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Free Stimulus with the Colombia Trade Pact

August 06, 2009

The economic role of the United States in the Western Hemisphere is at a crossroads. But the proposed U.S.-Colombian Trade Promotion Agreement (TPA), currently stalled in Congress for the second year, will expand a robust market for American goods and strengthen an important strategic ally. Failure to pass the bill will further undermine the United States’ tenuous economic influence in the hemisphere at a time of increasing competition from across the globe. We can no longer afford to sacrifice this sound policy at the altar of partisan politics.

Though there are encouraging signs that the Obama administration is resisting the gravitational pull of creeping protectionism, it should follow the lead of Canada and others by using trade expansion as a tool to combat the effects of the financial crisis. With every penny of the federal stimulus package coming under increased scrutiny, passage of the TPA would provide “free” economic stimulus, increasing U.S. exports by an estimated $1 billion without adding to the federal budget deficit.

The TPA will level the playing field for American firms at a time when growth is increasingly dependent on exports. The nearly 10,000 American companies selling goods in Colombia now pay high tariffs, while most Colombian imports enter the United States duty free under the Andean Trade Preference Act and other trade agreements. Under the proposed deal, most tariffs currently imposed on American goods would be eliminated immediately, with the rest to be phased out over time. The TPA will also increase transparency and provide Americans with legal protections, allowing them to invest safely in a market that has grown dramatically in recent years. In turn, increased U.S. investment will help Colombia ensure future growth and continue along a path toward long-term stability.

Pulling the rug out from under the Colombians now would be disastrous.

Under the leadership of President Álvaro Uribe, Colombia has made remarkable strides consolidating its democratic institutions, increasing the openness of its markets and promoting the rule of law. Although Colombia’s human rights abuses are cited by opponents of the TPA, it is in the arenas of human rights and security that Colombia has made its most impressive progress. When Uribe came to office in 2002, Colombia was on the brink of becoming a failed state. But under his administration, kidnapping, terrorist attacks, and murder are down dramatically, and the criminal conviction rate has increased sharply. Members of right-wing paramilitary and left-wing insurgent groups have laid down their arms, returning large swaths of the country to government rule. While Colombia still faces considerable security and humanitarian challenges, Uribe has presided over a dramatic return to normalcy.

While we should be eager to endorse such admirable progress, a bilateral free-trade agreement should not be used as a “favor for friendly governments” as Senator Harry Reid (D-NV) said in a statement opposing the Colombia deal last year. Senator Reid is right. Congress should pass the TPA into law not as a gold star for Uribe’s government for a job well done, but because it is in the economic interests of the United States to increase access to what has become a significant export market for American goods.

In keeping with the administration’s mantra to “never waste a good crisis,” the first decline in global trade in nearly three decades provides an opportune moment to bolster our ties to a developing economy that is showing signs of a quick rebound.

The alternative is continued U.S. complacency in hemispheric economic relations, which would lead to a further ceding of economic influence in the region. While the substance of the region’s policies has not always matched the most inflammatory rhetoric of some of its leaders, Latin American policymakers have been aggressively diversifying their trade relationships and, in turn, diminishing their long-standing dependence on the U.S. market. This year, China surpassed the United States as Brazil’s principal trade partner. But U.S. policymakers continue to base negotiations on the outdated premise that access to the now beleaguered and indebted U.S. consumer will forever remain the holy grail of trade relations.

The Americas are largely in flux. As the landscape of post-Cold War Latin America takes shape, democracy is flourishing, a middle class is burgeoning, and Brazil is showing promise of becoming a true world power. At the same time, grinding poverty, inequality, and human rights abuses persist; the illicit drug trade is rampant; and large swaths of public opinion are sharply anti-American. This complex and evolving picture poses both great opportunities and great risks to the United States.

To be sure, passing this heavily negotiated and rather modest trade deal will not restore hemispheric relations or secure our economic interests in the region in one fell swoop. Nonetheless, by sending a clear signal of support to a steadfast ally and to the region as a whole, we will take a step in the right direction. Congress should pass this bill.

Benjamin D. Wolf is an associate attorney at Simpson Thacher & Bartlett LLP in New York, where he is a member of the Latin America practice group.