Colombia - E.U. Trade Makes
New Advance
The Colombia-E.U. free trade agreement (FTA)
was signed May 19, and will have important
symbolic significance for Colombia. Its
economic implications will be even more
significant, but felt gradually.
Colombia's exports declined substantially in
the recent global recession, with exports
experiencing their first annual decline of
the decade, from $8.7 billion in 2008 to
$7.6 billion in 2009. However, the
government expects them to recover to over
$9 billion in 2010.
E.U. Trade
The E.U. is Colombia's most important
commercial partner, after the U.S.
Therefore, conclusion of negotiations by the
governments of Colombia and Peru in February
for the recently signed FTA was very
significant from the Colombian perspective.
The agreement requires parliamentary
ratification in both Colombia and the E.U.
(European Parliament). This creates
potential for a year or more of delay,
particularly if European parliamentarians
continue to focus on the Colombian
government's human rights record and
guarantees.
Major Benefits
The FTA is important for Colombia in several
respects, by providing:
--a level playing field with other Latin
American countries (e.g., Chile) that have
negotiated FTAs with the E.U., or are likely
to do so;
--long-term certainty for exporters that
currently benefit from the E.U.'s
"Generalized System of Preferences Plus"
program, which is scheduled to expire for
Colombia in 2015;
--reduction of tariff and non-tariff
barriers across a range of export and import
sectors; and
--closer, more formalized collaboration with
the E.U. on sensitive issues, such as labor
and human rights.
Major Concern
In Colombia, the most vociferous opposition
to the E.U. agreement has come from dairy
farmers, because the large majority of dairy
farms in Colombia are family-run or
small-scale businesses, which are unlikely
to be able to compete against more
efficient, larger-scale European producers
of high-quality milk products. The FTA
envisages phased reduction over 17 years of
Colombian tariffs on E.U. products in the
sector.
In response, a parallel agreement provides
for E.U. assistance in raising the level of
competitiveness of the Colombian dairy
products sector. According to the Colombian
government, the E.U. will provide 30 million
euros ($37.2 million U.S.) over seven years
toward this objective.
While an important symbolic gesture, this is
likely to be insufficient to assist all
small-scale farms, with the livelihoods of
an estimated 480,000 families likely to be
affected to some degree.
Colombia-U.S. FTA
The signing of the E.U. accord comes as a
welcome respite for the Colombian government
in its hitherto heavily U.S.-focused trade
agenda. Exasperation within the Colombian
government at U.S. government failure to
pursue a vote in Congress on the Colombia-U.S.
FTA recently has shifted toward a sense of
resignation that ratification will likely
not take place before 2011.
U.S. President Barack Obama has suggested
that greater political capital may soon be
expended in pursuit of ratification. This
chimes with his new trade policy agenda,
announced March 1, which is being referred
to as the "National Export Initiative." It
aims to double U.S. exports within five
years, creating 2 million jobs.
Other FTAs
Apart from the E.U. FTA, Colombia already
has established deeper trade regimes with
Chile, El Salvador, Guatemala, Honduras and
Mexico. An agreement with Canada currently
faces opposition in the Canadian
parliamentary ratification process over
human rights concerns.
Looking to the future, the Colombian
government has been working to deepen trade
ties with numerous global powers, including
India, Russia and China, as well as
continuing serious talks with Panama and
South Korea. Colombia also hopes soon to be
admitted to the Asia-Pacific Economic
Cooperation.
Original story can be found at:
http://www.forbes.com/2010/05/22/colombia-exports-trade-business-oxford-analytica.html |
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