Supporters of a free trade agreement (FTA), between Colombia and South Korea, have told Colombia Reports that there are huge long-term competitive benefits to the pact, including new markets for Colombia’s agricultural products.
The FTA with South Korea has met massive opposition and has been stalled in Congress over political pressure by business leaders and labor unions alike. However, the FTA also has supporters who believe that the agreement with the country across the Pacific is particularly beneficial for Colombia.
“The treaty with Korea is extremely important,” Rafael Mejia Lopez, president of Colombia’s agricultural association said to Colombia Reports.
‘Asia is the next natural step’
“You have to look at the whole context of what international trade is in Colombia from the agricultural point of view,” Lopez said, “First, [we had] treaties with the United States, Canada, and EU that are net exporters of food.”
“Next, treaties with South America and Central America that are relatively indifferent, and now the most favorable to Colombia because they are net food importers, Korea, Japan and China, are delayed.”
Hernan Vallejo, associate professor and Ph.D in Economics at University of Andes told Colombia Reports that the agreement with South Korea is beneficial for the South American country because it would be a key step towards integrating Colombia with Asia.
“Colombia has FTAs with most of the countries in America and Europe. Asia is the next natural step. It would be a mistake to stop FTAs before integrating with Asia, since this could increase the risk of trade diversion i.e., importing more expensive goods from America and Europe, instead of importing them from Asia, just because we do not have FTAs with Asia”, Vallejo told this website.
Furthermore he pointed to the fact that experts agree that Colombia’s agriculture has great potential on the Asian market, and that Colombia is lagging in its share of international trade on GDP, with regard to countries with the same level of development.
Colombia has free trade agreements with countries such as Bolivia, Venezuela, Peru, Ecuador, Argentina, Brazil, Israel, EU, and United States. At the moment agreement’s with Japan as well as China are still being negotiated.
Free trade, better products, and better competition
Critics of the agreement have pointed out, that Colombia is suffering from overly high production costs, an under-developed infrastructure, and a government that lacks planning when it comes to the free trade agreements. Especially the car industry fears the low production costs in the Asian country. However, Vallejo has another perspective on this.
“Whether Colombia’s car industry survives an FTA with Korea is up to producers in that industry. But they have had their fair share of opportunities for decades, and Colombian consumers have paid very expensive cars for a very long time. It is time to open up and find out if those decades of paying expensive cars were worth it. Besides, that industry has shown so far that when faced with greater foreign competition, it can assemble better cars at better prices, and it can export successfully to other countries, including countries as competitive as Mexico,” he said.
So when critics of the agreement lament the lack of competitiveness of Colombia and blame the government for lack of planning, some supporters blame the industry for lack not looking inwards. If producers optimize their production and try harder they will be able to compete on the international market, the pro-FTA lobby said.
|“Colombia has had more than 50 years of protectionism that has led to inefficient production, rent seeking and one of the worst income distributions in the world. It is hard to defend infant industry arguments in Colombia after such a long period of protectionism.”|
However, some supporters of the agreement did point out that the government failed to live up to promises made to different industries ahead of signing FTAs.
According to Lopez, he — as then-president for the farmers association, told former president Alvaro Uribe that the treaty with the U.S. was manageable under the condition that the government met their commitments.
“These commitments were the transport infrastructure, science, technology, education, health, housing, etc., for the rural sector. That has not been met, what has happened is, that the U.S. has made the most of the treaty and Colombia has not,” Lopez explained.
Lopez also recognizes that, especially with the transportation costs in Colombia, it is impossible to compete with U.S. since the US, according to him, had invested $90 billion in subsidies.
Free trade and a history of protectionism
“Freeing international trade has never been easy,” Vallejo said to explain how and why the agreement has been stalled in Colombia’s Congress. “Several interest groups oppose such agreements arguing publicly that they are against the nations welfare, because they see them as a threat to their own interests. In a healthy democracy, all groups of society should be able to express their concerns.”
Vallejo also said, he hopes the agreement will pass eventually. “Colombia has had more than 50 years of protectionism that has led to inefficient production, rent seeking and one of the worst income distributions in the world. It is hard to defend infant industry arguments in Colombia after such a long period of protectionism.”
When it comes to United States, Vallejo underlined that in the long run Colombia’s export to United States will increase with the FTA. “Would the recent decrease in exports to the USA have been greater with FTA or without FTA?”
Presidential candidates delaying agreement to remain popular
With less than a week until the presidential election all of the people Colombia Reports have been talking to agree that it is very likely that the delay of the agreement in Congress is linked to the election on May 25.
Vallejo said that “Elections are always a sensitive period and it is possible to identify one or more candidates trying to gain electoral support by opposing the FTA with Korea, and FTAs in general.”
But Lopez has a clear idea that the agreement will eventually pass in Congress. “The [trade agreement with] Korea should be approved, we are waiting. The agricultural sector believes in justice and equity in trade. We will see what the gentlemen of the Congress and the government say.”
- Interview with Hernan Vallejo (Colombia Reports)
- Interview with Rafael Mejia (Colombia Reports)