Too Late! Canadians Eat Our Lunch in Colombia

Jun 15, 2010

Yesterday, BusinessWeek reports, Canadian lawmakers in the House of Commons approved a free trade agreement with Colombia. Soon, the Canadian Senate will follow suit, and U.S. producers will find themselves at a distinct disadvantage to their Canadian competitors in this growing market. Colombia taxes foreign products an average of 12.5 percent, with applied tariffs ranging as high as 80 percent, according to the World Trade Organization. These additional taxes will no longer apply to Canadian producers, unlike their U.S. counterparts, once the agreement is implemented.

But wait, you say, the United States has a free trade agreement with Colombia, too.

And you would be correct. The U.S. signed an agreement with Colombia in 2006 that would eliminate all tariffs charged to U.S. products. Canada did not even begin negotiations until 2007. Yet today, instead of enjoying a 12.5 average advantage in the Colombian market, U.S. producers are poised to be set at an equivalent disadvantage. That is because the White House and Congress have allowed U.S. trade policy to be held hostage to the political whims of the unions, who wield trade policy as a convenient wedge issue. It costs the unions nothing (workers are another matter), while providing a litmus test for union loyalty. Meanwhile our Colombia agreement stagnates, much to the chagrin of our South American ally.

U.S. manufacturing and agricultural industries pay the price. Take wheat, for example. U.S. Wheat Associates, an industry association representing U.S. growers, has said, “Colombia is traditionally the largest market for U.S. wheat in South America with market share of up to 70 percent. However, U.S. wheat market share could easily drop to 30 percent or lower if Canada and the European Union implement their own agreements with the Colombian government allowing their wheat to enter Colombia duty-free. About $100 million in annual sales are at stake.”

“Many of the things that we buy from the U.S. we could buy from Canada and we could buy tariff-free,” said Colombia’s Trade Minister, Luis Guillermo Plata.

But it’s not just Canada. The European Union recently signed a free trade agreement with Colombia, too. The same scenario is playing out with other trading partners, including Panama and South Korea whose trade agreements with the United States are also languishing. The global economy is being re-shaped and the United States is sitting on the sidelines.

The White House and Congress could turn this around today by taking up and passing the free trade agreements with Colombia, Panama, and South Korea, and reestablishing the historical U.S. leadership role in global trade policy through an aggressive market opening agenda. A recent study by the U.S. Chamber of Commerce study entitled Opening Markets, Creating Jobs: Estimated U.S. Employment Effects of Trade with FTA Partners clearly illustrated what’s at stake. It found nearly 18 million U.S. jobs depend on trade with America's free trade agreement (FTA) partners -- 5.4 million of which were created by the increase in trade unleashed by the agreements.

Please, please, please tell your Member of Congress it’s not too late – but it may soon be.

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