Obama’s Colombia Free Trade Agreement

Testing Time for Obama’s Colombia Free Trade Agreement

-President Uribe to Fortify his entente cordiale with Democratic Majority leader Steny Hoyer

Reference to the pending U.S.-Colombia Free Trade Agreement resurfaced in the final presidential campaign debate between Barack Obama and John McCain on October 15, 2008. At the time, Obama voiced his disapproval of the FTA, stating that continued violence in Colombia and the treaty’s insufficient human rights protections should slow the agreement’s passage, perhaps indefinitely. However, throughout the entire negotiation process, Democratic House Majority Leader, Steny Hoyer (D-MD), consistently supported the agreement. Despite earlier opposition to the long pending agreement, the Obama administration has set the stage for reversal of its position by currently supporting a free trade initiative between the two nations once provisions are in place for the adequate protection of human and labor rights in Colombia.

However, the White House’s hesitation is little more than window dressing as President Obama contacted U.S. Trade Representative Ron Kirk in April to begin revisions of the agreement in hopes of eventually solidifying a free trade relationship between Colombia and the United States. The President’s support of such an initiative signifies the continuation of neo-liberal trade policies first introduced by President Bill Clinton with the formulation of NAFTA, and later reinforced by the Bush administration’s numerous bilateral trade pacts.

The U.S.-Colombia Free Trade Agreement (CFTA), also referred to as the United States-Colombia Trade Promotion Agreement, was born out of failed multilateral negotiations between the United States, Colombia, Peru and Ecuador, the latter three being members of the Andean Community of Nations (CAN). Washington’s first bilateral trade negotiations were initiated with Colombia in 2004 and concluded on November 22, 2006. While the Colombian Congress approved the agreement in 2007 by a substantial margin in both the House and Senate , it has yet to be enacted in the U.S. due to strong opposition from environmental and labor organizations, including the AFL-CIO, as well as a bloc of Democratic legislators. CFTA is the subject of particularly heated controversy, even more so than surrounds other free trade pacts. Widespread uneasiness over Bogotá’s poor enforcement of labor laws and lack of repercussions stemming from the murder of hundreds of Colombian labor leaders has deeply troubled U.S. trade union members.

The U.S.-Colombia FTA contains several measures, including provisions aimed at reducing tariffs on U.S. exports to Colombia and the enforcement of intellectual property rights, internationally-recognized labor laws, and environmental protections in Colombia. The agreement provides U.S. companies with access to Colombian markets by eliminating tariffs on 80 percent of U.S. consumer, industrial and agricultural exports to Colombia, including beef, cotton, wheat and soybeans, as well as textiles and clothing. All other goods are destined to become duty-free within 10 years of the agreement’s initial implementation. Provisions for increasing the transparency of customs’ procedures through public hearings and access to documents are also to be incorporated into the text of the trade pact. The initiative equalizes the benefits conferred on the citizens of both countries by granting American investors the same privileges as those enjoyed by Colombian investors.

Boom for Big Business
Despite criticism in Washington among Democratic members of Congress as well as some influential labor lobbyists, the agreement is likely to be passed. It certainly will be favorable for many U.S. multinational corporations who are likely to be the primary beneficiaries of the agreement. While 90 percent of Colombian products already enter the U.S. tariff free due to the Andean Trade Preference Act (ATPA), the U.S.-Colombia FTA would now be able to provide comparable benefits to U.S economic sectors, which currently pay tariffs as high as 35 percent on various products. While large sums will not be involved, U.S. firms will all but certainly gain from this agreement, which could potentially increase U.S. exports by 13.7 percent or $1.1 billion, contributing $2.5 billion to U.S. GDP, according to the United States International Trade Commission (USITC). While U.S. exports to Colombia totaled only $8.6 billion in 2007, constituting less than 1 percent of national GDP, the Congressional Research Service reports that the agreement would produce a small, but still positive, gain for the United States.

Under the FTA, large U.S. industries, and the agro-industry in particular, would have the opportunity to expand into a previously almost inaccessible market. The agreement, if passed, would certainly provide financial benefits to large companies by concentrating profits in the multinational corporate sector, although smaller and mid-sized businesses could be largely excluded the economic opportunities that the agreement promises.

