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Monday, April 25, 2011

Proposed U.S.-Colombia Free Trade Agreement: Background and Issues

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. The agreement must be approved by the U.S. Congress before it can enter into force. The Colombian Congress approved the agreement in June 2007 and again in October 2007, after it was modified to meet labor and environmental concerns. Upon congressional approval, it would immediately eliminate duties on 80% of U.S. exports of consumer and industrial products to Colombia. 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%, and even higher for certain products.

The 112
th Congress may consider implementing legislation for the proposed CFTA. Negotiations for the agreement were conducted under the trade promotion authority (TPA). Implementing legislation for the CFTA (H.R. 5724/S. 2830) was introduced in the 110th Congress on April 8, 2008, under TPA. The House leadership, however, took the position that the President had submitted the implementing legislation 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).

The congressional debate surrounding the agreement has mostly centered on the violence and human rights issues in Colombia. Numerous Members of Congress oppose the agreement because of concerns about violence against union members and other terrorist activity in Colombia. However, other Members of Congress support the CFTA and take issue with these charges, stating that Colombia has made progress in recent years to curb the violence in the country. They also contend that the agreement would open the Colombian market for U.S. exporters. Other 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.

President Barack Obama has expressed the importance of strengthening U.S. trade relations with Colombia. On April 6, 2011, the Obama Administration announced an agreement between the United States and Colombia that resolves the concerns related to labor rights and violence in Colombia. The announcement states that the agreement would “clear the way” for the U.S.- Colombia FTA to move forward to Congress. The agreed upon “Action Plan Related to Labor Rights” includes a number of specific and concrete steps that the Colombian government agreed upon to address issues related to violence against union members, impunity, and worker rights. The Obama Administration’s announcement states that the successful implementation of key elements of the plan will be a precondition for the agreement to enter into force.

The United States is Colombia’s leading trade partner. Colombia accounts for a very small percentage of U.S. trade (0.9% in 2010), ranking 20
th among U.S. export markets and 25th 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 1.9%).

Date of Report: April 12, 2011
Number of Pages: 33
Order Number: RL34470
Price: $29.95

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