The shift in the per capita consumption of asparagus is part of the general

trend toward increased consumer preference for fresh vegetables. In

addition, the consumption of asparagus, which is a high-value product, is

particularly responsive to increases in personal income, according to

econometric studies. In the latter half of the 1990s, real disposable

personal income increased by an average annual rate of about 3 percent.

The increase in fresh asparagus consumption has helped keep prices

trending upward despite the increase in supply from imports. In contrast,

shifts in preference and the declining consumption of processed asparagus

have kept prices for processed asparagus relatively flat, as shown

in figure 5.
Page 13 GAO-01-315 Agricultural Trade

Figure 5: Season-Average Prices for Fresh and Processed Asparagus, 1990-2000

Note: These prices represent season-average shipping-point prices that include some packing and

processing costs. Actual prices received by producers are unavailable. Prices have been inflation

adjusted to 1999 purchasing power.

Source: GAO’s analysis of USDA’s data.

The decline in the consumption of processed asparagus particularly

affects producers in Michigan and Washington, the two states that produce

the majority of frozen and canned asparagus. For example, processed

asparagus accounted for approximately 86 percent and 68 percent of the

production of that crop in Michigan and Washington, respectively, in 2000.

Our analysis shows that processed asparagus decreased from 42 percent

of domestic production in 1990 to 34 percent in 2000. Most of the decline

occurred in Washington.

In 1999 dollars per pound

0.40

0.50

0.60

0.70

0.80

0.90

1.00

1.10

1.20

1.30

1.40

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Year

Fresh

Processed

Fresh Trend

Processed Trend
Page 14 GAO-01-315 Agricultural Trade

If ATPA is reauthorized, the producers of asparagus and, in particular,

asparagus for processing will likely face some continued displacement

from imports, but consumers can expect continued benefits from the yearround availability of fresh asparagus. However, some of this displacement

will likely occur even if ATPA is not reauthorized and the normal tariff is

imposed: 5 percent in 2 of the 5 months when the majority of Peru’s

asparagus is imported, and 21.3 percent in the other 3 months. This is

because U.S. consumers prefer fresh asparagus, which domestic

producers cannot supply in some months, and because of Peru’s

advantages in climate and labor costs. In addition, consumers would likely

face decreased availability and pay higher prices than they would

otherwise to the extent that the increase in tariff creates a reduction in

imports from Peru and hence an overall reduction in asparagus supply.

U.S. asparagus producers will also face increasing competition from

Mexican imports under the North American Free Trade Agreement. In the

longer term, the Free Trade Area of the Americas, currently being

negotiated, could go beyond both NAFTA and ATPA by creating a dutyfree trade zone in the Western Hemisphere for many products, including

asparagus.

If ATPA is reauthorized, U.S. asparagus producers, particularly of

processed asparagus, will likely face some continued displacement from

imports because the removal of tariffs on imports under ATPA allows

fresh asparagus to be imported year-round. Since consumers tend to

prefer fresh rather than processed asparagus when it is available, this

displacement will likely continue.

Consumers can expect continued benefits from this year-round availability

of fresh asparagus. Peruvian asparagus enters the United States when

domestic production is low, resulting in an increased supply of fresh

asparagus in the marketplace. This extended product availability is

believed to be partly responsible for increases in the consumption of fresh

asparagus and declines in the consumption of processed asparagus. As

shown in figure 6, the consumption of fresh asparagus reached 250 million

pounds in 1999—representing a 103-million-pound, or 70-percent, increase

since 1990. In contrast, the consumption of processed asparagus declined

by 39 million pounds, or 37 percent, since 1990.

Impacts on Producers

and Consumers Likely

to Continue With or

Without ATPA

Producers Face Continued

Displacement, and

Consumers Benefit From

the Increased Availability

of Fresh Asparagus if

ATPA Is Reauthorized
Page 15 GAO-01-315 Agricultural Trade

Figure 6: U.S. Consumption of Fresh and Processed Asparagus, 1990-99

Source: USDA.

Peruvian asparagus will likely remain a strong competitor for domestic

producers even if ATPA is not reauthorized and the normal tariff is

restored—5 percent in 2 of the 5 months when the majority of Peru’s fresh

asparagus is imported and 21.3 percent in the other 3 months.13 This is

because U.S. consumers have expressed a preference for fresh rather than

processed asparagus when it is available in the marketplace. In addition,

Peru’s climate allows for the year-round production and export of fresh

asparagus. Peru also enjoys relatively lower labor costs for this laborintensive crop.

