#Free Trade Agreements

U.S. media washes hands of Colombian free trade criticism

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Now that the damage is done, the Free Trade Agreement (FTA) is signed, and up and running, the United States has been conspicuously absent from the conversation about Colombia’s agricultural strikes.  Although newsworthy in England, Spain, Germany, and other European countries, most mainstream U.S. media outlets failed to take note of the manifestations until President Santos deployed 50,000 troops in Bogotá last Friday after protests got out of hand.

While The Guardian and the BBC published detailed accounts of the strikes, coverage in The New York Times and other U.S. publications has been limited.  The New York Times reprinted a short Associated Press piece on the militarization of Bogotá eleven days after the strikes began, but failed to mention Colombia’s FTA with the U.S.  With the exception of Reuters and The Huffington Post, coverage in other mainstream media outlets has mainly focused on President Santos’ response to demonstrations in the capital.

Although you wouldn’t know it from U.S. newspapers, there have been many newsworthy aspects of the now 19 day agrarian strike in Colombia.  For one, farmers in several regions of the country have managed to block major highways for close to two weeks, defying soldiers and riot police.  Tens of thousands of people across the country have gathered to bang pots and pans in a show of solidarity with the campesinos that has been remarkably widespread.  Their demonstrations have been met with excessive force on the part of Colombia’s riot police, prompting Archbishop Luis Augusto Castro Quiroga and local government officials in the department of Boyacá to publicly denounce the abuses.

Even more noteworthy, in terms of U.S. government and business interests, is the relationship between the FTA implemented in May of 2012 and current protests.  Considering the fact that this agreement is partly to blame for the farmers’ worsening economic conditions in Colombia, you would have thought it worth at least a passing mention.  Among other petitions, the striking farmers are asking the government to stop the importation of various agricultural products and demanding the immediate suspension of free trade agreements with the U.S. and the European Union.

Since the FTA between the United States and Colombia has gone into effect, both governments have touted the deal as a harbinger of economic growth.  A message on the website of Colombia’s U.S. Embassy reads, “With the FTA in place, U.S.-Colombia trade partnership is stronger than ever and the highly complementary U.S. and Colombian economies are reaping the benefits.”

The attached report goes on to highlight the fact that in the sixteen months the FTA has been in effect, U.S. agricultural exports to Colombia have increased by an astounding 68 per cent.  Barley, corn, cotton, wheat, and soybean farmers in the U.S. are enjoying the immediate elimination of tariffs, and poultry and pork producers are sure to benefit over the next five to ten years as their products become tariff-free.

The Colombian Embassy website proudly points out that U.S. farmers “are active in [their] support of the FTA.”

And why wouldn’t they be?  In 2012 U.S. farmers received $15 billion in agricultural subsidies from the U.S government.  They are now enjoying the elimination of tariffs on more than 70 percent of their exports to Colombia.  The International Trade Commission predicts that the FTA will increase U.S. GDP by a total of $2.5 billion.

For farmers in Colombia, however, the Free Trade Agreement has brought nothing but misery.  With small plots of land and limited technology, most farmers can’t compete with the sudden influx of agricultural and dairy products from the U.S. and Europe.  Coupled with the rising costs of production, free trade agreements have created an untenable situation in which farmers can’t make ends meet.

Before the FTA, potato farmers from the departments of Boyacá and Cundinamarca were protected by a 5 to 20 per cent tariff leveled on U.S. tuber imports. Now there is nothing standing between them and financial ruin.

Farmers of other agricultural products have met the same fate.  Oxfam International estimates that the average income of 1.8 million small farmers in Colombia will drop 16 per cent as a result of the FTA.  According to a 2011 Oxfam report, 400,000 farmers who were living on less than minimum wage before the FTA was implemented will lose between 48 and 70 per cent of their earnings.  They will undoubtedly join Colombia’s massive internally displaced population—the largest of any country in the world.  In fact, these farmers are likely part of the reason the number of internally displaced people increased by 46 per cent in 2012 in comparison with the previous year, according to a report published by the Consultoría para los Derechos Humanos y el Desplazamiento (CODHES).

