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The United States-Colombia Trade Promotion Agreement (CTPA) is a trade proposal between the United States and Colombia. This trade agreement is also known as the Colombia Free trade. The trade agreement was signed by the Deputy US trade representative and the then minister of Trade and Industry in Colombia. The primary objective of this trade agreement was to eliminate barriers to trade as well as trade tariffs in trade between the two countries.
The US is the main trading partner of Colombia. In the year 2005, 39% of all the exports from Colombia went to the US while 29% of all the imports in Colombia came from the US. The most dominant export of Colombia to the US is crude oil and other petroleum products. On the other hand, corn is the leading export of the US to Colombia. In the year 2005, the trade deficit between the US and Colombia was at $3.43 billion.
The key provision of the US-Colombia Trade Promotion Agreement was that the agreement would grant duty free treatment to specified agricultural products from both countries. Another provision was that some products would receive improved market access. The US eliminated 80% of duties on exports to Colombia. Colombia on its part would eliminate trade barriers on information technology products. Agricultural commodities that received duty free treatment include quality beef, key fruits and vegetables, soybeans, cherries and other processed food products. On the other hand, arm products that would benefit from improved market access were pork, corn, rice, fruits and other dairy products.
The two countries have persistently worked to eliminate the sanitary and phytosanitary barriers that exist in agricultural trade. These barriers hence are seen as a limiting factor to efficient trade between the two countries. An example of one such barrier is the food and safety inspection on dairy products. According to the agreement, textiles and apparel are exempted to duty provided they meet the agreement's stipulated quality measures. The agreements also create a legal framework that protects US investors in Colombia. This states that, US investors are entitled to right to establishment, acquisition and operation of investment opportunities in Colombia.
This trade agreement allowed US firms operating in Colombia hire national professional as opposed to the previous regulation that required these firms to face restrictions in cable television and the financial sector. The Free Trade Agreement between USA and Colombia also has introduced greater protection of Intellectual Property Rights. This agreement provides improves the laws on Intellectual Property Rights in Colombia to be consistent with the laws on the same in the US. This protection includes all digital products such as US software, music, and videos e.t.c.
In August 2002, President George Bush enacted the Andean Trade Preferences and Eradication Act which replaced the previous Andean Trade Preference Act. This act allowed preferential tariff treatment to Bolivia, Colombia, Peru and Ecuador. The Free Trade Agreement between USA and Colombia faced a difficult challenge of getting the US Congress approval. However, the house democrats put pressure on the act forcing the Bush administration to include more environmental; and labor standards 2(Schott, 2006).
The Free Trade Agreement between USA and Colombia has sparked a lot of controversy over its implementation and its applicability in the economy of both countries ad specifically the US. In 2008, the then President of the US George Bush sent the Free Trade Act to the congress. The house had 60 days to authorize the implementation of the Act as stipulated by the law. The House Democrats sparked a heated debate over the applicability of the Act and its economic effect on the economy of the country.
One of the key issues on the Free Trade Agreement between USA and Colombia is the economic impact on the US economy. The Trade Act of 2002 requires the Commission on International Trade to prepare a report that analyzes the economic impacts of proposed trade agreements on the economy of the United States as well as selective industrial sectors. The trade agreements should also be in consideration with consumer interest and protection.
Since the Free Trade Agreement between USA and Colombia, there has been an increased US trade deficit with Colombia a situation which has led to the displacement of production that supported over 253,336 US jobs. The most affected sectors are the production and manufacturing industries. Free Trade Agreement between USA and Colombia contained a free trade and direct investment that provided investors with a guarantee designed to stimulate foreign direct investment. However, the agreement failed to extensively cover for the maintenance of labor and environmental standards.
The ideology behind the Free Trade Agreement between USA and Colombia was that this agreement would lead to job creation and reduce the non-employment rate in the US. The argument of the proponents of this ac argued that increased trade between the two countries meant more job creation hence higher incomes for US workers. However, the admissibility of this statement is put to question by the fact that the real effect of the Free Trade Agreement between USA and Colombia was misinterpreted.
The real effect according to the opponents of the Free Trade Agreement between USA and Colombia is that the economy of the country would be affected both positively and negatively. The only question would be which side would have a greater impact on the US economy. The general viewpoint is that increase in US exports leads to more job creation hence the country would benefit positively from the Free Trade Agreement between USA and Colombia. However, increase in imports tends to reduce job creation as a result of goods that would have otherwise been made in the country being displaced to the trading country.
The impact of the Free Trade Agreement between USA and Colombia and other South American states does not directly have an impact on the employment levels according to Jackson (Jackson, Pg, 9).However; any change in the employment level is substantially dependent on the trade balance. In this case, the trade deficit between the US and Colombia was at $.3.43 billion. This imbalance in trade is bound to affect the employment level in the country hence the argument according to the democrats was that many officials, policy analysts and business leaders ignored the negative impacts of the Free Trade Agreement between USA and Colombia on the US economy.
Growing trade deficit and job losses
According to the American Soybeans Association (ASA), the Free Trade Agreement between USA and Colombia would bring about substantial growth in the US private sector considering the fact that most of the agricultural goods had received preferential duty exemptions. Despite this being relatively true, the long term effect according to some financial analyst is that the Free Trade Agreement between USA and Colombia would bring about a rise in the unemployment levels. Most of these job losses are concentrated in the manufacturing sector which heavily affected by the problem of US growing trade deficit with Colombia.
Colombian Grain Importers have also risen concerning regarding the success of the Free Trade Agreement between USA and Colombia to benefit both countries positively. There has been continued pressure from Colombia for the ratification of the Free Trade Agreement between USA and Colombia. This is because; relatively lower tariffs from other South American countries have led Colombia to importing more from these countries such as Brazil and Argentina. This has resulted to the US losing the market share in Colombia as well as market growth.
Free Trade Agreement between USA and Colombia was seen as a move to strengthen the Colombian civil society as well as open up economic opportunities for US investors. The Free Trade Agreement between USA and Colombia was projected to benefit Colombia by changing the economic approach of Colombia to a more import compeitit9on economy. The rejection of such a trade act would weigh down negatively on the Colombian economy. According to a recent research conducted by the University of Antioquia, the disapproval of the Free Trade Agreement between USA and Colombia would lead to a total of 4.5% decline in investment level in Colombia.
The Free Trade Agreement between USA and Colombia sparked both sharp criticism and acceptance by different private and public stakeholders form both countries. The Free Trade Agreement between USA and Colombia was officially accepted in Colombia since its implementation would bring more positive effects on the Colombian economy that negative impacts. However in the US, some economic analysts argued that the long term impacts of the Free Trade Agreement between USA and Colombia would weigh down on the US economy.
During the voting by the congress, the opponents of the Free Trade Agreement between USA and Colombia saw the need for the inclusion of more environmental and labor standards. This would prevent the agreement form weighing down on one beneficial party. The Bush administration included more environmental and labor standards before the Free Trade Agreement between USA and Colombia could be passed by the Congress. However, some political analysts argued that the opposition of the trade agreement between the US and Colombia by democrats was not entirely based on economic factors. They argue that it might have been a ground to reach some kind of political compromise with the president. Approving a free trade agreement with Colombia is about supporting a market democracy in a region where liberal values are under attack.