The Colombian Free Trade Agreement with the United States is a treaty that envisions opening up the market in both countries to eliminate barriers in the international commerce of goods and services. This agreement was first signed in November 12, 2006 and it was recently passed in October 12, 2011, but despite the fact that it brings some benefits to both countries it is my belief that these advantages are insignificant when compared to the massive disadvantages the treaty will bring.
The following are some of the benefits that Colombia will receive after signing the Free Trade Agreement (FTA) with the United States. First of all, the FTA will open for Colombia the world’s largest market in goods and services. Second, the FTA will bring stability to Colombia, and as some recent studies show, it will benefit the economy by raising the number of exports and by providing more jobs. Four years from now, Colombia will be a more competitive country and it will be substantially more open to the world, with a more mature productive sector, and with better conditions to attract foreign investments.1
Moreover, in the past years, Colombians had had to pay over $ 9 million in custom duties for their products to come into the States, but now as a result of the FTA, about 99% of Colombian products in the United States will be duty-free immediately. Products coming from the United States will be cheaper (since they won’t be required to pay custom duties as well) therefore the consumers, the most benefitted group, will have more options concerning quality and price; therefore the Colombians’ purchasing power will increase significantly. 1
Respectively, according to the U.S. International Trade Commission, ratifying the Colombia trade agreement would mostly benefit the United States by making 80 percent of U.S. exports to Colombia duty-free immediately and by phasing out the remaining tariffs over 10 years.2 The duty-free goods include almost all products in these sectors: agriculture and construction equipment, aircraft and parts, auto parts, fertilizers and agro-chemicals, information technology equipment, medical and scientific equipment, and wood.
Moreover, the U.S.–Colombia Trade Promotion Agreement (TPA) is estimated to support more American jobs, increase U.S. exports, and enhance U.S. competitiveness. The FTA would allow U.S. corporations to extend patents on medicines, a prioritization of profit over access to health care.3 In summary, the agreement will provide significant new access to Colombia’s $166 billion services market, supporting increased opportunities for U.S. service providers. As a result, there will be an increase U.S. exports to Colombia by $1.1 billion (or 13.7 percent).
As we have previously seen, there are some very good advantages for both countries. However, several disadvantages are something inevitable in these kinds of agreements, and unfortunately, they outgrow the advantages in this case.
Since 1991, due to the Andean Trade Promotion Act, almost 90% of the Colombian products that go into the United States are already duty-free; therefore, by signing the agreement, only the remaining 9% of the products will become duty- free. However, by signing the FTA the States will be able to remove 80% of their products’ custom duties. This makes the U.S. products cheaper than Colombian products; therefore many Colombian small businesses will go bankrupt. Furthermore, as shown by extensive research, “the FTA would push Colombia to lower minimum wage, and remove or reduce guarantees for overtime pay, collective bargaining and worker’s compensation. According to the Pan-American Health Organization, the FTA would raise annual medicinal costs for Colombians by $900 million.” But also, intellectual property rights provisions would place patents on traditional medicinal knowledge and natural resources, rendering traditional medicinal practices illegal.4 Needless to say that Colombians will suffer a detriment because it is estimated that the FTA will also make the investment in Colombia decrease by 4.5 percent.
According to the organization Witness for Peace, if anyone benefits from the FTA it is the drug traffickers because “when growing food becomes unsustainable, some farmers turn to cultivating illicit crops like cocaine.” They also declare that the FTA not only benefits drug traffickers but also national and multinational corporations that exploit natural resources because the FTA proposes reforms that give them the right to challenge environmental protection, public health, and public safety laws in Colombia because they are “barriers to trade.”
It is obvious that the FTA does not benefit those that it is supposed to such as small farmers, but instead, it is estimated that “without protections from U.S. agricultural imports subsidized by the U.S. government to the tune of $24 billion per year, Colombian small farmers are projected to lose 16% of their income.” Undoubtedly, the FTA will accelerate displacement, and since land inequality in Colombia is among the highest in Latin America, (Colombia’s 5 million internally displaced people represent the world’s third largest displacement crisis) “the FTA will worsen this problem by accelerating land expropriation to benefit large-scale agro-export industries.”