Major Colombian industries to gain from agreement with U.S.
There are also potential benefits for Colombia as a result of the agreement, although it is unlikely that they will see the same desirable results as would U.S. firms. Under the ATPA, Colombia already experiences preferential treatment of most of its exports. These benefits would be equalized and maximized under the U.S.-Colombia FTA. However, Colombia would likely attract increased foreign direct investment as a result of its interaction with U.S. commercial sectors, its demonstrated commitment to befriending Washington and as an enthusiastic advocate of free trade. President Uribe’s pro-market policies, such as modernization of Colombia’s hydrocarbon industry and the protections being offered to foreign investors, signify his administration’s dedication to a neo-liberal economic agenda which has in the past increased investor confidence abroad. This commitment has long been appreciated by Washington, as shown by the $6.03 billion of U.S. assistance to Bogotá from 2000 until 2008 under Plan Colombia, which was an initiative established to promote social and economic development as well as to combat the production and trafficking of narcotics. Foreign direct investment to Colombia is estimated to increase by more than $2 billion under the agreement, due to protections regarding the “establishment, acquisition, expansion, management, conduct, operation, and sale” of investments. Financially, the bilateral agreement touts the supposed generation of revenue which could be used to fund programs to impede the production of coca and other narcotics, as well as the manual spraying of fungicides and funds to finance social programs, such as food distribution centers.

As is the case with the United States, the U.S.-Colombia FTA would primarily benefit large Colombian corporations. The United States is presently the largest source of foreign investment in the South American nation, totaling “U.S. $10.5 billion, more than quadruple the amount in 2002” according to the U.S. Department of State. These figures are predominantly found in the manufacturing, mining, and energy industries that comprise the bulk of Colombia’s economy. While new foreign funds will be injected into the country as a result of increased foreign direct investment, these monetary gains are not likely to be equally distributed amongst Colombia’s smaller and mid-sized companies. Ultimately, while large Colombian industries can expect to benefit from the agreement, smaller sectors of the Colombian economy will still relatively be unaffected, or potentially even hurt by trade relations with an increasingly proficient U.S. trade infrastructure. Not only will local Colombian enterprises be handicapped by their size from receiving appreciable funds from foreign investment, but their position could be weakened by having to compete with modernized and efficient American firms.

FTA could threaten workers in Colombia and U.S.
The pending FTA between Bogotá and Washington could potentially cause American jobs to be outsourced to Colombia as a result of increased foreign investment and development in the nation. The agreement threatens that American employees will either be replaced by laborers in Colombia or will be forced to work for lower compensation due to price competition with U.S. labor’s South American counterparts. The consequences of the agreement on American workers will likely not only be felt by those employed in small firms, as such expansion could potentially result in increased employment both in Colombia and the United States, although the quality of the jobs could markedly differ.

Alternatively, many fear that Colombian jobs, particularly in the agricultural industry, which comprises the third largest sector of the Colombian economy and contributes 9.4 percent to the national GDP, will be harmed due to increased competition with American agro-industries as well as other corporations once tariffs are entirely eliminated. Moreover, if the condition of the Colombian economy is inherently weakened by an FTA with the U.S., hopes of combating the cultivation of coca — for decades, a preoccupation of Washington policy makers — are dim as former Colombian farmers will likely resort to producing narcotics, particularly for reconstituted paramilitary organizations. An increase in the production of coca would revitalize narcotics trafficking by drug cartels, the Revolutionary Armed Forces of Colombia (FARC), and other radical paramilitaries. As a result, the FTA would fail in achieving its central objectives: to provide reciprocal benefits to the United States while simultaneously eradicating drug trafficking, poverty and threats from paramilitary organizations operating in Colombia.

Violence in Colombia could ruin chances of a FTA
Many U.S. Congressional members and human rights advocates are aggressively opposed to CFTA and expanded trade relations with Colombia. This is primarily because of the violence that has been perpetrated against the country’s union workers and the impunity enjoyed by paramilitary groups in spite of their routine assassinations of local unionists. Despite President Uribe’s success at reducing the overall level of crime in Colombia, some pro-free trade Congressional members have issued a statement saying that it “would be willing to consider the Colombia FTA once ‘concrete evidence of sustained results’ in reducing violence and impunity in Colombia are shown.” President Obama also expressed hesitation about establishing trade relations with Colombia on the grounds that “the history in Colombia right now is that labor leaders have been targeted for assassination on a fairly consistent basis, and there have not been prosecutions…” The United States appears to be rightfully hesitant over becoming involved with a nation afflicted by such flagrant violence and corruption.

Opponents of the U.S.-Colombia FTA also point to the continual violation of the rights of Colombian workers by corporations and paramilitary organizations. The text of the FTA states that each nation must abide by the rights called for in the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-Up (1998), which includes the following stipulations:

“freedom of association, the effective recognition of the right to collective bargaining, the elimination of all forms of compulsory or forced labor, the effective abolition of child labor and, for purposes of this Agreement, a prohibition on the worst forms of child labor, and the elimination of discrimination in respect of employment and occupation.”

