Will Colombia be the next free trade victim?

Free trade agreement (FTA) fever is again gripping Washington in the wake of yesterday’s unofficial news that negotiations on the long-proposed deal with Colombia had been completed for the second time.

The Bush administration actually announced that it had completed negotiations for an FTA with Colombia in 2007. But the Colombian habit of assassinating inconvenient labor leaders (3,000 in the last 30 years, of whom 51 were killed last year according to the New York Times) gave rise to opposition from U.S. unions and key Democratic members of Congress who blocked debate on the agreement.

Initially, the Obama administration demonstrated no interest in resuscitating what appeared to be a dead deal. But in the wake of his November electoral “shellacking,” the president has tried to prove that he really likes the U.S. Chamber of Commerce and U.S. business leaders generally by renegotiating with the Colombians to get better terms on labor-related issues. He hopes, of course, that this will appease the AFL-CIO and congressional Democrats enough to enable passage of the bill as a way of appeasing big business and Republicans enough to him to get reelected in 2012.

According to early reports, the Colombians have, somewhat reluctantly it appears, agreed to provide more protection to labor advocates, shop stewards, and bargaining committee members and to criminalize actions, including threats, that affect worker rights. It also agreed to relocate and protect teachers who are in danger of possibly violent attacks. The Colombian government will also beef up the number of police helping prosecutors in cases of crimes against union members.

Whether this will be enough to get the deal through the U.S. Congress is not at all clear. As of today, the AFL-CIO was still opposed, pointing out that there probably wouldn’t have been a deal if 51 CEOs had been assassinated this year instead of 51 labor leaders. Still, I guess that there are enough Democrats who will join with the now much larger contingent of pro-deal Republicans in the Congress to get the agreement ratified.

Actually, the bigger question is what the deal is really all about and who will benefit. Especially, the question is will Colombia benefit, and why do Colombia’s leaders want the deal?

The heart of the agreement are undertakings by the United States to reduce 80 percent of its tariffs on imports from Colombia to zero immediately and the rest over 10 years while Colombia will zero its tariffs on 50 percent of its U.S. imports immediately and the rest over 10 years. This looks better for Colombia than it is because 90 percent of U.S. imports from Colombia already enter duty free under various special arrangements. On the other hand, Colombian tariffs on U.S. imports are relatively high. So the United States is actually gaining — at least theoretically — relatively more market access than Colombia. Indeed, the U.S. trade representative’s office estimates that U.S. exports to Colombia will rise by about $1 billion as a result of the deal if it is ratified.

OK, a billion dollars is better than nothing, but the days are long gone when you could call it real money à la former Republican leader Everett Dirksen who famously quipped: “a billion here and a billion there and pretty soon you’re talking about real money.” For the nearly $15 trillion U.S. economy which generates about $1.5 trillion of exports, $1 billion (assuming this is anywhere near a realistic estimate) is less than a drop in the bucket. So what is the real objective for the United States here?

The website of the U.S. trade representative emphasizes that this deal will “strengthen peace, democracy, and freedom” in Colombia, demonstrate solidarity with Colombia’s democratic leadership, and undercut the power of the drug cartels by creating licit jobs in Colombian export industries as an alternative to coca growing and drug smuggling.

Sounds good — but wait a minute.

If 90 percent of Colombian exports already enter the United States duty free, how is the FTA really going to increase jobs in Colombian export industries? In fact, it’s not going to create many jobs for Colombians. Actually the deal may well destroy a lot of Colombian jobs. Recall that U.S. exports are projected to grow by $1 billion. I already noted that that’s not a lot for the U.S., but it’s a pretty big increase in imports for a tiny economy like Colombia’s, and the bulk of it would be in agricultural products.

Now think about NAFTA and how that FTA was supposed to create jobs in Mexico and reduce illegal immigration into the United States. Well, one downside of NAFTA has been that subsidized U.S. agriculture such as corn, sugar, and cotton growing has been given easy access to the Mexican market and devastated smaller-scale Mexican peasant farms. The result has been a severe hit on the Mexican economy and an increase in illegal immigration along the U.S. southern border.

The danger for Colombia (and the United States) is similar. Big, subsidized U.S. agriculture will have free run of the market. Far from finding new licit jobs, displaced Colombian small-scale farmers may well be forced to find more illicit jobs in coca growing and cocaine making.

I have to say that I have long wondered why Colombia’s leaders have wanted to do this deal. I really don’t see much in it for Colombia. Some have suggested the possibility that the agreement will open exploitation of Colombia’s mineral wealth more readily to foreign investors who may have partners among some of the Colombian elite.

More likely is the possibility that all of Colombia’s economists have been trained at leading U.S. universities where they learned the same knee-jerk “free trade is always win-win” doctrine as their American trade-negotiating counterparts.

In any case, although the balance of immediate benefits appears to be slightly with the United States in this case, I’m afraid I’m from Missouri on this one.


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