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FTA is the Way

FTA is the Way

Trade has been throughout history the cornerstone of relations among states. It has also been a tool to boost economic growth, generate employment, mobilize investment and stimulate social transformation. Over the centuries the world has experienced periods of trade expansion and periods of strong protectionism claiming the need to stimulate local industries, protect employment or simply for domestic political circumstances.

Latin America suffered from 1970 to 1990 a period of extreme protectionism derived from the import substitution policies. Under this theory based on developing strategic sectors, many problems took place. Uncompetitive industries became highly protected, exporters relied on Government subsidies, lack of competition, state capture by economic interests and lack of incentives for industrial transformation, were the common denominator.

During the 90s trade liberalization became a vital element of Policy Reform across the region. Some countries took the wrong approach of unilaterally opening their markets without a coherent policy to expand exports based on stable long-term rules. This approach harmed local industries and more importantly the agricultural sector when facing subsidized competitors. Acknowledging the consequences of unilateral opening, intra-regional trade agreements began to emerge simultaneously with the creation of the WTO in 1995.

During the decade between 2000 and 2010 LAC began to search for more long-term stable trade relations, and in 2003 the FTAA was launched in Miami. Unfortunately the agreement did not evolve due to domestic interest from strong political players in the region. At the same time a Global Agreement under the WTO was not moving at the desired pace.

Considering that the FTAA had derailed and that a Global Trade Agreement lost momentum, a round of bilateral trade agreements became the only feasible route to develop access to markets. Countries like Colombia, Chile, Peru, Mexico, Brazil, the Central American and Caribbean Countries began to engage in bilateral, intra-regional and extra-regional trade agreements.

When the global and regional trade agenda began to fail the U.S. played a key role by articulating a comprehensive trade agenda composed of bilateral trade negotiations. Agreements with Australia, Bahrain, Chile, Israel, Jordan, Morocco, Oman, Peru, Singapore, Dominican Republic and Central America (Guatemala, Honduras, Nicaragua, El Salvador and Costa Rica) became pivotal mechanisms to expand trade and investments while providing long term certainty for entrepreneurial endeavors.

For Colombia engaging in a free trade agenda with the United States was essential for many reasons. Trade and access to markets constitute a strong way in which our nation can build long-term prospects for business development, increment investment and contribute in boosting a more dynamic economy that can continuously reduce poverty.

The U.S. is Colombia’s largest trading partner and bilateral trade between the two countries is highly complementary. Colombia has been historically the second largest market for U.S. agricultural products in Latin America after Mexico (But fell to third place in 2009 due to a decrease in imports of corn, wheat and soybean meal from the USA). The U.S. is Colombia’s largest supplier of wheat and the most important provider of machinery, software, hardware, technology and medical products. Hundreds of American companies operate in the Colombian economy and the Colombian flower industry, which supports thousands of U.S. jobs.

On November 2006, the FTA was signed providing duty free access to the Colombian Market for U.S consumer and industrial goods exports, with remaining tariffs to be lifted out in 10 years. Colombia would also grant immediate duty free access to more than half of U.S agricultural exports, with the remaining tariffs lifted over time. Almost five years have passed and U.S Congress has not ratified the FTA.

Recently President Obama has agreed to present the Colombian FTA for ratification after a long period of additional requests. Colombia has done everything possible to fulfill them and there is not much else to be done.

For the U.S. the Colombia FTA has a strong strategic value. According to the American Farm Bureau Federation the drop in U.S agricultural exports from 2008-2009 was estimated to cost 160,000 American jobs in the production, processing and transportation sectors. The U.S. Department of Commerce reports that every US$1billion in agriculture exports supports 8,000 U.S. jobs and every US$1 billion manufacturing exports supports nearly 7,000 jobs. Colombian imports of U.S. agriculture products have been decreasing due to the expansion of trade with Argentina, Brazil, Paraguay and Uruguay.

A stronger U.S leadership in the trade agenda is required to help developing countries improve their leaving conditions, expand the middle class, and generate employment. Such role must not be affected by sentiments of protectionism. The Congressional Ratification of the Colombia FTA will be a central instrument for our nation to generate jobs, attract investment and strengthen the historical relations that have characterized our nations. Colombia and the U.S. share the values of Democracy, Freedom, Justice and Private Initiative. Trade will always be the right way to solidify this everlasting friendship.

Alvaro Uribe Velez was President of Colombia between 2002 and 2010. In August 2010 he was appointed Vice-chairman of the UN panel investigating the Gaza flotilla raid.