In response to protester demands, the Colombian government announced the suspension Thursday morning of a controversial resolution regulating the seeds Colombian farmers are allowed to plant in their fields.  Resolution 970 of 2010, which applies intellectual property laws to seeds, prohibits farmers from reusing patented seeds for commercial purposes.  Instead of continuing their tradition of recycling seeds from year to year, farmers must buy new seeds after every harvest or risk paying fines and spending time in jail.

Although the Instituto Colombiano de Agricultura claims that similar regulations have been in place since 1976, renewing this type of agreement through Resolution 970 was a requirement for U.S. approbation of the FTA.

It remains to be seen whether or not the mainstream U.S. media and the U.S. government will start to pay attention now that Monsanto and other genetically modified seed corporations are at risk of losing money.

Colombia´s Santos visits United Kingdom

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Colombia President Santos arrived in the United Kingdom today for a two-day trip where he met with Prime Minister David Cameron to discuss ways to increase trade links between the countries as well as the often thorny issue for Colombia of human rights.

Speaking at a press conference this morning after meeting with the British Prime Minister, Santos paid homage to the support that the UK has offered in the peace process calling relations between the countries as being at the “best time in its history”.

Santos highlighted that Colombia had doubled its trade with the UK since his last visit two years ago and that the free trade agreement with the European Union – finally ratified by the Colombia Congress yesterday – would help this growth to continue.

Also, among this issues discussed was that of bilingualism, through which President Santos expressed his Anglophilia by saying he wanted Colombia to become a “centre of bilingualism” in Latin America, one imagines by increasing the standard and number of English speaking Colombians.

After meeting the Prime Minister as well as Foreign Secretary William Hague and Minister of State Hugo Swire, Santos later visited Oxford University where he joined representatives from a number of countries across the globe to launch a joint scheme with the university   that will help emerging countries tackle poverty through the creation of a peer-to-peer network.

Speaking at the visit, Santos boasted his record on the economy by claiming that two million jobs have been created since he took office in 2010. He also spoke of his record on tackling poverty and income inequality, stating that Colombia’s Gini coefficient – the standard measure on economic inequality – has fallen from 0.56 in 2010 to 2012 0.539.

Perhaps of note to Santos in this aspect is that this is the highest in the exclusive club that Colombia is about to join – the OECD.

Santos will meet with Prince Charles tomorrow after speaking at an event hosted by the Financial Times.

 

Romney, Obama neglect Latin America

USA Presidential candidates Mitt Romney and Barack Obama Monday night debated head to head for the final time before polls open on Tuesday 6 November, barely touching on the continent that sits on their doorstep.

In fact Latin America has gone virtually unmentioned throughout the campaign.

What do we expect? US elections are historically policy light, and almost foreign policy free. Add to this the crises in the Middle East and many will conclude that Latin America is, frankly, not a priority for the two men fighting to become the leader of the free world.

However, the cultural ties, the growing middle class and the rapidly expanding economies of the US´ southern neighbours – not to mention the ideological war between the liberal and authoritarian socialist states that splits the region – mean that now more than ever Latin America DOES matter.

So it was predictable but disheartening that in the 90 minutes of debate last night – a debate on the international relations – Latin America featured for little more than 20 seconds.

Mitt Romney, as he has done in previous debates, mentioned his promise to boost trade with the countries south of the border, likening the size of the ´Latin American economy´ to China´s. Obama failed even to respond, ignoring the latino voters who polls suggest in their majority side with the current Commander in Chief.

Obama´s advisers argue that his record speaks for itself. He has signed free trade agreements with Panama and Colombia, and has visited the region more than most other US Presidents, they point out.

Fair enough, but the trade agreement with Colombia was virtually done before he got into office and he took three years to get it through Congress.

And ok, Obama has indicated that he is at least willing to let the discussion about changes to drug prohibition policy to take place, but how involved he will become in this discussion we will have to wait and see).

It is also probably – on balance – a good thing for regional security that Obama has toned down the rhetoric on Chávez. The US is better served through soft diplomacy; quietly working with allies, supporting trade and democracy.

So we know Obama´s record and whilst it hasn´t been bad,  it hasn´t been good either; a 5 out of ten, perhaps.

If Obama is re-elected we should expect more of the same, a cool disinterestedness.

Should the polling momentum continue with Romney and should the US wake up on the 7 November with a new president, however, what will we get from a Romney administration? What do we know about his views on Latin America?