However, it is difficult, if not impossible, to guarantee the enforcement of basic labor rights’ protections in Colombia, where paramilitary organizations threaten to assassinate union leaders who seek to gain viable wages, health benefits, and job security for their trade union members. The severity of crime in Colombia necessitates more stringent labor standards in the agreement, ones that encompass fair treatment of labor rights by foreign corporations and violations of standards committed by paramilitary organizations.

The labor laws stipulated in the agreement are problematic because they only specify transgressions of labor rights involving an employer and employee. However, the circumstances in Colombia are complicated by violence perpetrated against laborers by paramilitary organizations. These rebel forces are not covered by the ILO labor clause because they are independent from the Colombian government and local employers. Moreover, Colombia has an exceptionally poor record of prosecuting cartels who assassinate, threaten, and abduct unionists, at times commissioned on behalf of an employer or his management. Of the 4,000 trade unionists murdered since 1986, only five perpetrators of these killings have been convicted. Currently, the agreement lacks any capacity for rigorous oversight of violence committed by paramilitary organizations. While the “Labor Affairs Council”, established in the agreement, is important for reviewing the implementation of the labor statute, a second independent body is needed to regulate the occurrence of crimes against unionists as well as to conduct criminal trials against the perpetrators of the violence.

The prospect of international corporations establishing more branches and operations in Colombia could be disconcerting, as some of these companies are accused of hiring paramilitary organizations for the expressed purpose of dismantling the labor unions operating in their businesses. For example, Coca-Cola is alleged to have employed these tactics, as 8 union leaders have been assassinated at the company’s Colombian bottling plants since 1989. Drummond Coal, an American coal company primarily operating in Colombia, was embroiled in a federal law suit accusing its personnel of hiring a right-wing paramilitary unit to assassinate 67 Colombian workers in 2001. Provisions to monitor the felonious behavior of these international corporations, must be incorporated into the free trade agreement, otherwise existing labor protections do not insure against these kinds of transgressions, particularly because the crimes are committed by external elements that are not under the jurisdiction of the pact.

Colombia- favored by U.S.?
Colombia is a beneficiary of the Andean Trade Promotion and Drug Eradication Act (ATPDEA), in which goods from Colombia, Ecuador and Peru enter the United States duty-free under the condition that its members cooperate with U.S. efforts to combat the cultivation of coca in South America. Bolivia, initially a participant of ATPDEA, was suspended as a “result of Bolivia’s failure to cooperate with the United States on counternarcotics efforts.” Bolivian President, Evo Morales, argued that the suspension was an attack on the country’s leftist policies rather than a result of the country’s noncompliance with American counternarcotics efforts as Bolivia has apprehended more drugs and reduced coca cultivation more than Colombia. Coca cultivation increased by 27 percent in Colombia compared to 5 percent in Bolivia according to the United Nations Office on Drugs and Crime.

Yes and No?
The complexities of a free trade agreement, particularly one involving a country plagued by violence, corruption, and crime, have given rise to serious controversies. Perhaps a multilateral agreement, such as the U.S.-Andean FTA (the failed precursor of the U.S.-Colombia agreement), would be better received in Washington since, under that agreement, the World Trade Organization would be able to more closely monitor human and labor rights violations in Colombia because of the dispute settlement clause found in multilateral trade agreements. This could possibly alleviate some of the present concern about the injustices committed against labor union members, as well as resolve some of the opposition to the U.S.-Colombia Free Trade Agreement.

The inclusion of heightened labors standards in the body of the free trade agreement (as negotiated by the Bush administration and a bipartisan congressional taskforce in response to concern about unsatisfactory labor protections) is a step in the right direction towards ensuring that the agreement is both economically and socially beneficial to Colombians. The agreement can be counted on to be more viable once a clause describing enforcement provisions and possible repercussions for violence against union workers by paramilitary organizations is integrated into the agreement.

However, while the U.S.-Colombia FTA certainly has its faults, supporting an agreement that would assist corporations employing thousands of laborers domestically and internationally might prove positive in the midst of a global economic recession. While the agreement certainly does not ensure that both Colombia and the United States will benefit equally, the financial gains at stake for both nations remain considerable. With more comprehensive labor protections, the economic gains deriving from free trade agreement could be realized, but only if Colombia’s leadership can simultaneously work to protect trade union leaders from being assassinated and if a weakening of the rights of organized labor and individual workers does not occur.

Growing pressure from labor, environmental, and corporate lobbyists will inevitably bring the agreement to a vote on the Congressional floor, a decision that will solicit satisfaction or concern among the American and Colombian public, depending upon one’s perspective.

This analysis was prepared by Research Associate Gretchen Knoth
June 17th, 2009
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