While media reporting on trade issues has justifiably focused on the pending Free Trade Agreement with Korea, industrial and agricultural producers have also been advocating forcefully for progress on the pending free trade agreement with Colombia, arguing that the delay on this agreement is costing American businesses market share and preventing much-much needed job creation.
Agriculture is one sector that has been hurt by the delay on the trade agreement. Because Colombia entered the Mercosur (South American trading bloc) agreements, while ratification of the treaty with the United States has been delayed, American agricultural products have lost market share in Colombia. In particular, American corn and Soybean producers have lost more than half of their Colombian market share in during the 5-year interlude since the free trade agreement was signed.
In manufacturing, US construction equipment giant Caterpillar is eagerly anticipating sales to Colombian mining companies of its US-made large bulldozers and earth-movers, needed for Colombia’s large open-pit mining industry. However, those products still face tariffs close to 50% of their value due to the failure of the trade agreement to take effect.
Caterpillar isn’t the only major manufacturer who could benefit from the agreement. General Electric currently faces a 7% tariff on much of the electronic and industrial equipment that it sells. Passing the free trade agreement and therefore removing this tariff would give GE an advantage over European competitors.
Additionally, other countries are making progress on free trade with Colombia even as Congress debates the ratification of the agreements. For example, Colombia’s free trade agreement with Canada (which competes with the United States on many agricultural exports) comes into effect on August 15th of this year. Additionally, Colombia expects to sign an agreement with the European Union at some point next year, although the coming-into-effect date would be determined at a later time. Finally, Colombia has also recently completed an investment agreement with China, allowing Chinese firms greater access to that country’s growing market and potentially clearing the way for further agreements down the road.
On free trade, the story is always the same: developing economies require foreign investment and have an appetite for foreign goods – and if the United States won’t trade with them, someone else will.