Obama's Trade Contortions

The Obama administration has been letting the free trade agreement (FTA) with Colombia, signed in 2008, languish in a drawer, and its explanations for doing so grow more convoluted every day, says Mary Anastasia O'Grady, an editor at the Wall Street Journal.

There's a reason for that. Under Obamanomics, exports are supposed to play the leading role in putting Americans back to work, making the Colombia deal good. But Big Labour is against free trade agreements and Mr. Obama needs Big Labour – that makes the Colombia deal bad.

To make sense of the Obama administration's opposition to a Colombia FTA – when the United States is already open to Colombian exports under the Andean Trade Preference Act (ATPA) – takes real mind-bending.

The advantage for Colombia of the trade agreement is that it will codify ATPA, so it doesn't have to be renewed every few years.

In exchange, Colombia commits to opening to U.S. foreign investment and exports.

Consumers, producers and investors in both countries come out winners.

But let's assume the Obama administration is mentally stuck in 1930s Italy and thinking only of exports. It still can't justify its position on Colombia, the third largest market for agricultural imports in Latin America.

American farmers now pay an average 16.5 per cent tariff on exports to Colombia.

As a result, according to Colombia's ministry of trade, "countries like Argentina [which is part of an FTA] are rapidly displacing U.S. producers. In 2008 American farmers had 46 per cent of the Colombian market; today that share has diminished to 22 per cent."

Next year, Ottawa's Colombia free trade agreement will enter into force, and Canadian producers will join the list of competitors who have an advantage over Americans in the Colombian market. The European Union and South Korea have also signed FTAs with Colombia and will have advantages on the industrial production front, says O'Grady.

It's hard to understand what Mr. Obama is thinking about besides his loyalty to the AFL-CIO. But Colombia's plans are clear. It wants to trade with the U.S. But if it is rejected, it will simply buy and sell with the rest of the world.

Source: Mary Anastasia O'Grady, Obama's Trade Contortions, Wall Street Journal, November 29, 2010.

For text: http://online.wsj.com/article/SB10001424052748704693104575638402644710436.html?mod=ITP_opinion_0

For more on Trade Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=42

First published by the National Center for Policy Analysis, United States

FMF Policy Bulletin/ 07 December 2010