Thursday, March 27, 2008

U.S.-Colombia FTA or the end of life as we know it

It looks like the Bush Administration will soon push Congress to approve a free trade agreement with Colombia, and so more pro-FTA commentary is flowing.

It seems to me, though, that the administration is shooting itself in the foot with hyperbole. I am interested in hearing real debate about the FTA, but there won’t be any. President Bush himself has linked the FTA to defeating the FARC and countering Hugo Chávez. He even laid it out in his typical black and white terms:

As the recent standoff in the Andes shows, the region is facing an increasingly stark choice: to quietly accept the vision of the terrorists and the demagogues, or to actively support democratic leaders like President Uribe.

So pass the FTA or you support terrorism. What kind of monster would vote to “accept the visions of the terrorists”?

The U.S. Trade Representative is even more apocalyptic, to a degree that must make even FTA supporters cringe:

Leaders in the hemisphere and Latin America have said that the single most destabilizing factor in Latin America today may be the U.S. Congress's failure to ratify the Colombia Free Trade Agreement. That is more destabilizing today than anything that Colombia's neighbor Venezuela is doing or threatening to do— and that is saying a lot.

I don’t know who these “leaders” are, as I’ve not heard anyone making that sort of claim. But it seems that not passing an FTA with Colombia will destroy Latin America. What kind of a monster would vote “no” when it means wholesale destruction of the region?

By those standards, the WSJ’s Mary Anastasia O’Grady sounds almost rational when she agrees that an FTA will make Colombia just like Ireland, and that failure to approve an FTA will harm Colombia’s national security because other countries will have an FTA and it won’t.

What kind of a monster would refuse to allow Colombia to be just like Ireland and protect its national security?

UPDATE: If anyone is interested, here is a copy of the FTA.

12 comments:

Anonymous,  12:27 PM  

Although I don't say this much, I have to say that in this case, our esteemed President hit the nail on the head. He outlines in very clear terms the benefits for the US of approving the FTA. Bush is not saying that a failure to pass the FTA means you support terrorism. What he is saying is that the failure to pass the FTA sends the message that the US does not stand by its friends in their time of need. The tangible economic benefits (or damages) to the US from this FTA are minimal given the relatively small size of Colombia-US trade. Most of the tangible economic benefits go to Colombia, but that should be more than enough to pass this FTA. The entire issue at hand for this particular FTA is geopolitical. Strengthen your allies.

Here is the soundbite I think is most relevant:
"We would cripple our influence in the region, and make other nations less likely to cooperate with us in the future. We would betray one of our closest friends in our own backyard."

On this issue, I am 100% with GWB.

Anonymous,  4:11 PM  

I dont know how these things typically work...are there any kind of labor stipulations or rules built in?

Greg Weeks 4:31 PM  

I've put a link in the main message to the text of the FTA. The labor section stipulates that each country must abide by the fundamental principles of the International Labor Organization. As far as I can tell, that is the extent of it. The only way a dispute would arise is if one government accused the other of some type of abuse. That, of course, is not likely to happen.

Boli-Nica 12:11 AM  

It is refreshing to hear a South American trade minister talk about modernizing his country's economy in terms that would not be out place in Vietnam or India. Pretty stark contrast with the outright irrationality of the neighbor. Just from one sane measure Colombia gets almost a billion dollars in FDI, while Venezuela's oil industry - in the middle of a boom- shrinks almost 5 percent in a year and can't meet its OPEC quota.

Colombia' leaders aspire to be the Ireland of SA, Venezuela wants the rest of South America to imitate their irrational policies and pays money to spread their silliness.
Bolivia seems well on their way - YPFB can't even meet its contracts with Argentina and Brazil.

Anonymous,  9:26 AM  

Colombia might aspire to be the Ireland of SA, but it's worth reviewing the recent post on Mexico, "Exporting Obesity to Mexico."

http://weeksnotice.blogspot.com/2008/03/exporting-obesity-to-mexico.html

Free trade is not that popular in the US right now, which is one reason Bush would use his usual terror rationale for something that could be argued more soberly. Weeks was criticizing the political speech, with not word criticizing FTA for Colombia.

Venezuela's oil production might be falling, but the same is true for Mexico, the US, and other mature oil regions. Venezuela's making good money as world demand grows while supply does not. Oil still in the ground probably will be worth more than oil burned right now.

Bolivia has failed to meet gas demand from Brazil and Argentina, but it has more money than it can handle now. I don't think this market is going to disappear. Brazil, Argentina, and Chile will continue to value cheap, pipeline-transported gas and will invest in it--in Bolivia.

But I am worried about how Argentina and Chile will cope with this winter.

--John

Anonymous,  10:50 AM  

Boli-nica, what is wrong with a country like Venezuela not following the neoliberal model? Clearly, it didnt work for Venezuela in the 80s and 90s.

The changes in Venezuela occurred in a democratic manor, and the economy is improving. Poverty is down...the informal economy is shrinking, sales of US cars and hummers are up by some crazy percentage...clearly Venezuelans do not seem to be suffering like some would want to attribute.

Also, look for some important investment in Venezuelan agriculture to occur soon (in the next month or so). Brazil and Venezuela are in negotiations on how to alleviate food shortages that are primarily the result of increased consumer demand.

