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Monday, October 11, 2010

The Proposed U.S.-Colombia Free Trade Agreement

M. Angeles Villarreal
Specialist in International Trade and Finance

The proposed U.S.-Colombia Trade Promotion Agreement, also called the U.S.-Colombia Free Trade Agreement (CFTA), was signed by the United States and Colombia on November 22, 2006. Congress must approve implementing legislation for the agreement to enter into force. The agreement would immediately eliminate duties on 80% of U.S. exports of consumer and industrial products to Colombia. An additional 7% of U.S. exports would receive duty-free treatment within five years of implementation, and most remaining tariffs would be eliminated within 10 years of implementation. The agreement also contains other provisions in services, investment, intellectual property rights protection, labor, and the environment. About 90% of U.S. imports from Colombia enter the United States duty-free under trade preference programs or through normal trade relations, while U.S. exports to Colombia face duties of up to 20%.

The negotiations for the proposed CFTA were conducted under the trade promotion authority (TPA), also called fast-track trade authority, that Congress granted the President under the Bipartisan Trade Promotion Act of 2002 (P.L. 107-210). The authority allows the President to enter into trade agreements that receive expedited congressional consideration (no amendments and limited debate). Implementing legislation for the CFTA (H.R. 5724/S. 2830) was introduced in the 110
th Congress on April 8, 2008, under TPA. The House leadership, however, took the position that the President had submitted the legislation to implement the agreement without adequately fulfilling the TPA requirement for consultation with Congress. On April 10, 2008, the House voted 224-195 to make the provisions establishing expedited procedures, inapplicable to the CFTA implementing legislation (H.Res. 1092). There is currently no indication that the 111th Congress will consider implementing legislation for the pending U.S.-Colombia FTA.

In his January 2010 State of the Union address, President Barack Obama called for a new National Export Initiative (NEI), which includes a component that calls for opening new markets for U.S. exports by resolving outstanding issues on the pending CFTA. The Obama Administration also has made a case for pursuing free trade agreements as part of the National Security Strategy of the United States, though the CFTA is not specifically mentioned in the report. In March 2010, U.S. Trade Representative Ron Kirk stated that the Obama Administration was developing a finite list of proposals to give to Colombia to resolve the issues blocking congressional approval of a free trade agreement with the United States.

The congressional debate surrounding the agreement has mostly centered on the violence issues in Colombia. Some Members of Congress oppose the agreement because of concerns about violence against union members and other terrorist activity in Colombia. Other Members who support the CFTA take issue with these charges, stating that Colombia has made progress in recent years to curb the violence in the country. Some policymakers argue that Colombia is a crucial ally of the United States in Latin America and that if the trade agreement is not passed, it may lead to further violence in the region. For Colombia, a free trade agreement with the United States is part of its overall economic development strategy.

The United States is Colombia’s leading trade partner. Colombia accounts for a very small percentage of U.S. trade (0.8% in 2009), ranking 22
nd among U.S. export markets and 27th as a source of U.S. imports. Economic studies on the impact of a U.S.-Colombia free trade agreement (FTA) have found that, upon full implementation of an agreement, the impact on the United States would be positive but very small due to the small size of the Colombian economy when compared to that of the United States (about 1.6%).

Date of Report: October 1, 2010
Number of Pages: 32
Order Number: RL34470
Price: $29.95

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