The U.S. approval of the Colombia free trade agreement should make it easier for the South American country to obtain similar trade pacts with other consumer markets like that of the European Union and Asia, said Hernan Vallejo, trade expert and economics professor at Colombia’s leading University of the Andes Thursday.
“The most important benefit is that this FTA is a very powerful signal to our producers and to our trade partners,” Vallejo told Colombia Reports.
“Our producers now have a clearer and credible timeline to update their technologies and adapt to a more competitive environment. And our trade partners know Colombia is serious and means business, regarding its integration to the rest of the world. As such, this FTA should make it easier for Colombia to obtain the final approval of the FTA with the European Union, and the future FTAs with Asian countries, since these countries will want to access the Colombian market in similar conditions to those granted to the United States of America.”
The sectors that stand to gain from the FTA have been identified “in agriculture such as fruits, vegetables and cattle; in agro-industry such as sugar, chocolate and vegetable oils; manufactures such as jewelry, furniture and graphic arts, and services such as medical services, consultancy, tourism and call centers.”
For these sectors, the FTA offers producers “preferential market access more permanent in nature.”
“This should allow for better planning, more certainty, and ultimately, greater trade,” the economist said.
Vallejo admitted that vulnerable sectors like the dairy, rice and poultry industry will face “short and medium run income distribution effects.”
However, according to Vallejo, the Colombian government has already designed programs “to support the agricultural sector in its productive improvement and transformation in order to prepare farmers to greater competition from abroad, for example from the FTA with the USA, the European Union and Canada. Also, very vulnerable sectors have been provided with longer periods of protection within the FTAs, and other mechanisms that aim to facilitate the adjustment process.”
Vallejo also sees benefits for Colombian consumers who “gain access to a greater quantity and quality of goods and services.”
“It is possible that some goods within the basket of goods may lower their price and/or improve their quality, but in principle at least, that should be a one off or a gradual adjustment in the level of prices. In the long run, the rate of inflation should depend more on the policies applied by the central bank, than on what is agreed on trade agreements such as the FTA,” said the expert.
The economist does not think that Washington’s inclusion of improving labor rights in Colombia weakens the country’s competition.
“Although many economists believe that freeing up trade should be independent of special considerations regarding labor and environmental standards, the Colombian Action Plan Related to Labor Rights was a result of the negotiation process towards the approval of the FTA. The bottom line is that it is in Colombia’s own interest that rule of law be applied under all circumstances and in all sectors, including workers rights and due protection to labor union movements.”