After years of political unrest, peace is on the horizon for Colombia. The nation’s leaders are now looking for ways to boost its economy. That’s why Colombia is considering broader world trade participation. The country has been talking to the United States about a mutually beneficial agreement. With 48 million citizens, Colombia has significant potential for growth, which could help the U.S. economy substantially.
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Situation: Colombia’s Economy
In 1990, 65 percent of Colombian citizens were living in poverty. Organized violence was a major issue and political unrest prevented Colombia from participating in world trade. In 1995, Colombia signed the G3 Free Trade Agreement that liberalized trade among Colombia, Mexico, and Venezuela. Colombia has made several other trade agreements since, including a U.S.-Colombia Trade Promotion Agreement in 2012. Today, only 25 percent of Colombia citizens are living in poverty.
Colombia stands to gain a lot from broader world trade participation. Its geographical location is perfectly suited for trade with the Latin-American market. Additionally, goods can reach the U.S. from Colombia by air in just five hours. Colombia is looking to invest more money in its education system and continue to transition to a more service-based economy.
Benefits of the Trade Promotion Agreement for the U.S.
If the World Trade Promotion Agreement goes through, it will eliminate 80 percent of current tariffs on the U.S., and the remaining 20 percent will be phased out over a 10-year period. This would substantially increase U.S. exports because tariffs currently range from 7 to 15 percent. Exports in agriculture, information technology, construction, and several other sectors would see an immediate lift in tariffs. That’s great news for the U.S. economy.
In 2010, the U.S. exported $12 billion in goods to Colombia. Tariff reductions would expand exports by more than $1 billion, as well as add thousands of new jobs in the U.S. Additionally, the trade agreement would give the U.S. access to the service market in Colombia and would significantly boost opportunities for businesses in the U.S. to increase profits.
As WhiteHouse.gov states, “Our economies are largely complementary in terms of the goods we ship each other. For example, Colombia is a large importer of grains from the U.S. while it exports a number of tropical fruits to our country.” The U.S. also exports cotton to Colombia, which local manufacturers use to make apparel that they then export back to the U.S. Free trade would bolster both of these industries, as well as many others.
Obstacles to U.S.-Colombia Trade
The World Trade Promotion Agreement has not been signed yet. Some people worry that Cuban mediators and the FARC cannot be trusted yet. After all, the U.S. is very hesitant to trust any organization with historic ties to terrorism, since it leaves open the possibility for more organized violence. Money is also an obstacle.
For years, the U.S. has seen Colombia as a challenging place to do business. Now, however, there is a real opportunity for trade. No timeline is in place for approving the trade agreement yet, and the two countries must talk more before coming to an agreement.[/show_to]
