A different perspective on trade agreements
There’s been a lot of alarmism regarding trade agreements on the presidential campaign trail.
Republican candidate Donald Trump has threatened to withdraw from the North American Free Trade Agreement if Mexico and Canada do not agree to renegotiate it. He has pledged to label China a currency manipulator and impose punitive tariffs on Chinese goods.
Democratic candidate Hillary Clinton has also vowed to impose tariffs on countries that “break the rules.” She has promised to appoint a chief trade prosecutor (a new office) and triple the number of trade enforcement officers.
Both candidates have denounced the controversial Trans-Pacific Partnership trade deal championed by President Obama.
Given the over-the-top rhetoric, you might be surprised to learn that one trade agreement seems to be working.
Four years ago, the U.S.-Colombia Trade Promotion Agreement (CTPA) went into effect. The pact provided for protection of intellectual property rights, equal access for services exports, equal access to government procurement opportunities, and elimination of tariffs. When it took effect in 2012, more than 80 percent of U.S. exports of consumer and industrial products to Colombia immediately became duty-free; the remaining tariffs are to be phased out over 10 years.
So far, the affects have been positive for both countries. In 2011, the year before the CTPA, U.S. goods exports to Colombia totaled $14.3 billion. Our exports reached a high of $20.1 billion in 2014, but fell to $16.3 billion in 2015, primarily due to falling oil prices. Even with that drop, U.S. exports to Colombia have seen a growth rate of 14 percent over the past four years, compared to 1.4 percent growth for U.S. exports worldwide.
Today, Colombia is our 20th largest goods export partner and the third largest in Latin America behind Mexico and Brazil. Manufacturers and farmers, in particular, have benefitted. Manufacturing exports grew from $13.2 billion to $14.5 billion, an increase of 9.8 percent. Agriculture and livestock exports doubled, from $648 million to $1.3 billion.
Before the CTPA, U.S. exporters had seen their share of the Colombian market decline year after year. In 2009, U.S. exports made up 29 percent of Colombian imports, and by 2012, the U.S. share had dropped to a low of 24 percent. Since the CTPA, U.S. market share in Colombia has rebounded, reaching 29 percent in 2015.
At the same time, the overall value of U.S. goods imports from Colombia decreased by 39 percent, from 2011 to 2015, primarily due to falling oil prices. The value of mineral fuel imports from Colombia dropped from $16.8 billion in 2011 to $8.1 billion in 2015, though the quantity of exports has remained relatively steady.
Other Colombian industries performed better. Imports of live plants, especially cut flowers, increased by 8 percent, imports of non-knit apparel increased by 17 percent, and imports of aluminum products tripled.
I’m not an economist, nor am I making any blanket endorsement of free trade here. But the next time you hear either candidate issue dire warnings about the perils of free trade, take them with a hefty grain of salt.