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The United States is Colombia's largest trading partner. Bilateral trade between the two countries is highly complementary and helps to increase exports, drive economic growth and create jobs in both countries. Main U.S. exports to Colombia include pork, corn, cotton, wheat, barley, soybeans, soybean meal, electrical machinery, audio/visual equipment and appliances. Colombia's key exports include oil and coal-energy exports, flowers, coffee, bananas and tropical fruits.
Colombia and the United States also maintain a significant investment relationship. More than 200 American companies today operate in nearly every sector of the Colombian economy, including energy, manufacturing, telecommunications, transport, agro-business and business and financial services. U.S. foreign direct investment (FDI) in Colombia increased by 38 percent between January and September 2008, and by 51 percent between January and September 2009.
The U.S.-Colombia FTA
On November 22, 2006, the United States and Colombia signed a bilateral free trade agreement (FTA), which would make permanent a reciprocal two-way trading relationship. The FTA would immediately provide duty-free access to the Colombian market for more than 80 percent of U.S. consumer and industrial goods exports, with remaining tariffs phased out in 10 years. Colombia would also grant immediate duty-free access to more than half of U.S. agricultural exports, with the remaining tariffs phased out over time.
By removing Colombia’s import duty on U.S. goods and services, as well as other non-tariff barriers on U.S. exports, the FTA has the potential to give U.S. exporters a competitive edge over imports from other international suppliers.
Colombia’s Expansion of Trade Ties with Other Countries
Not having the FTA approved has already reduced the market for some U.S. exports into Colombia. In addition to the pending FTA with the United States, Colombia has signed agreements with Canada and the European Free Trade Association, concluded negotiations for an FTA with the European Union, and enhanced its integration with the Southern Cone countries as the agreement with Mercosur reaches the final stages of implementation and tariff elimination. Colombia is also negotiating agreements with South Korea, Panama and Japan.
All of these agreements will grant those countries expanded access to the Colombian market. For example, Canada is Colombia’s second largest supplier of wheat, and accounted for 18 % of imports in 2008, which increased to 33% in 2009. It is predicted that Canada’s market share will continue to increase when the Colombia-Canada FTA is approved.
Challenges Facing the Bilateral Trading Relationship
• While bilateral trade has increased more than four-fold over the past decade – from $5 billion a year in the early 1990s to over $22.3 billion in 2009 – in 2009 there was a significant decline in Colombian imports of U.S. goods.
• Last year Colombian imports of U.S products only accounted for $9.0 billion, down from $11.4 billion in 2008.
Nearly $700 Million Decline in Colombian Imports of U.S. Agricultural Products in 2009
• For many years, Colombia was the second largest market for U.S. agricultural products after Mexico, but fell to third place in 2009 because of a 60% decrease in imports of corn, wheat and soybean meal from the United States.
• In 2008, Colombian imports of these three U.S. agricultural products accounted for $1.2 billion, which decreased to just $500.1 million last year.
• The drop in Colombian imports of U.S. agricultural exports was due in large part to Colombia’s expansion of trade ties with Argentina, Brazil, Paraguay, and Uruguay – parties to the Mercosur trade agreement, which fully entered into force last year.
• For example, the United States is Colombia’s largest supplier of wheat, although in 2009 its market share decreased to 46.1% from 72% in 2008.
• According to the American Farm Bureau Federation, the drop in U.S. agricultural exports from 2008 to 2009 is estimated to have cost roughly 160,000 American jobs in the production, processing and transportation sectors.
• The U.S. Department of Commerce reports that every $1 billion in agriculture exports support roughly 8,000 U.S. jobs, and every $1 billion in manufacturing exports supports nearly 7,000 U.S. jobs.
Moving beyond ATPDEA to a level playing field
The majority of Colombian exporters – roughly 90 percent – currently enjoy duty-free access to the U.S. market under the Generalized System of Preferences (GSP) and the Andean Trade Promotion and Drug Eradication Act (ATPDEA), formerly the Andean Trade Preference Act (ATPA), which was signed into law in 1991. The Act has been successful in helping stabilize Colombia’s economy and provide beneficial alternatives to the illicit drug market that harms both Colombia and the United States.
• Both U.S. imports and exports to Colombia grew by an average six percent per year between 1991 and 2002, creating thousands of jobs in both countries.
• Following the renewal and expansion of the Act in 2002, bilateral trade has continued to grow by an even greater percentage on average.
• The Colombian flower industry alone, which accounts for more than 75 percent of all cut flowers in the United States, helps to directly and indirectly support more than 200,000 Colombian jobs and roughly 220,000 U.S. jobs.
Conclusion
While the GSP and the ATPDEA have fostered growth in Colombian exports to the United States, the pending U.S.-Colombia FTA would help to provide reciprocal benefits to U.S. exporters – helping to expand export growth and job creation. A strong, growing Colombian economy is a critical component to building on the progress the country has already achieved.
The U.S.-Colombia FTA – which was signed in 2006, and approved by the Colombian Congress in June 2007 and again in October 2007 to include the May 10th agreement modifications – has the potential to significantly expand export and employment opportunities in both countries.
- Statistics
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