Well, not much. The Latam page on the Republican candidate´s campaign website could be condensed into two phrases ´socialism bad´ ´trade good´, and that´s about as much as we get.

The Governor has promised to sign more trade agreements, but the US has trade agreements with pretty much every country that wants one.  As ABC news said today:

The countries without U.S. trade agreements like Ecuador, Bolivia, Venezuela, Brazil, Argentina, Paraguay, Uruguay and Cuba are not very interested in entering into one.

Colombia Politics does not doubt Romney´s comitment to trade and perhaps he will pursue a more dynamic approach to the issue through his promised Campaign for Economic Opportunity in Latin America (CEOLA).

But on the issue of drugs, there is very little to suggest Romney has the will or the authority to take on those in his party who fail to see beyond the status quo.

For this reason alone, the prospect of a Romney presidency is perhaps the less desirable outcome for Colombia. The debate on narco-trade and the total failure of the war of drugs is not something we can wait four more years to discuss.

Whoever wins. however, there is little to suggest a real and positive change in relations.

Washington, like much of Europe, has failed to grasp the opportunities Latin America presents. Neither Obama nor Romney appear to care – they should.

Forget about Europe Mr Cameron, Colombia awaits

Santos meets HM the Queen

The French and the Germans might yet regret treating the British so badly. The treaty cooked up in Berlin and Paris two weeks ago to cripple London’s financial services industry, the engine of the British economy, was highly cynical. Prime Minister Cameron had no choice but to exercise the veto. Britain was not going to pay for the mistakes and overspending of economies in a currency it had the good sense not to join.

The bad behaviour of Europe’s bully boys should act as the catalyst for Cameron to lift his gaze away from the failing markets across the English channel.  He should cast his eyes across the Atlantic to an economy whose third quarter growth was just short of 8%, where private-sector optimism is high and where the government actively wants to do business. That country is of course Colombia.

Should Cameron heed this call, he will find fellow Brit and ultra-entrepeneur, Richard Branson already there. Next year Britain`s most popular billionaire will launch Virgin mobile across Latin America, with Colombia a key market.

Britons, Colombia awaits.

Last month President Juan Manuel Santos visited his second home, the UK. Santos cites his time in London both studying at the London School of Economics and working for the Colombian Coffee Growers Federation as the one of the best of his life. Santos is a true anglo-phile.

As reported on this website, during his state visit to the UK, President Santos met Prime Minster Cameron, the Queen and Foreign Secretary William Hague to build stronger and deeper ties between the two nations.

Emerging from the talks Santos and Cameron heralded the start of a new relationship built on security cooperation intelligence sharing and trade. Bogotá and London had committed to grow two-way trade to £1.75 billion by 2015.

Cameron must now act to make this happen. What better time than now with the Colombian economy set to record near 6% annual growth, and what better excuse than the Euro crisis to spur the Brits to look elsewhere for investment and trade.

While the global economy in 2011 has stumbled towards its recession death-fall and with the outlook for 2012 worse still, for Colombia this has been has 12 months of record-breaking economic success. GDP growth is running at pre-2008-crisis levels and is projected to grow by 5% next year, even more impressively, foreign investment will reach 15 million dollars by the end of the year. The buzz-word in Colombia is stability – something distinctly lacking elsewhere in the world.

Santos, this year wrote into law, strict government borrowing limits, leading the World Bank to conclude that the Colombian economy was safer than France’s. What’s more, inflation is uncharacteristically low for Latin America at 3%. Confidence in Colombia is also high among the credit rating agencies who earlier in the year bumped the country up to investor grade level. Next year the free trade agreement with the US will come into effect as it is expected will the agreement with the EU.

Despite the rosy outlook, Colombia still has its problems, not least its woefully lacking infrastructure, which it must improve urgently if it is to benefit fully from its access to the biggest markets in the world.  Yet these problems are also an opportunity. Take for example the need for major new transport links – contracts are waiting to be signed, money is promised, profit is certainly there to be made. British construction companies should be champing at the bit to provide their expertise in building the bridges and tunnels that must traverse and dissect this country’s extreme mountainous terrain. During Santos’ visit to the UK he secured assistance from the British Government on structuring the private, public loan and investment models required to generate the income for the works Colombia must deliver in the coming years. Should British business not be able to capitalise on these links it only has itself to blame.

