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Monday, July 11, 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 include new provisions on labor and the environment. If approved by the U.S. Congress, the agreement 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. 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 20% or more.

The 112
th Congress may be considering implementing legislation for the proposed CFTA. In a press release on June 28, 2011, United States Trade Representative (USTR) Ron Kirk welcomed the scheduling by the Senate Finance Committee of informal or “mock” markups for three separate draft implementing bills for pending FTAs with Colombia, Panama, and South Korea. USTR Kirk also welcomed the Senate Finance Committee’s inclusion of a renewal of the Andean Trade Preference Act (ATPA) and the Generalized System of Preferences (GSP) in the draft implementing legislation for the U.S.-Colombia FTA. The draft legislation includes a retroactive extension of ATPA and GSP until July 31, 2013. However, House Ways and Means Committee Chairman Dave Camp has stated that he did not agree with this legislative process and that the method of moving these items would be for the House leadership to determine.

The congressional debate surrounding the agreement has mostly centered on violence, labor, 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 to address the concerns related to labor rights and violence in Colombia. 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: June 29, 2011
Number of Pages: 38
Order Number: RL34470
Price: $29.95

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