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Pending Free Trade Agreements with Colombia, Panama, and South Korea and Creation of U.S. Jobs

In a statement submitted to the House Ways and Means Committee, Council of the Americas urged ratification of pending free-trade pacts with Colombia and Panama to achieve the administration's goal of doubling U.S. exports while prioritizing hemispheric relations.

PENDING FREE TRADE AGREEMENTS WITH COLOMBIA, PANAMA, AND SOUTH KOREA AND THE CREATION OF U.S. JOBS

HEARING BEFORE THE COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
JANUARY 25, 2011

 

The Council of the Americas (“Council”) appreciates the opportunity to provide a statement for the record concerning the pending agreements between the United States and Colombia, and the United States and Panama. The Council is a business organization representing some 190 member companies invested in and doing business throughout the Western Hemisphere. Since our founding in 1965, the Council has been dedicated to the promotion of open markets, social and economic development, democracy, and the rule of law, and we are widely recognized for our policy and commercial leadership throughout the Americas.

The Council strongly supports efforts to expand trade and investment throughout the Americas as a critical tool to improve people’s lives throughout the region. We also believe strongly that the pending agreements with Colombia and Panama are essential to retaining U.S. competitiveness in the region. Currently, both Colombia and Panama have almost complete access to the U.S. market, while U.S. exporters face significant tariffs on over 90 percent of their goods that enter Colombia and Panama. Compounding this unequal relationship is the increasing competition from global competitors who already have more favorable trade terms with Colombia and Panama than the United States. Figures show the percentage of U.S. exports decreasing rapidly; both intra-regional trade and expanding trade relations with China are directly supplanting U.S. exports.

This is particularly concerning in the context of the Administration’s stated goal of doubling U.S. exports in five years. It is also concerning in the context of a stated desire to prioritize relations with hemispheric neighbors.

United States Interests At Risk

The Colombia and Panama agreements were signed in 2006 and 2007, respectively, but continue to languish. Ironically, since the U.S. market is already essentially open to both countries due to unilateral trade preferences programs, it is almost exclusively U.S. exports that are being hurt. Both agreements remain stalled at the expense of the American worker who researches and develops goods and services, manufactures, producers, and grows goods and services, markets those goods and services, and makes finished goods and services exports available in foreign markets. In the meantime, U.S. reluctance to move ahead has opened the door widely to interest from other nations now deemed, rightly or wrongly, to be more reliable. Some of those nations, like China, routinely lack the same emphasis or standards in terms of personal freedom, human rights, and transparency. This emerging reality is not just harming U.S. exports, it is also undercutting broader U.S. interests throughout the Western Hemisphere.

Colombia

The Council of the Americas has provided economic and political arguments in support of the U.S. – Colombia Trade Promotion Agreement on numerous occasions, including advocating for open, two-way trade and the economic and political stability supported by permanent trade agreements. The progress of the nation across the board – on violence against unionists, respect for human rights, reduction of murders and kidnappings, economic growth and human development, and elsewhere – has been dramatic. Colombia is a bona fide bipartisan foreign policy success, going back to the Clinton Administration and the beginning of Plan Colombia.

Since the August 8, 2010 inauguration of the new President, Juan Manuel Santos, progress has accelerated. The Santos Administration has provided greater access to the government for civil leaders and provided them greater security protections. It has initiated reforms that strengthen the capabilities of the justice system, proposed legislation that would create stand-alone ministries for justice, environment, and labor and signed into law reforms for the military justice system. The president has proposed land reform and reparations for those who may have suffered at the hands of the state. President Santos continues to solidify the democratic gains of the previous two Colombian presidents and their governments while prioritizing accountability and reliability of the current government. A strong ally in a difficult neighborhood, he has pursued rapprochement and dramatically reduced tensions with Venezuela, and proven to be a strong friend of the United States in a region where close friends of the United States cannot be taken for granted.

It is long past time for the United States to engage seriously with the Government of Colombia to create a path forward, with transparent, achievable goals that can be attained in the near term, for the final passage of the agreement.

Panama

With regard to Panama, the stated obstacle for detractors of the U.S.-Panama Trade Promotion Agreement has long been the transparency of Panama’s financial sector. However, the recent tax-information exchange agreement between the United States and Panama, signed in November 2010, is compelling in this regard and is changing circumstances on the ground. Furthermore, the nearly $6 billion dollar expansion of the Panama Canal, to which the United States has a historic connection, provides investment and export opportunities for U.S. manufactures of heavy equipment and engineering services so long as U.S. producers are allowed to compete on a level playing field.

Passage of the agreement with Panama is the next logical step in the arc of a historic relationship that began with creation of the country itself in 1903, construction of the Canal in 1914, occupation and administration of the Canal Zone, invasion and restoration of democracy in 1989, turnover of the Canal to full Panamanian control in 1999 and the removal of U.S. troops on the ground, and the turnover of extensive military installations to Panama for use in critical civilian infrastructure and economic development. Having been a true partner with Panama literally every step of the way over the course of that nation’s history, it is remarkable that at a time when we have the opportunity to put the relationship on a permanent, more mature footing, we would hesitate.

Economically Rational, Strategically Imperative

On economic grounds the passage of the two pending agreements with Colombia and Panama are straight forward; neither threaten U.S. jobs or the economy, and in fact U.S. exports will increase and jobs will be created. On national security grounds, however, additional delay in passage of the agreements is irrational. The United States faces a rapidly changing hemisphere, and, absent concrete steps to shore up our influence, the relative ability for the United States to pursue its influence will continue to decline with the rise of Brazil and other extra-regional actors in Latin America including China. No longer is the United States looked upon as the default trade partner for the region. Partially, this is a result of positive changes in the region including greater economic weight and political maturity across the region, changes long called for and encouraged by the United States.

Partially, however, it is also the result of the impression growing rapidly that the United States is an unreliable partner, unable and unwilling to take steps to engage the region in areas of importance, including trade expansion. As a result, the nations of the region are not waiting for the United States, and are actively seeking other global partners, establishing supplier relationships and patterns of trade, investment, and political connections that, over time, will negatively impact the United States. Political institutions and relationships are changing, in some cases purposefully excluding the United States. A broader policy of re-engagement, beginning with completion of unfinished trade business, is necessary in order to maintain U.S. interests in the region.

For over five years, business leaders, editorial boards from across the nation, trade associations, economists, think tanks, and U.S. exporters have stated the case for Congress to pass the Colombia and Panama trade agreements. Today the passage of these agreements is even more imperative to our economy as the nation struggles during this time of economic recovery. The time has come. Further delay is unwarranted. The Council of the Americas calls on the Administration and Congress to pass expeditiously the pending trade agreements with Colombia and Panama.

The Council of the Americas’ independent policy journal, Americas Quarterly, highlights open markets and free trade in its most recent issue; excerpts are appended to this submission. For further information on open markets, including prior testimony to Congress, the International Trade Commission, and the Office of the United States Trade Representative, please visit the Council of the Americas’ website: www.as-coa.org.

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