 13The Normal Trade Relations (formerly known as Most Favored Nation) tariff rate is 21.3

and 14.9 percent for fresh and processed asparagus, respectively. A 5-percent tariff is

applied to fresh asparagus, not reduced in size, that is shipped by air from September 15

through November 15—2 of the 5 months when Peru has substantial exports to the United

States. Peruvian asparagus is not eligible for reduced tariffs under the Generalized System

of Preferences because the U.S. Trade Representative considers this product to be

competitive in our market.

Producers Face Continued

Displacement, and

Consumers Will Have

Decreased Availability and

Higher Prices if ATPA Is

Not Reauthorized

In millions of pounds

50

100

150

200

250

300

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Years

Fresh

Processed (fresh weight basis)
Page 16 GAO-01-315 Agricultural Trade

These advantages have allowed Peru to become the world’s second largest

producer of asparagus over the past decade and have given Peru the

potential for increasing exports in the future.14 In addition, Peruvian

growers began a marketing promotion program in 2000 to stimulate U.S.

consumers’ purchases of fresh asparagus.

Without ATPA, consumers would likely have decreased year-round

availability of fresh asparagus and pay higher prices to the extent that the

increase in tariff creates a reduction in imports from Peru. Since fresh

asparagus would not be readily available from other foreign producers,

supplies would decrease, and consumer prices would likely rise.

Regardless of what happens with the reauthorization of ATPA, U.S.

asparagus producers will face increasing competition from other current

and future trade agreements. In the near term, Mexico continues to be the

most important source of imported fresh asparagus. Mexico’s advantage of

lower transportation costs to U.S. markets is believed to offset any

production advantages in ATPA countries. In addition, Mexico’s sizable

shipments to the United States have occurred despite relatively high

tariffs. As tariff rates under NAFTA are phased out through 2008,

asparagus imports from Mexico will become even more competitive.

Over the longer term, negotiations are under way to create a free trade

zone among the 34 democracies of the Western Hemisphere. The Free

Trade Area of the Americas could create a duty-free trade zone more

extensive than both ATPA and NAFTA, which would result in the

elimination of tariffs on many products, including asparagus, according to

the U.S. Trade Representative.

China, the world’s largest producer of asparagus, has been granted normal

trade relations trading status by the United States, resulting in lower

tariffs. As a result, China has begun increasing its exports of processed

asparagus to the United States.

 14China, Peru, and the United States are the world’s top three producers of asparagus,

respectively.

Producers Face Increasing

Competition From Other

Trade Agreements
Page 17 GAO-01-315 Agricultural Trade

U.S. trade law contains several provisions under which domestic

industries may seek relief from injury caused by foreign imports.15

According to asparagus industry representatives, asparagus producers

have not pursued relief under any of these provisions because the cost of

bringing a case to ITC is considered too burdensome for such a small

industry. Alternatively, industry representatives have proposed that the

Andean Trade Preference Act be amended to remove duty-free treatment

for asparagus when an ATPA country is deemed to be economically

competitive with U.S. producers.

Under section 201 of the Trade Act of 1974, domestic industries can

petition ITC to investigate whether increased imports have caused them

serious injury or threat of serious injury. Upon receiving a petition, ITC

conducts an investigation to substantiate the allegation.16 ITC’s

investigation is designed to determine whether a product is being

imported into the United States in such increased quantities as to be a

substantial cause of serious injury or threat of serious injury to the

domestic industry. In making its determination, the Commission must

consider all relevant economic factors, including whether (1) productive

facilities in the industry have been significantly idled, (2) a significant

number of firms have been unable to operate at a reasonable level of

profit, and (3) significant unemployment or underemployment has

occurred within the industry. ITC also considers, among other things,

whether there is a decline in sales or market share; a higher and growing

inventory of the product; and a downward trend in production, profits,

wages, productivity, or employment in the industry. In addition, the

Commission must consider imports from all sources. There is no

requirement that the increases in imports or serious injury to a domestic

industry be attributable to an unfair trade practice.

