There has been "explicit acceptance and encouragement of coca production at the highest levels of the Bolivian government," the U.S. Trade Representative's Office said Tuesday.
Bolivia's president, Evo Morales, is a former coca-growers' union leader and he expelled U.S. drug agents from his country last year.
The U.S. office said it was extending tariff exemptions for Ecuador for another six months as part of the Andean Trade Preference Act. Peru, Colombia and Ecuador will see those duty-free privileges expire at year's end.
The region's cocaine-producing and transit countries have been allowed to export thousands of products to the United States duty-free since 1991 in hopes income from legal exports will help wean peasants off selling coca, the basis of cocaine.
In a document published on its Web site, the trade office said coca cultivation is "unconstrained" in Bolivia and the leaf is increasingly sold to drug traffickers.
The Bush administration suspended Bolivia's trade preferences in November after Morales expelled U.S. Ambassador Philip Goldberg and Drug Enforcement Administration agents. Morales alleged that Goldberg had helped incite a pro-autonomy revolt in Bolivia's eastern lowlands and that the DEA was engaged in espionage.
U.S. officials deny those allegations.
Landlocked Bolivia exports most of its cocaine to Europe through Brazil and Argentina, according to the DEA.
Although the Obama administration made the tariff decision, Morales blamed it on the previous U.S. government.
"Let's hope that it isn't long before the president of the United States immediately repairs the damage done by former President (George W.) Bush, and not only the economic but the political damage," he said during a speech in La Paz on Tuesday night.
The trade office said the loss of the DEA presence and "its information network has severely diminished Bolivia's interdiction capability."
It said the DEA previously had 57 employees in four Bolivian cities, making the country a headquarters for the southern part of South America. Those agents are now spread elsewhere across the region, leaving what U.S. law enforcement officials call a black hole in Bolivia.
U.S. officials had previously refused to disclose the size of DEA staff in Bolivia despite repeated inquiries.
The U.S. government estimates Bolivia's potential cocaine yield at 195 metric tons.
