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Colombia FTA: What Next?

The U.S. Congress may still pass the US-Colombia free trade agreement, experts say.


Despite the indefinite postponement of a congressional vote, the U.S.-Colombia free trade agreement may be approved as early as this year, leading experts say. "With a measure good will among the House Leadership, the Bush White House, and the Colombian Government, I think there is still time to find sufficient common ground to approve the FTA by year’s end," says Peter Hakim, president of the Inter-American Dialogue.

Eric Farnsworth, vice president of the Council of the Americas, agrees. "A vote in a lame duck [period] would be more likely so that the issue is taken off the plate for the next president to have to deal with, whoever he or she may be," he says, referring to the period between the November presidential elections and the January inauguration of the next president of the Unite States.

Despite the opposition to the Colombia agreement from Senators Hillary Clinton and Barack Obama - the two Democratic presidential candidates - Farnsworth believes a victory by one of them in the general election may actually boost the chances of the lame duck scenario.

"If a Democrat is elected in November this actually makes it marginally more likely that it’ll get voted on in a lame duck, and passed," he says. "I know it’s counterintuitive, but the fact is no president, Republican or Democrat, will want to start off their administration with a hemispheric policy burdened by a failed agreement with Colombia.  But neither will a Democratic president want to bring it up in the first 100 days in office, having just run an election against trade."

However, if a Republican is elected and the Democrats pick up a number of new seats in November, as many are predicting that they will, a lame duck scenario is less likely, Farnsworth argues. 

Even if the Colombia FTA is not approved during the lame duck period, it would have to be addressed by the next president, including a Democrat, according to Hakim.

"A new President Obama or Clinton cannot simply ignore the FTA," he says. "It is an agreement that has been signed by the United States with its closest ally in Latin America. And Colombia’s parliament has already ratified it twice."

The new president’s US Trade Representative will have to negotiate with Colombia, and be very clear on what is needed from the Colombia government to bring the FTA up for a vote, Hakim adds. "Once a Democrat enters the White House, the FTA can no longer be left in limbo — with vague expressions of concern about Colombia’s human rights record and no real timetable — as it has by the Democratic-led Congress."

However, Colombia will have to agree to changes in the agreement, and probably make "some very stiff commitments about on the human rights front," Hakim predicts. 

Credit Suisse analyst Carola Sandy sees no chance of a Colombia FTA approval this year. "It is unlikely, in our view, that the US Congress will discuss this bill this year," she wrote in an analysis last week. "Whether the US-Colombia FTA bill is discussed or not by the U.S. Congress in 2009 will depend on the outcome of the November elections."

Despite the possibility of a Colombia FTA approval this year, leading business groups have blasted the vote last week. "The American Farm Bureau Federation is disappointed with the House Leadership’s decision to remove the timetable for consideration of the Colombia Trade Promotion Agreement," the organization said in a statement. This decision will not only place a vote on the agreement in limbo, but it is a direct strike at the United States’ most important trade negotiating tool, Trade Promotion Authority."

Before the House vote, the Business Roundtable urged lawmakers to vote against delaying the FTA vote.  “We are extremely disappointed that the House of Representatives is going to consider taking away the benefits of trade promotion authority for the U.S.-Colombia Trade Promotion Agreement and strongly urge the House to reject the change,” John Castellani, president of Business Roundtable, said in a statement Wednesday. "The American people expect their elected representatives and leaders to do what is in the national interest. Trade agreements, like the one with Colombia, are crucial to our country’s competitiveness."

The Business Roundtable is an association of chief executive officers of leading U.S. companies with $4.5 trillion in annual revenues and nearly 10 million employees.

Other groups that support the Colombia FTA include the American Association of Port Authorities (AAPA), which represents 160 of the leading public port authorities in the U.S., Canada, Latin America and the Caribbean. "Today, with our uncertain economy, U.S. exports are more important than ever," AAPA President and CEO Kurt Nagle said in a statement. "This free and fair trade agreement with Colombia is an opportunity not only to expand the movement of goods and services between the U.S. and the second most populous country in South America, but it will also strengthen hemispheric ties and provide important economic benefits for U.S. exporters."

According to the U.S. International Trade Commission, passage of the Colombia FTA will result in approximately a $1.1 billion annual increase in U.S. exports to Colombia due to tariff reductions. 


So what does the delay mean for Colombia?  On the trade front, it will have no immediate effect since most of Colombia’s exports to the US already are exempt from duties under the Andean Trade Promotion and Drug Eradication Act (ATPDEA), Sandy argues.

"A majority of Colombia’s exports to the US already are exempt from duties; therefore, the US Lower House move should have no impact on Colombia’s external accounts in the near term," she believes.

However, the delay may effect foreign direct investment, which has been growing on the expectation of the Colombia FTA being passed. "The FTA was expected to attract more FDI into the country over the long term," Sandy points out. 

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