If ITC makes an affirmative injury determination, it is required to

recommend to the President an action that would be most effective in

addressing the injury. Recommended actions may include increased

tariffs, quotas, trade adjustment assistance to workers (such as job

 15Sections 201 to 204 of the Trade Act of 1974 (19 U.S.C. 2251-2254) and section 204 of the

Andean Trade Preference Act of 1991 (19 U.S.C. 3203(e)).

16ITC conducts investigations upon receipt of a petition from an entity—including a trade

association, firm, certified or recognized union, or group of workers—that is representative

of an industry, upon the request from the President or the U.S. Trade Representative, upon

resolution of the U.S. House Committee on Ways and Means or the U.S. Senate Committee

on Finance, or upon its own motion.

Remedies Available to

Domestic Industries

Under U.S. Trade Law

Have Not Been

Pursued by Domestic

Asparagus Producers
Page 18 GAO-01-315 Agricultural Trade

training), or a combination of these measures.17 As part of its

recommendation, ITC must also state whether and to what extent its

findings and recommendations apply to imports from ATPA countries.

Following the receipt of ITC’s recommendations, the President may take

one of several actions. These include taking (1) the action recommended

by ITC, (2) other action deemed appropriate, or (3) no action. However,

the President cannot take action that is solely in the form of suspension of

duty-free treatment for ATPA imports unless the Commission’s

investigation has found that the serious injury or threat of serious injury to

the domestic industry resulted from the duty-free treatment. In any event,

the President is required to report to the Congress what action, if any, he

intends to make. If the President takes action that differs from ITC’s

recommendation or takes no action, the Congress may enact a joint

resolution, which directs that he proclaim the action recommended by

ITC.

The trade act also authorizes ITC to make preliminary determinations and

recommendations to the President for provisional relief in two situations.

Under the first situation, an industry producing a perishable agricultural

commodity that has already petitioned ITC and is undergoing a section 201

investigation, may file a request with the U.S. Trade Representative for the

monitoring of imports. The U.S. Trade Representative may then request

that ITC monitor imports. If an ITC monitoring investigation has been

under way for at least 90 days, then the industry producing the domestic

product may request, in a section 201 petition with respect to imports of

the monitored product, that a remedy be applied on a provisional basis,

pending completion of a full section 201 investigation and presidential

review. ITC would have 21 days to make a recommendation concerning

provisional relief, and the President would have 7 days to make a decision.

Any provisional relief granted by the President upon ITC’s

recommendation would generally be in the form of increased tariffs.

Under a second situation, an industry filing a section 201 petition may

request provisional relief if it believes critical circumstances exist. Such

circumstances exist when clear evidence shows that increased imports are

a substantial cause of serious injury or threat of serious injury to the

domestic industry and delay in taking action would cause damage that

would be difficult to repair. ITC would have 60 days to make a critical

 17ITC may also recommend that the President initiate international negotiations to address

the underlying cause of the increase in imports or otherwise to alleviate the injury or threat

or implement any other action authorized under law that is likely to facilitate a positive

adjustment to import competition.
Page 19 GAO-01-315 Agricultural Trade

circumstances determination and make a recommendation, and the

President would have 30 days to decide what, if any, action to take. Such

an action would generally be in the form of a tariff increase.

In addition, ATPA specifically provides that an industry filing a section 201

petition with ITC can then also petition the Secretary of Agriculture for

provisional relief. Under the ATPA special emergency relief provision, the

Secretary of Agriculture and the President are authorized to make

speedier determinations when an investigation of a perishable agricultural

product under the trade act is ongoing. If the Secretary of Agriculture’s

determination is affirmative, the President may temporarily withdraw the

product’s duty-free treatment or take no action. No preexisting monitoring

investigation by ITC is required. The Secretary and President have a total

of 21 days to make their final determination. The emergency action would

be rescinded upon a negative determination of ITC’s investigation, a

presidential determination of changed circumstances, or the decision to

take another relief action.

To date, asparagus producers have not petitioned ITC for an investigation

based on allegations of serious injury from imports under ATPA.

According to industry representatives, the cost associated with preparing a

case is burdensome, especially for such a small industry. Alternatively,

industry representatives, in comments submitted to the U.S. Trade

Representative on the operation of ATPA in 1997, have requested that the

law be amended to remove duty-free treatment for asparagus when an

ATPA country is deemed to be economically competitive with U.S.

producers.18 Without a petition from the industry, the ITC has not initiated

an investigation.

