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Tuesday, July 26, 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 from the May 10, 2007 bipartisan understanding between congressional leadership and President George W. Bush. 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.

The 112
th Congress may consider implementing legislation for the proposed CFTA. President Barack Obama has emphasized the importance of strengthening U.S. trade relations with Colombia, Panama, and South Korea. In a press release on June 28, 2011, United States Trade Representative (USTR) Ron Kirk announced that he welcomed the scheduling of informal or “mock” markups of the draft implementing legislation for the three pending trade agreements and stated that any movement on the implementing legislation for the agreements must be accompanied by a renewal of Trade Adjustment Assistance (TAA). On July 7, 2011, the House Ways and Means Committee and the Senate Finance Committee approved draft implementing bills for the pending FTA’s with Colombia, Panama, and South Korea during the informal or “mock” markup process. The draft legislation for the pending U.S.-Colombia FTA includes a retroactive extension of ATPA and GSP until July 31, 2013.

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. For Colombia, a free trade agreement with the United States is part of its overall economic development strategy.

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 specific and concrete steps, with specific timelines, that the Colombian government agreed upon to address issues related to violence against union members, impunity, and worker rights. The Colombian government submitted numerous documents to the United States in time to meet the April 22, 2011, and June 15, 2011, target dates listed in the Action Plan. The USTR reviewed the documents and stated that Colombia had met the requirements that were slated for completion by these dates.

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: July 8, 2011
Number of Pages: 42
Order Number: RL34470
Price: $29.95

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