PUERTO VALLARTA, Mexico -- -- The U.S. is suspending a trade deal with Bolivia, Secretary of State Condoleezza Rice said Thursday, calling the decision unfortunate but necessary because Bolivian President Evo Morales has failed to improve anti-drug efforts.

Rice made the announcement just as Bolivian envoys arrived at the U.S. Trade Representative's office in Washington to lobby for continued participation in the Andean trade pact, which lowers U.S. tariffs for Colombia, Ecuador, Peru and Bolivia in exchange for cooperation with the U.S. war on drugs.

Bush last week signed a six-month extension of the Andean Trade Promotion and Drug Eradication Act, and it wasn't immediately clear when Bolivia would begin losing out. Rice said the U.S. Congress will decide.

The suspension will raise U.S. tariffs on imports of Bolivian jewelry, textiles, wood and other products. Bolivia estimates that 30,000 workers would lose their jobs and more than $300 million in exports would be priced out of the U.S. market.

Morales has said his people shouldn't fear reduced trade with Bolivia's third largest trading partner after Brazil and Argentina, but he characterized it as a punitive sanction along the lines of the U.S. embargo against Cuba. "We don't have to be afraid of an economic blockade by the United States against the Bolivian people," Morales said.

Diplomatic relations between the U.S. and Bolivia have soured recently. Morales booted the U.S. ambassador last month, accusing him of supporting his opponents, which the former ambassador denies. The U.S. sent Bolivia's top diplomat home in response.

Bolivia also demanded that U.S. development projects and Drug Enforcement Administration officials to leave the coca-growing region of Chapare, prompting Washington to place Bolivia on an anti-drug blacklist, which triggered the recommendation by U.S. President George W. Bush to suspend Bolivia's participation.

Rice announced the suspension while visiting the resort of Puerto Vallarta to discuss Mexico's progress against drug cartels. Meanwhile, Bolivian Finance Minister Luis Alberto Arce was in Washington, calling the tariffs an injustice.

Arce also met with Sen. Dick Lugar, a leading Republican in foreign affairs matters, who called for continuing trade preferences to support Morales' progress in reaching a constitutional compromise with his opponents.

This is a critical moment in U.S.-Bolivian relations, Lugar said, and more engagement, not less, is what both countries need.

"When Bolivia stands at the cusp of a new era, with a new Constitution, U.S. assistance should be forthcoming as an effort to help Bolivia, and not to be an impediment to its progress," Lugar said.

Rice said other aid to Bolivia would continue, and that Bush has made it clear that there is no ideological test for cooperation and friendship with the United States.