Just a question though: how can Colombia be an Ireland when the government gives the ok to murder protesters, and when an illegal and violent drug trade cripple much of society?

FTAs dont bring democracy. They dont bring human or workers rights either. Will it bring trade and prosperity? Sure it will benefit some....but we all know who that is, & it not women in flower factories, or unionists, or farmers or any of the underclass of Colombian society.

Boli-Nica 10:55 AM  

The mismanagement and neglect at PDVSA is almost criminal. Even Iraq in the middle of the war is increasing production.

And that is symptomatic of Venezuela's government policies. This is not limited to the executives agressive tone, increased centralization, and state intervention in the economy. It is not only what it has done but what it has neglected: judicial stability, administrative efficiency, security, transparency in government operations, and sound fiscal and monetary policies. Corruption and waste are at staggering levels;

Foreign companies do not want to invest in such an environment. Oil companies will happily continue to extract at higher taxes, but no one will make serious investments beyond needed maintenance.

These policies and the attitude are at play in Bolivia. The State has failed to develop the gas indsustry, which would NOT EXIST but for the capitalization of the mid-90's. The Evo-MAS government scares away investors when in opposition and it does so as government. The cost in commitments in investment is arguably in the billions of dollars. Bolivia's production should be double what it is now. But there are gas fields that are just sitting there.
And Evo just had a massive failure in the last meeting, where Brazil will hold the country to its committments. It probably will start paying penalties for failing to supply the gas contract.

Boli-Nica 11:04 AM  

It is not the fact of "not following the neo-liberal model". Colombia arguably has had the best macro-economic management in the continent for the past 100 yrs. But many of its measures including limiting capital inflows and mild protectionism are not IMF orthodoxy. The current policies, did not pop out of thin air. Colombia has overhauled its judicial system, created a modern regulatory framework, and improved state administration in the past 15 years. The specific policies are being designed very prudently with requirements for investment and job creatiion. They are not giving uo the house in other words.

Anonymous,  12:19 PM  

How effective is judicial reform when judges who try to investigate abuses get threatened or killed?

How effective is a regulatory system that allows gross violations and rights abuses?

You might be right, that Colombia has a solid institutional framework. But when the people in and around those institutions allow rampant political murders and refuse to crack down on paramilitary groups that are "correctly politically oriented" then I fail to see such a rosy picture as yours. This free trade agreement is going to benefit the Colombian upper class, and US businesses...and not much else.

Anonymous,  12:24 PM  

And dont get me wrong...Venezuela has a lot of issues and things to work on, but ignoring the significant improvements that have been made is not helpful.

Boli-Nica 2:27 PM  

How effective is judicial reform when judges who try to investigate abuses get threatened or killed?

How effective is a regulatory system that allows gross violations and rights abuses?


We are talking about the economic and administrative sides of the state. There has been significant reforms in civil courts, banking and telecommunication regulations.

That is not to say there hasn't been political reforms. In the early 90's Colombian constitution was re-written aimed at increasing political inclusion outside of the two traditional parties. The past decades have also seen municipal and regional decentralization, including community consultative budgeting.

Its amazing that over the last 25 years, Colombia's government have done ANYTHING. 15-20 years ago, the country was verging on "failed state" according to some political scientists. 10 yrs ago, it was a "besieged democracy" where the state had no control over 1/2 the municipalities in the country.

There are entire areas with multiple generation blood feuds, drug fiefdoms, feudal landowner armies, murderous political bosses. And then a large - self-financing Commmunist army whose entire goal is to destroy the Colombian State, making it the most cohesive and disciplined threat to the state. It not only has helped perpetuate the cycle of violence, its 90's expansion pretty much led to the paramilitary's explosive growth in the 90's.

The fact Colombia actually attracts investment given that craziness is amazing, Venezuela on the other hand is the beneficiary of the largest oil boom in its history. Question: where is inflation highest?

Boli-Nica 12:35 PM  

And dont get me wrong...Venezuela has a lot of issues and things to work on, but ignoring the significant improvements that have been made is not helpful.

The idea there have been "significant improvements" under Chavez is a myth, as this article by economist Francisco Rodriguez shows, confirming what many have known for years.

First of all, most "social policies" under Chavez are (arguably worst run) variations of policies prior governments had in oil booms. About the same percentage of the budget is allocated to social programs.
In real dollar terms, this oil boom is the biggest in Venezuela's history, something like 600 billion dollars of revenue has poured in. So there has been more money spent on social policies, and poverty has gone down. But with the incredible amount of corruption, waste, ideological stupidity, and mismanagement, there have been no real improvements in key areas.

official statistics show no signs of a substantial improvement in the well-being of ordinary Venezuelans, and in many cases there have been worrying deteriorations. The percentage of underweight babies, for example, increased from 8.4 percent to 9.1 percent between 1999 and 2006. During the same period, the percentage of households without access to running water rose from 7.2 percent to 9.4 percent, and the percentage of families living in dwellings with earthen floors multiplied almost threefold, from 2.5 percent to 6.8 percent. In Venezuela, one can see the misiones everywhere: in government posters lining the streets of Caracas, in the ubiquitous red shirts issued to program participants and worn by government supporters at Chávez rallies, in the bloated government budget allocations. The only place where one will be hard-pressed to find them is in the human development statistics.

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