The FTA also brings disadvantages to Afro-descendant and indigenous peoples because as noted by Trans Africa Forum and the Michigan Citizen “it requires changes to the Colombian Constitution that would deny indigenous populations’ communal landholding status. It would also harm Afro-Colombians, who make up 26% of the population and are disproportionally being displaced from their resource-rich lands.”
For the first few years, the FTA might be beneficial to Colombia because it will remove 9% of our product’s custom duties. Nevertheless, Colombian products will be in great competition in the United States as well because the United States is signing free trade agreements with several other nations, therefore the Colombian products will be in great disadvantage in comparison to the other countries’ products and this will affect severely the commercial scale between Colombia and the United States.
Unfortunately, the disadvantages are not only for the Colombian people, but also for the U.S. citizens. “Job loss in the US”, A September 2010 NBC News/Wall Street Journal poll found 69% of Americans think “free trade agreements between the United States and other countries cost U.S. jobs.” This is the article reply: “They’re right: The Economic Policy Institute estimates that the Colombia FTA will result in the loss or displacement of 55,000 U.S. jobs. Never one to rely on facts, Bush skipped over the reality that increased trade flow only benefits an economy as long as it doesn't lead to unsustainable deficits.”
It is not without foundation that most Americans think that free trade agreements cost U.S. jobs because as seen in 1993, a small pre-NAFTA (North American Free Trade Agreement) U.S. trade surplus with Mexico reversed into a $91 billion deficit in 2007, while a pre-NAFTA deficit with Canada grew exponentially. Most Americans also saw the result as well. A 69.1% increase in the U.S. combined trade deficit with Canada and Mexico, from $24 billion in 1993 to $190 billion in 2007.
In reality, and opposite to what most FTA supporters have said, unemployment in the United States will rise by 1.8 percentage points, which represents a loss of 460,000 jobs. The Gross domestic product will fall 4.5 percent, and poverty will climb 1.4 points. A very insightful website named “The Rag Blog” made by Americans who don’t see the FTA benefits also declared that “Trade affects the composition of jobs, not the total number.” According to The Rag Blog “three million net U.S. manufacturing jobs have been lost under NAFTA”, therefore they mock the job creation claim saying that it is “particularly sly, as economists know that total employment numbers and unemployment rates are not typically affected by trade policy, but by central bankers who set interest rates.”
In fact, they say economists define labor force growth as simply income growth minus productivity growth. But instead, what trade policy actually affects is the composition of jobs in the economy, in particular tradable sectors like manufacturing. The Rag Blog also declares” the original claim by NAFTA boosters in 1993 that the pact would lead to 170,000 annual U.S. job gains was premised on the projection that the U.S. would have a growing trade surplus with Mexico” which never happened. They explain:
U.S. manufacturing employment declined from 16.8 million people in 1993 to 13.9 million people in 2007, a decrease of nearly 3 million manufacturing jobs, nearly 20% of the total. Moreover, today's $190 billion U.S. trade deficit with NAFTA countries -- as a simple accounting matter -- equals manufacturing jobs that could have been here. The Economic Policy Institute estimates that the U.S. could have had over 1 million additional manufacturing jobs had there been trade balance between NAFTA countries alone, or no NAFTA at all. 5
From what we have previously observed by the research on the advantages and disadvantages of the Free Trade Agreement between Colombia and the United States we can conclude that (unlike my previous thesis) it does not benefit either the United States or Colombia better than the other, but it brings equal amounts of disadvantages to both, and the reason why it is being passed is not for the benefit of the majority but for the benefit of a small elite which also controls media and makes it seem like “it’s a great deal.”
Bibliography
- “Beneficios del TLC entre Colombia y Estados Unidos.”Portafolio. Accessed 06 December 2011. Available.
- Economic Benefits of the U.S.-Colombia Free Trade Agreement.” NCPA. Accessed 06 December 2011. Available.
- “U.S.- Colombia Trade Agreement.” Office of the United States Trade Representative. Accessed 06 December 2011. Available.
- “Colombia- U.S. Free Trade Agreement.” Witness for Peace. Accessed 06 December 2011. Available
- “Colombia and the TLC: just who benefits from ‘free trade’?” The Rag Blog. Accessed 06 December 2011. Available.
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