Economy & Budget

Colombia Free Trade Agreement in Trouble

Colombia’s patience – sometimes valuable in the war on narcotics — may soon wear thin because the U.S. Congress is continuing to stall a vote on a Free Trade Agreement, in limbo since its signing 590 days ago in November of 2006.

White House Undersecretary for International Trade Christopher A. Padilla said Congress is holding the CFTA hostage to election year politics, having refused it even a debate on the House floor due to Congress’ disagreement with President Bush over “protocol” measures and concerns for labor unions in the country.

At a meeting at the Heritage Foundation Tuesday, Padilla reported that Americans have paid $1.1 billion in tariffs – import product taxes – to the Colombian government. Colombia, though, exports about 92 percent of their products to us duty free, in what Padilla tagged “one-way free trade.”

A result of the Andean Trade Preferences Act, which was enacted to help fight drug trafficking and alleviate poverty in Colombia, the U.S. opened its market to Colombian imports, but did not remedy things positively for the U.S. Enacting the CFTA would benefit both countries by reducing barriers for the US and installing trading security for Colombia.

The CFTA would significantly decrease the tax burden on Americans and increase American exports. The current trade agreement between the countries is set to run out on December 31, 2008. If the measure doesn’t come to the floor for a vote, it could expire under the 110th Congress.

Earlier this year, President Bush signed a letter to Congress designed to move forth legislation to implement the CFTA, but progress remains to be seen — even though 9,000 American companies that do business with Colombia would likely benefit economically, according to a recent report from the Competitive Enterprise Institute.

As trading partners worldwide move forward, the U.S. lags behind and Padilla noted pending trade agreements with Korea and Panama as well. 

“The Koreans are negotiating with the EU, with Canada, and they’re even talking to the Chinese…so if we really want to stand by and watch East Asia integrate around China as opposed to integrating with the United States, well, that’s what happens if we turn our backs on allies like Korea,” Padilla said.

House Speaker Nancy Pelosi is a principal force against moving the CFTA to the floor for a vote but Padilla cited that “10 or 11 Democrats” have voted against her position. Representatives Gregory Meeks (NY), Joseph Crowley (NY), Jim Matheson (Utah), and Jim Cooper (Tenn.) all support the agreement.

Earlier this year, Pelosi and the Democrats on the House Rules Committee were able to change established congressional rules for “fast tracking” trade agreements because President Bush had planned to send the measure to Capitol Hill without the support of Democratic leaders.

Padilla believes the rule changes are actually “a trend toward economic isolationism on the part of the Congressional leadership, and not these excuses about needing more time or labor environment issues.”

Colombia has already signed and renegotiated their side of the agreement but the U.S. hasn’t finalized their end. Padilla said that if the Congress hasn’t acted by the December date, the Colombians will not have a preferential benefit any more.

The U.S. has free trade agreements with Central America, Peru and Chile, and Colombia may fear they will lose jobs from people investing in countries more available to free trade. 

President Bush said the CFTA will advance America’s national security interests, strengthen Colombia and help America’s economy and workers. The Bush Administration has pushed the measure, having more than 50 members of Congress – Democrat and Republican – visit the country for assessment purposes.

“[My Grandma] would say throwing away coupons from the Sunday paper is like throwing away free money…The good news is we have a coupon that would eliminate all of the tariffs on our products, in most cases immediately as soon as the trade agreement goes into effect…And the coupon as of today is worth $1.1 billion, and it’s called the Colombia Free Trade Agreement,” Padilla said.

According to CEI, the CFTA would make it so “more than 80 percent of consumer and industrial products exported to Colombia would enter that country duty-free immediately.”

By enacting the agreement, America could also decrease import prices, thereby relieving price anxieties on Colombia and helping to improve their economy overall.

Economics aside, accepting the CFTA would amp up American national security interests. Colombia has successfully battled the domestic terrorist group FARC by upholding democracy and maintaining free markets under President Alvaro Uribe, who enjoys an 80% approval rating.  Colombia is surrounded by dangerous countries like Venezuela, who would be more than happy to assist them in coming up against the US should we prove unreliable.

“I think the debate about Colombia is an important litmus test in many ways for whether America is going to remain committed to the policies of openness, the basic idea that we are better as a society because we are open to foreign trade and investment,” Padilla said.

Many Congressional Democrats cite violence against labor union workers as the reason for their opposition to the CFTA but the statistics show that union members are no more prone to violence than the general population. According to CEI, murders in the country overall have decreased almost 90% from 1996.

Padilla believes the CFTA deserves a swift vote in Congress, which will prove wide bipartisan support for it. He cited last year’s vote to enact the Peru Free Trade Agreement as an example, noting that even Sen. Barack Obama said he would have voted for it had been present. (Obama was absent due to the presidential primary season campaigning.)

“The provisions in the Peru free trade agreement that passed the Congress late last year with very heavy bipartisan support — I think it was 350 votes in the House,” said Padilla. “So, if it’s got identical provisions, I don’t understand why we wouldn’t also seek support for Colombia.”

President Bush said Colombia’s President Uribe has expressed that “approving the free trade agreement is the best way for America to demonstrate our support for Colombia.”

Bush noted that people are watching to see what America does here and by not passing the CFTA, America would “Not only abandon a brave ally; it would send a signal throughout the region that America cannot be counted on to support its friends.”

Republican presidential candidate John McCain this week released an ad supporting the CFTA and bolstered his credentials by featuring the commercial with a Spanish translation. Democratic presidential candidate Barack Obama does not support the agreement.

“I don’t understand how we can say we want to work with the world and then refuse to pass agreements that are in our own interest with allies,” Padilla said.

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