Despite the alarmist talk from those on the British left, the UK will not be left on the sidelines of Europe. Trade with Europe is not going to go away. The UK’s economy is still reliant on a successful continental market. But while the Europeans are losing their heads, the Brits would be wise to seek alliances further afield.

The history of the UK was built on the success of its international trade, of daring to go where others had not yet ventured. Yet in recent years the country has slavishly stuck to the devil it knows best, Europe, and the US. The last time we had a Queen Elizabeth on the throne gold stolen from Spanish ships off the coast of Cartagena filled British coffers. As our more recent economic partners tank, now is the time to hoist up the Union Jack and set sail once more for the Americas.

Colombia US trade agreement – it’s the politics, stupid!

After years of procrastination, the US Senate is expected finally to sign off the Free Trade Agreement with Colombia – the House has already voted in favour.

Don’t listen to the misguided voices against it, the FTA is an important and necessary step – both for Colombia and for the US.

While for Colombia the advantages of privileged access to the largest market in the world are obvious, the FTA is – for this website – of even greater importance to the US.

Failure to sign the agreement on the part of the US would represent an economic and diplomatic retraction in a key emerging market in a region of strategic geopolitical importance.

Economically the US is already in retreat in the continent. Chinese investment in Latin America continues to rise – exponentially. If the US doesn’t act China will soon become the major economic force in the region.

But the agreement is about more than just trade and the economy. The FTA is also crucial for US foreign policy. There are signs the US’ influence in the South is on the wane. Given Colombia is the US’ closest ally in the region, the failure to deepen ties with the country would represent extreme negligence, and accelerate its diplomatic decline.

This is not a time for the US to rest on its laurels.

The economic necessity

The FTA will increase US exports by over 1 billion dollars. It will create thousands of new jobs, and help stimulate an economy in the doldrums.

Colombian is one of Latin America’s fasting growing import markets. In 2010 imports rose to 41 billion dollars.  But the US is not taking advantage of this. In fact the US’s share of this market is retreating, and fast. In 1999, US products represented 37 per cent of the total imports to Colombia. But by 2010 this had fallen to 26 per cent.

This while China’s imports have risen six fold over the last ten years – and 47 per cent in the last year alone. China is now Colombia’s second largest trade partner; it is threatening in the coming years to overtake the US.

Colombia’s economic star is rising. As reported on this website last month, the World Bank and the IMF have both given the country glowing reports, while the credit rating agencies have awarded it investment grade status.While economies across the world struggle, Colombia’s GDP will increase by over 5 per cent this year.

So it’s little surprise that the competition to invest in the country is heating up – free trade agreements with the EU and with South Korea should be in force next year, while the agreement with Canada is already active.

The US economy is retreating. Sitting back and watching others benefit from privileged access to the emerging markets on her doorstep is a luxury Washington cannot afford. The US will act today out of necessity.

The political necessity 

Latin America has endured a history of instability. Democracy is has not been ubiquitous, dictatorships and military leaders have been as visible as elected presidents. Colombia is a stable democracy, representing the values the US wishes to project. She must be supported.

Two of Colombia’s neighbours, Venezuela and Ecuador represent an anti-American socialism that seeks to replace the free-market and individual liberalism of the Washington consensus with a distorted idea of state-control Bolivarianism.

Should the US’ – and other Western democracies’ – influence continue to decline, the authoritarian regimes of Chavez and Correa, emboldened, will see their potency to tip the balance of power in the region in favour of the Bolivarian revolutionist movement increase. Chavez has cultivated friendships with Iran, China and Russia – Latin American democrats will not forgive the US for allowing Chavez’s attempts to replay the Cold War to bear further fruit.

Colombia – alongside Chile and Peru – are the standard bearers for a more liberal politics in South America (the election of Humala earlier this year in Peru has put the future of that country in doubt, however). Promoting the principles of free-trade through active agreements reinforces the liberal democratic counterweight to threat of a potential Caracas consensus.

FTA – an unavoidable decision

The FTA to be signed today is part of Colombia’s emergence as an important world economy. It will create new jobs and business opportunities as well as increase the spending power of the average family.

