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| 12/5/2008 12:00:00 AM

Free trade frenzy

The main focus of Colombia’s international economic policy might be the FTA with United States, now hindered in the US Congress. But it is not the only interest. In less than a week, the country struck two free trade agreements and also secured an important cooperation deal

Free trade frenzy Free trade frenzy
President Alvaro Uribe has had a couple of very difficult weeks. His government is tarnished, he has often been misinformed, the US trade deal seems to be in no man’s land and the pyramid scheme scandal has threatened to plunge the country into a social crisis. But at least in international trade he can smile a little. In less than a week, three deals were signed, which can provide Colombian products with access to larger international markets.

They include two of the biggest countries in the world –China and Canada- and a group of four politically small –but stable- European states, which have ratified their support for trading with Colombia even amidst one of the biggest economic crises of all time.

The deal with Canada

The first piece of news came during the Asia Pacific Economic Cooperation (Apec) summit, held in Lima on 22nd and 23rd November. Colombia is not officially a member of Apec, but both president Alvaro Uribe and part of his cabinet were in the Peruvian capital to meet Stephen Harper, Canada’s Conservative Prime Minister, and Stockwell Day, Minister of International Trade. The main goal was to sign the FTA and environment and labour cooperation agreements.

At first sight, the situation seems positive for Colombia. Securing a deal with a country like Canada, which plays a big role internationally as a member of the exclusive G-8 group, will always be important. In Bogotá, both the National Association of Colombian Industrialists (Andi, in Spanish) and the Colombian Society of Farmers (SAC) expressed their satisfaction after the signing of the agreement, which should strengthen the 1.1 billion dollar two-way merchandise trade the two countries completed in 2007.

Nevertheless, there is still a difficult path ahead, and the FTA could eventually face problems during the respective ratification processes. In Canada, for instance, Harper has a minority government and faces strong opposition in Parliament. In June this year, the Standing Committee on International Trade, a group of congressmen from all parties, recommended maintaining close ties to Colombia but not signing a FTA until it improves in terms of “displacement, labour law and accountability for crime, and until the Colombian government shows a more constructive attitude to human rights groups in the country”.

Trade union movements both in Canada and in Colombia have also fiercely stated their opposition to the deal. SEMANA INTERNATIONAL spoke to Paul Moist, National President of the Canadian Union of Public Employees (Cupe), which works closely with left-wing Colombian politicians and trade union groups. Mr. Moist travelled to Colombia to check whether the FTA would be a good decision, and expressed his concerns about how it can improve people’s lives in Colombia. “We have no problem with trade with Colombia per se, but if the tide is not rising to lift all the boats and we don’t see it, then there is a problem”, he commented.

For now, both Colombia and Canada have greeted the signing of the FTA. Canada has even admitted that it will try to help the South American country improve its human rights record. But that is not enough. The FTA must now be checked in detail, to decide whether it stays as just a couple of signatures on a piece of paper or if it proves to be a treaty which really benefits both countries.

Colombia, now closer to Chinese markets

The Apec forum in Lima ended up being very productive for the Colombian government. Apart from stimulating growth of the commercial relationship with Canada, the Colombian president also met Hu Jintao, President of China, who was making his first visit to the Peruvian capital.

There, both Mr. Uribe and Mr. Hu agreed to strengthen cooperation and signed a deal aimed at promoting investments. Colombia’s Minister of Trade, Industry and Tourism, Luis Guillermo Plata, explained that “it is very important for Colombia, because it will protect Chinese investments in the country, respecting international standards, which will raise the confidence of Asian investors. Furthermore, investments by Colombians in China will also be protected”. The deal can also benefit Colombia politically, since Mr. Hu admitted he will support Colombia’s bid to officially join Apec.

There is currently a deficit in Colombia’s trade balance with China. Whereas Colombia imported the equivalent of 2.8 billion dollars between January and August this year, the South American country only exported 303 million dollars. The deficit has also been rising. China has been importing 39% more this year, especially raw materials such as coal and ferronickel, but Colombian exports have decreased.

As far as this aspect is concerned, President Hu is considering, according to Chinese Press Agency Xinhua, “increasing imports from Colombia to realize a balanced rise in bilateral trade”. He added that his government will continue to encourage Chinese investments in Colombia, especially in areas such as infrastructure, construction, agriculture, telecommunications and energy.

Four European States support Colombia

Not many people had heard of the EFTA states in Colombia until Álvaro Uribe’s government announced that it planned to sign a free trade agreement with them. Formed by Norway, Iceland, Switzerland and Liechtenstein, the treaty between this group of countries and Colombia reached an important point when Minister Plata travelled to Geneva to sign the agreement, four months after the negotiations concluded in the alpine resort of Crans-Montana.

In general terms, trade between Colombia and the EFTA States is not very significant. In 2007 it amounted to only 720 million dollars. In fact, with this trade partner Colombia has a surplus, and it is exporting more to them than the other way round. As far as products are concerned, Colombia exports mainly metals, coffee, tea, spices, fruits and nuts, whereas it imports pharmaceutical and chemical products, machinery and mechanical appliances, as well as optical, medical and surgical instruments.

Even though the trade figures are relatively small, the agreement can be important for Colombia. “This deal does not improve access to the EU market for Colombian exports, but we hope it will improve the overall conditions for Colombian companies seeking to do business with Europe by, for instance, establishing a commercial presence in an EFTA state and doing business from there with other European countries as well”, Ivo Kaufmann, director of the EFTA Trade relations division in Geneva, told SEMANA INTERNATIONAL.

The deal could also help EFTA States wishing to strengthen ties with Colombia and Latin America. “Quite a number of them do business with the region from Colombia, so we would anticipate that through this FTA, which improves overall conditions for EFTA businesses in Colombia, there may be new companies which decide to locate in Colombia or existing ones could expand their operations”, concluded Kaufmann.



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