We provided USDA’s Economic Research Service and Foreign Agricultural

Service, staff from the U.S. International Trade Commission, and the U.S.

Trade Representative with a draft copy of this report for their review and

comment. We met with Economic Research Service agricultural

economists, including the Team Leader for Fruit and Vegetable Analysis;

ITC’s staff representing the Offices of External Relations, Economics,

Industries, and General Counsel; and U.S. Trade Representative officials,

including the Deputy Assistant U.S. Trade Representative for Latin

 18ATPA requires the President to submit a report to the Congress on the operation of the

program every 3 years. The U.S. Trade Representative drafts the report with input from

relevant agencies and offices, such as the Department of State, USDA, and ITC, and solicits

public comment.

Agency Comments
Page 20 GAO-01-315 Agricultural Trade

America. They generally agreed with the substance of the report and

provided technical and clarifying comments, which we incorporated as

appropriate.

In a letter commenting on the report, USDA’s Foreign Agricultural Service

stated that the report does not adequately address the congressional

rationale for providing duty-free access for asparagus imports under

ATPA. The Foreign Agricultural Service stated that it does not believe that

Peruvian asparagus production provides an alternative economic

opportunity for coca producers and workers—the stated purpose for the

trade act.

Determining whether ATPA is meeting its intended purpose of providing

alternative economic opportunities for coca producers and workers in the

four Andean countries was beyond the scope of our review. However, our

report does describe how asparagus production has contributed to

economic development in Peru.

The Foreign Agricultural Service also commented that the data we used in

our draft report did not adequately reflect the current impact of Peruvian

asparagus imports on the U.S. market. The 1999 quantity and value of

domestic asparagus production data that we used to prepare our draft

report were the most current available at the time of our review.

Subsequently, in January 2001, USDA’s National Agricultural Statistics

Service released its Vegetables 2000 Summary report. We updated our

draft with the production information from that report. The updated

information did not alter the results of our analyses.

Appendix III presents the Foreign Agricultural Service’s comments on the

report and our detailed response.

We conducted our review from September 2000 through February 2001 in

accordance with generally accepted government auditing standards.

Appendix I discusses our scope and methodology.

Copies of this report are being sent to interested congressional

committees; the Honorable Steve Koplan, U.S. International Trade

Commission; Ambassador Robert B. Zoellick, U.S. Trade Representative;

the Honorable Ann Veneman, Secretary of Agriculture; and other

interested parties. We will make copies available to others upon request.
Page 21 GAO-01-315 Agricultural Trade

If you or your staff have any questions about this report, please contact me

at (202) 512-3841. Key contributors to this report were Robert C. Summers,

Carol E. Bray, and John C. Smith.

Lawrence J. Dyckman

Director, Natural Resources

 and Environment
Page 22 GAO-01-315 Agricultural Trade

List of Congressional Subcommittees

The Honorable Thad Cochran

Chairman

The Honorable Herb Kohl

Ranking Member

Subcommittee on Agriculture, Rural Development

 and Related Agencies

Committee on Appropriations

United States Senate

The Honorable Henry Bonilla

Chairman

The Honorable Marcy Kaptur

Ranking Minority Member

Subcommittee on Agriculture, Rural Development,

 Food and Drug Administration, and Related Agencies

Committee on Appropriations

House of Representatives
Page 23 GAO-01-315 Agricultural Trade

To determine the impact that the Andean Trade Preference Act (ATPA)

has had on domestic asparagus producers and consumers and the likely

impact of its reauthorization, we interviewed and obtained information

from representatives from the federal government, asparagus producers’

