Tuesday, November 01, 2011

Non-effects of Colombia FTA

When the Colombia FTA was ratified, I thought we'd be done with bad analyses about it--and there were so many--but unfortunately I was wrong. From Bloomberg/Businessweek, we get the argument that the late passage was a total disaster because it prompted Colombia to strengthen ties to China, Europe, the rest of South America, and to Canada.

This is a strange argument because it suggests that Colombia did not have access to U.S. markets before the FTA was passed, but of course it did through the ATPDEA. The main benefit of the FTA was not to give Colombia more access, but rather to make the relationship permanent and eliminate the need to keep renewing the ATPDEA (which was indeed a pain in the neck). In short, Colombia did not suddenly look elsewhere for trade because of the refusal to ratify the FTA. It kept exporting to the U.S. while simultaneously expanding trade with other countries.

Next, the argument makes it sound like China came to Colombia because of the absence of an FTA. But we all know that China is going everywhere, including countries that already have an FTA with the United States. In fact, China signs its own FTAs with countries that already have U.S. FTAs, such as Chile. China would have increased economic ties to Colombia even if the FTA had been passed seven years ago.

This article, like many others, cannot seem to grasp the fact that Latin American countries do not base all their decisions on the United States. It also cannot grasp the fact that FTAs do not somehow lock other countries into trading only or even primarily with the United States.


Otto 7:58 AM  

it's bloomberg, therefore unsurprised. You expected insight?

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