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Congressional Testimony: The U.S.-Colombia Trade Promotion Agreement

October 05, 2006

SUBMISSION FOR THE RECORD
BEFORE THE US INTERNATIONAL TRADE COMMISSION
HEARING ON THE US-COLOMBIA TRADE PROMOTION AGREEMENT
OCTOBER 5, 2006
ERIC FARNSWORTH
VICE PRESIDENT
 
The Council of the Americas appreciates the opportunity to provide testimony for the record concerning the pending bilateral trade agreement between the United States and Colombia. The Council of the Americas is a business organization representing approximately 180 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 democracy, open markets, and the rule of law, and we are widely recognized for our policy and commercial leadership throughout the Americas. 
The Broader Context of the US-Colombia TPA
The Council strongly supports the pending trade promotion agreement between the United States and Colombia and urges its rapid progress through the Trade Promotion Authority-mandated process to Congressional approval and timely implementation.

Before addressing the reasons for this, however, it is imperative to discuss the broader policy and security framework jointly facing Colombia and the United States, putting the agreement itself in context.

For many years, Colombia and its Andean neighbors have literally been at hemispheric ground zero in bi-partisan US efforts to fight the illegal narcotics trade, end the last remaining guerrilla insurgencies that threaten regional democracy, reduce violence and the conditions that help create movements inimical to US interests, and enable broadbased economic development that promotes sustainable development, labor rights, and gender inclusion. The war on drugs is very much alive and continues to corrupt fragile democracies across the region. The Andean region produces all of the cocaine, 50 percent of the heroin, and significant amounts of the marijuana consumed in the United States. At the same time, violent insurgencies by both FARC and ELN guerrillas and the AUC paramilitaries continue to bleed the countryside while corrupting institutions through a linkage of convenience with narcotics traffickers. Fortunately, Colombia’s democracy, though under challenge, is long-standing and resilient. The newly re-elected President, Alvaro Uribe, continues to provide strong leadership to end the extra-judicial guerrilla war while working to maintain appropriate human rights protections, and the commitment of the Colombian government to cooperate with the United States in combating illegal narcotics is unquestioned.

Trade Expansion in the Andes Enjoys Long Bi-Partisan Support as a Strategic Priority

As a strategic matter, for the last 15 years the United States on a bipartisan basis has supported economic growth in Colombia and in the broader Andean region as a bulwark against drug traffickers and guerrilla movements by opening its markets unilaterally through the Andean Trade Preference Act (ATPA), a program that was renewed and expanded in 2002 as the Andean Trade Promotion and Drug Eradication Act (ATPDEA).

The ATPDEA is set to expire in December 2006, unless extended by Congress. In the meantime, it has proven to be a economic, political, and social success, especially in Colombia. Since 1991, ATPA/ATPDEA has made significant inroads in providing incentives for job creation in alternative export sectors. Colombian exports under

ATPDEA have increased to some $3.8 billion. Perhaps the program’s greatest success has been in the boost it has given to non-traditional export sectors, for example cut flowers. This sector alone generates more than 170,000 direct and indirect jobs, with 60 percent being held by women. Other sectors have also seen impressive results.

Interestingly, some US exports also depend on Colombian access to the US market, particularly in the use of cotton for the production of textiles.

Without continued Colombian access to the US market such gains would be lost; reciprocal market access provided by the trade promotion agreement would make trade permanent while also providing enhanced US access to the Colombian market for the first time. Freer trade on a reciprocal basis would also lead to greater US direct foreign investment in Colombia, as happened in Mexico under NAFTA, Chile under the USChile FTA, and as we are beginning to see in Central America under CAFTA-DR. It is this investment that ultimately creates the largest number of jobs, and would therefore provide the greatest alternatives to the coca fields and the guerrilla fronts. As a result, the best thing the United States could do for Colombia and for our own strategic interests there would be to pass and implement the trade promotion agreement.

Support for Plan Colombia Has Enjoyed Strong Bi-Partisan Support

The United States has also committed itself to supporting the Plan Colombia initiative.

Since 2000, with bi-partisan support, the United States has provided some $4.5 billion under Plan Colombia, and progress is apparent on the ground. Violence in Colombia, though high, has been reduced. Homicides are now at their lowest point since 1987. The

Colombian government is regaining control over its national territory, with a police presence in all 1,098 municipalities. Kidnappings are down dramatically, having declined 72 percent between 2003 and 2005, and 47 percent from 2004 to 2005. 