associations, and research institutions. Specifically, we obtained and

reviewed the annual reports prepared by the U.S. International Trade

Commission (ITC) on ATPA’s impact on U.S. industries and consumers

and interviewed ITC staff about the basis for their conclusions. We also

obtained and reviewed the model used by ITC to analyze ATPA’s effect on

the U.S. economy. We obtained and reviewed reports from the Office of

the U.S. Trade Representative (USTR) on ATPA’s operation and

interviewed officials concerning its impacts. We analyzed domestic and

international asparagus production and marketing data provided by the

U.S. Department of Agriculture’s Economic Research Service and Foreign

Agricultural Service. In addition, we obtained production and marketing

information from representatives of the California Asparagus Commission,

Michigan Asparagus Advisory Board, Washington Asparagus Commission,

and Peruvian Asparagus Institute. We reviewed studies on trade impacts

from the University of California-Davis and obtained and reviewed two

econometric models from Washington State University that investigated

prices, production, and income in the U.S. asparagus industry. We adjusted

prices in this report to 1999 dollars using the Gross Domestic Product

implicit price deflator to more accurately compare prices and costs over

time. Data on U.S. asparagus production and values are as of December

2000. All other data used in the report are as of December 1999, the most

current available at the time of our review.

To describe the trade remedies available to domestic industries adversely

affected by imports under ATPA, we reviewed the applicable provisions of

ATPA and other U.S. trade legislation, and interviewed officials from ITC

and USTR. We also interviewed representatives of asparagus trade

associations in California, Michigan, and Washington to determine their

use of these remedies. We conducted our review from September 2000

through February 2001 in accordance with generally accepted government

auditing standards.

Appendix I: Scope and Methodology
Appendix II: Tariff Rates on Asparagus

Imported from Mexico Under the North

American Free Trade Agreement, 1999-2008

Page 24 GAO-01-315 Agricultural Trade

Year

Asparagus type and entry time 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Fresh, January 10.5 9.3 8.1 7.0 5.8 4.6 3.5 2.3 1.1 0

Fresh, February 1 to June 30 15.0 13.3 11.6 10.0 8.3 6.6 5.0 3.3 1.6 0

Fresh, July 1 to December 31 0 0 0 0 0 0 0 0 0 0

Frozen, all year 6.0 4.5 3.0 1.5 0 0 0 0 0 0

Canned, all year 7.0 5.2 3.5 1.7 0 0 0 0 0 0

Fresh white, all year 0 0 0 0 0 0 0 0 0 0

Source: ITC.

Appendix II: Tariff Rates on Asparagus

Imported from Mexico Under the North

American Free Trade Agreement, 1999-2008
Appendix III: Comments From the U.S.

Department of Agriculture’s Foreign

Agricultural Service

Page 25 GAO-01-315 Agricultural Trade

Appendix III: Comments From the U.S.

Department of Agriculture’s Foreign

Agricultural Service

See comment 4.

See comment 3.

See comment 2.

See comment 1.
Appendix III: Comments From the U.S.

Department of Agriculture’s Foreign

Agricultural Service

Page 26 GAO-01-315 Agricultural Trade

See comment 7.

See comment 6.

See comment 5.
Appendix III: Comments From the U.S.

Department of Agriculture’s Foreign

Agricultural Service

Page 27 GAO-01-315 Agricultural Trade

The following are GAO’s comments on the letter from the U.S. Department

of Agriculture’s Foreign Agricultural Service dated March 2, 2001.

1. We do not agree. Determining whether ATPA is meeting its intended

purpose of providing alternative economic opportunities for coca

producers and workers in the four Andean countries was beyond the

scope of our review. However, our report does describe how

asparagus production has contributed to economic development in

Peru.

2. We disagree. The report provides information on both the fresh and

processed sectors of the U.S. asparagus industry from 1990 to 2000.

For example, figures 1, 4, 5, and 6 contain information on fresh and

processed asparagus.

3. We disagree. As we reported in figure 5, the inflation-adjusted prices

for fresh asparagus have trended upward from 1990 through 2000

while prices for processed asparagus remained relatively flat during

this same period.

4. See comment 1.

5. ITC’s most recent study estimates that ATPA displaced an estimated 2

to 8 percent of the total value of domestic fresh asparagus production

from what it would have been without the act. The 1999 data used for

their study were the most current information available at the time of

their analysis.

6. We agree. The scope of our work did not include evaluating the

economic impact on domestic growing regions.

7. We disagree. The quantity and value of domestic asparagus production

data for 1999 that we used to prepare our draft report were the most

current available at the time of our review. Subsequently, in January

2001, the Department of Agricultures’s National Agricultural Statistics

Service released its Vegetables 2000 Summary report. We updated our

draft with the production information from that report. The updated

information did not alter the results of our analyses.

GAO’s Comments

(150294)

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