But the reality is Colombia is no longer reliant on the US. While the US has been inexplicably coy – taking years to consummate the trade marriage to one of her closest allies – Colombian President Santos has been busy forming other economic alliances. He has successfully positioned the country as an attractive investment opportunity for Europeans and Asians alike.

Despite concerns about the protection of union workers in Colombia, despite protectionist views in the US Democrat party, and despite the fear in Colombia that certain parts of the economy are not ready to trade on an level playing field with the US, the FTA is ultimately an opportunity the US can not afford to allow pass by – economically and politically.

Colombia – Time for American TLC?

Obama and Santos in Cartagena, photo AFP

Obama needs to show Colombia some love.

Colombia is the US’ closest ally in South America. But as the country continues to wait – five years and counting – for the US Congress to sign off the Free Trade Agreement, many are asking ‘why is it taking so long, Mr President?’

Earlier this year, the Obama regime promised Colombia that the FTA (TLC in Spanish) would be pushed through Congress in a matter of months. So as US politicians return to their desks this week after their summer vacation, will the breakthrough finally come?

What’s in it for the US?

Colombia is the third most populous country in Latin America, after Brazil and Mexico.

While Europe and the US economies are in the doldrums, Colombia’s GDP expanded 5.10 per cent in the first quarter of 2011 over the same quarter, previous year. Average annual GDP growth over the period 2001-2011 was 4.12 per cent.

The US International Trade Commission estimates that the FTA would increase US GDP by nearly 2.5 billion dollars, and US merchandise exports by 1.1 billion. http://export.gov/FTA/colombia/index.asp

Colombia’s star is in the ascendance.

But…less than 1 per cent of total US trade is done with the Andean country.

What’s in it for Obama?

Most agree, that job creation is the problem that Obama faces (particularly if he is to have a chance of re-election next year). Colombians – and many Republicans on Capitol Hill – argue, what better way to generate employment than a FTA with a successful but unexploited market? An easy win win, you might suggest.

So, what’s the hold up?

The recent delay has been largely due to Democrat resistance – from two positions:

Protectionism – Democrats argue the FTA could threaten American jobs (most argue though that trade liberalisation always generates more jobs than protectionism protects)

Workers’ rights – Democrats claim that not enough has been done by the Colombian government to protect Unions in the face of threats (from as George Miller – House Representative from California put it ‘death squads’).

In April this year, following a meeting with President Santos, Obama revealed that agreement had been reached with Colombia to boost labour rights. There should be no objection by Democrats to the FTA going through, he appeared to argue.Despite this, Obama has been making all the right noises.

Following that meeting, Colombia launched another diplomatic offensive to try to push the FTA over the line. At the culmination of the talks, US Sectary of State Hillary Clinton held a press conference alongside Colombian External Relations Minister Maria Angela Holguin, during which she was unequivocal in her support for the FTA:

“I hope that the people of Colombia do no lose heart in watching the activities of our Congress because there always is a lot of rhetoric and skirmishing between the parties before they finally hit the deadline. I’m absolutely sure we’re going to get it (the FTA) passed.”

So it’s a done deal?

Not yet…Colombian policy makers and business men are watching anxiously as we move into a crucial session of Congress, one that winds up the US legislative year on 8 December.

If the FTA is not pushed through during the next months it could well gather dust for quite some time. 2012 is election year and it’s highly unlikely FTAs will even be on the agenda during campaign season.

The good news is that Obama has packaged up the FTA with Colombia (alongside others with South Korea and Panama) in his growth strategy for jobs. Politically, he will want to see Congress agree them.

The fear is, however, the fierce debate surrounding Nanci Pelosi’s (minority leader of the House) bill sanctioning China for currency manipulation could derail Obama’s plan, scheduling it off the table. http://www.ft.com/intl/cms/s/0/c5f2495c-cbef-11df-bd28-00144feab49a.html#axzz1XCaFqC7k

Will there be sufficient time in Congress for further consideration of the FTA? Santos will be looking for Obama to come good on his promises and ensure that there is.

For full details on what’s contained in the FTA, click here for the 2006 report to Congress: http://www.nationalaglawcenter.org/assets/crs/RS22419.pdf