Topic Brief: Columbian Free Trade Agreement

Overview

This week President Bush tried to fast track a free trade agreement (FTA) with Columbia through Congress.  However, the House has already undone the mechanism that would have forced them to vote on it today and has promised to stop the agreement from passing.  What is peculiar about this move is that the same Congress approved a nearly identical FTA with Peru last year.  Many analysts believe that the rejection of this current bill, as well as the promise to interfere with a similar South Korean FTA, has more to do with election season posturing then it does with genuine policy concerns.  Therefore, this brief will outline some of the details of the FTA and what the different sides are saying before assessing the political and economic ramifications of the little FTA that is causing a whole lot of ruckus.

Important Terms and Figures

The FTA:  For a long time the United States has given Columbia a break on tariffs as part of an effort to develop strong political ties with the country, especially as an incentive for the continuation of plan Columbia – a major part of the war on drugs.  Because this status was renewed yearly, Columbia often worried that they would lose this access to American markets. In 2006, they offered to drop their tariffs on American goods in an effort to begin creating a more permanent trade agreement. Specifically the current agreement seeks to remove nearly all tariffs.

Democrats: The Democratic opposition to this FTA comes mainly at the behest of the AFL-CIO and other unions and labor organizations.  The first step they have taken to stop the FTA is the removal of “fast track” privileges. Further, they have argued that Congress needs to be allowed to take measures to offset the domestic impact of an FTA before they can pass it.  Many argue that Democratic opposition has been a ploy to galvanize support from middle class America in light of the 2008 electoral cycle.

Republicans: Republicans see the bill as an important part of developing a global economy.  This is consistent with the neo-liberal ideology that has dominated the party since Regan.  As such, they paint the Democratic opposition to the bill as hurting America’s economy for political gain.

Fast Track:  A program under which Congress had to approve or reject all presidential economic bills and agreements within 90 days of presentation without amendment.  Created with the intent of ensuring that economic stimulus measures got to the public in a timely manner as needed.  Largely based on their opposition to the Columbian FTA, Congress has allowed the fast track system to expire, endangering the future of subsequent Bush FTA’s and other economic programs.

Major Issues

Economic Impact in the US: While labor groups argue that the FTA will hurt middle income Americans, as their jobs are undersold by South American competition, many economists argue that the FTA has been de facto in force since 2006.  While there may indeed be adverse effects to the FTA, they are already impacting the American economy.  What this means is that only through a full closure of free trade agreements with Columbia can we protect the economy – a reason to reject the FTA.  But it also means that the FTA itself will not cause any new harm, suggesting that the economic incentives for rejection may not be as strong as the unions would have Americans believe.  Generally, the strongest and most simple argument regarding the economics is that there would be no discernable impact, so the battle on this issue is really about politics and not about economics.

Impact on Columbia: While the passing of the FTA means little to America, it could mean the world to Columbia.  The more open access to US markets could vastly increase development in Columbia.  Further, the US support that has often come with trade is one of the major factors in Columbia’s ability to combat FARC, a terrorist organization that has long operated within their borders.  Ultimately, what this means is that as the US battles over the political ramifications of the FTA , they are leaving out the fact that it could be hugely beneficial to Columbia, a move that may move this current US ally, towards more leftist, anti-American regimes in South America.  As such, one major unintended consequence of the rejection of the FTA would be the strengthening of Hugo Chavez’s influence in the Americas and more momentum towards anti-Americanism in Latin America.

Elections Relationship with Policy:  The Battle over the FTA also highlights a potentially troubling trend in American politics – politicians getting more active as elections get closer.  The Pelosi Congress has certainly rubber-stamped other Bush administration FTA’s; however their pro-labor ideologies have now come to the forefront as the certainty of Democratic victory in November seems to diminish.  This trend is troubling in two ways: first, it suggests that politicians may discount the good of the country in order to try to win voters (an accusation bandied by the right); also, it suggests that politicians will only really listen to their constituencies during election season.   Either option is decidedly not in the interest of the country, as such the inconstancies in democratic attitudes towards trade should be evaluated the election cycle comes near.

General Criticisms of FTA’s:  Beyond the criticisms of this specific FTA, this debate has also returned the focus on the more general criticisms of free trade.  While the neo-liberal philosophy that dominates Republican circles argues that the free market will solve the problems of the world, critics of international free trade posit two basic arguments.  First, they assert that promoting free trade globally comes at the cost of the American worker.  While business can increase profit margins with expanding markets, cheaper supplies and more available low wage labor, the production jobs either move out of the US or are lost to cheaper international competition.  In essence, the argument posits that free trade only benefits the corporations, undermining domestic labor   Beyond the economic cost of free trade, the second argument focuses  on the real cost to the nations that the US engages in FTA’s.  Many critics note that the cooperate access the FTA grant drives down wages in foreign countries, leading to exploitive business practices including sweatshops, environmental degradation and support of non-democratic regimes.  Moreover, the removal of government control of international trade removes one of the primary barging chips the government has in trying to promote human rights in other countries.  For example, critics of the Columbia FTA argue that the agreement only legitimizes a government that has often implement race-based relocations and persecutions and will make it harder to prevent the widespread human rights abuses that are committed against civilians in the name of fighting FARC.  As such, many see the FTA’s as a neo-colonialist tool that allows industrialized nations to reap the economic benefits of lesser developed nations with no responsibility for the cost of their actions.

Sample Questions
Will the Democrats pass any form of the Columbia FTA?
What impact would the Columbia FTA have on the American economy?
What impact will the failure of the US to adopt a Columbia FTA have on Columbia?
Does the failure of the Columbia FTA also spell doom for the South Korean agreement?
Is free trade with the US really the best policy for Columbia?

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