According to US government statistics, coca cultivation was down 33 percent from 2001- 2004, with a further decline in 2005. Clearly, the Government of Colombia is responsible for these gains. Nonetheless, its partnership with the United States and the support of the American people have proven compelling as Colombia confronts its twin security challenges. Even as progress continues to be made on the security side, however, Plan Colombia was never meant to be a permanent program and prospects for extension are uncertain. Coupled with the pending expiration of ATPDEA, Colombia faces the potential for a reduction or cut-off of direct support at the same time access to the US market is no longer guaranteed. Passage of the US-Colombia TPA would mitigate these circumstances. 

Trade Expansion is a Significant Means to Blunt Growing Anti-US Currents in the Andes

Colombia under President Uribe has been a strong ally of the United States on Afghanistan, Iraq, and the war on drugs, and Colombia maintains a bias in favor of antiterror and narco-terror initiatives within the international community. Passage of the trade agreement would solidify the underlying partnership between the United States and Colombia, avoiding the awkward circumstance of otherwise having to explain the inability to conclude an important agreement—would would clearly benefit the United States both on economic and strategic grounds—with a close global ally. More broadly, anti-US voices in the Andes are loud and getting louder. Passage of the trade agreement with Colombia (and also, for that matter, with Peru) would help blunt the charge increasingly made by populist leaders that the United States is an uncertain hemispheric partner. Now is not the time to give anti-US voices in the Andean region and elsewhere an opportunity to suggest that the United States lacks commitment even to a close regional ally, a circumstance that would be exacerbated and readily exploited by other regional leaders whose political interests are contrary to our own. 

The US-Colombia Trade Promotion Agreement

With this in mind, the Council of the Americas urges that the ITC find in favor of the pending trade promotion agreement between the United States and Colombia.

• By unilaterally opening the US market to Colombia, the ATPDEA allowed Colombia to strengthen its economy in part by providing alternative sources of income for Colombians and thus combating the illegal narcotics trade. The USColombia TPA, which will open the Colombian market to US products, is the next logical step in this long-term pattern of economic and political engagement with Colombia pursued by both Republican and Democratic administrations alike. A bilateral trade agreement would enlarge the commercial relationship further, leading to increased trade and investment flows, while providing a reciprocal framework for existing trade and investment activities and strengthening a strategic partner both economically and politically.

• The trade promotion agreement offers important growth opportunities for US industry and agriculture. Colombia is the sixth largest economy in Latin America, with a population of 40 million and an estimated average GDP growth approaching five percent for the past four years. Two way trade already totals some $14 billion, and is expected to increase. Colombia imports more from the United States than anywhere else, including Brazil, Venezuela, or China or India, with a propensity for US goods and services that make it likely such imports would grow significantly under a bilateral trade agreement with the United States.

• According to USTR, under the US-Colombia TPA over 80 percent of US exports of consumer and industrial products to Colombia would become duty-free immediately, with remaining tariffs phased out over 10 years. Product categories that would be expected to increase under the US-Colombia TPA include US sales of technological goods and services, agriculture products including corn, wheat, soy, and chicken, vehicles, textiles, and others.

• The disciplines contained in the agreement in areas such as services, investment, and government procurement enhance the transparency and accountability of day-to-day governance in Colombia, which makes the country a more attractive place for foreign investment. In fact, Colombia is currently making a push to become investment grade with the global credit rating agencies, and passage of the trade agreement would assist this effort.

• As an agreement with the potential for regional application, the US-Colombia Trade Promotion Agreement sets the stage for an attractive regional market and potentially enhances integration and cooperation among the countries of the Andes—a critical ingredient for long-term, peaceful and democratic stability in the region and for the eradication of illicit narcotics cultivation.

• Finally, as discussed, the agreement would enhance the US relationship with a country that is a much-needed ally in a strategically important region. US credibility in the hemisphere, as well as with the broader multilateral trade agenda, is also on the line as Congress considers this agreement.

In short, the Council of the Americas believes that the US-Colombia Trade Promotion Agreement stands on its economic merits. On the basis of reciprocity alone, after 15 years of duty-free access to the United States for most exports from Colombia under the ATPA/ATPDEA, it should be non-controversial to open Colombia’s markets to our goods and services. The foreign policy arguments in favor of this agreement, however, are even more compelling and urgent.

Conclusion

The Council urges the Commission to report favorably on the pending agreement with Colombia, which we believe will become a cornerstone for continued democratic and economic growth and development in the region while creating important new economic opportunities for the United States. In the longer term, the US-Colombia Trade Promotion Agreement is also an important building block toward the vision of a unified hemispheric market, which we share, that will enhance the competitiveness of the United States and our neighbors in an era of unparalleled global competition.