Free Trade: Colombian, Panamanian and Korean Trade

Agreements in Limbo
The Obama administration recently named Gary F.
Locke as ambassador to China replacing Ambassador
Jon M. Huntsman Jr. Mr. Huntsman is stepping down
for a presumed presidential run against his soon to be
former employer.

The nomination of Gary Locke leaves the position of

Commerce Secretary empty for the foreseeable future.

Senate Republicans have threatened to block the confirmation of a replacement until

President Obama submits, for Senate consideration; the Panamanian and Columbian
free trade agreements. The Obama administration has yet to do this. The United
States-Korea Free Trade Agreement (KORUS FTA) has been finalized but is being held
up until the other two are finished and submitted to the Senate.

With Republicans holding 44 seats in the Senate, if the caucus can remain united, they
will succeed in forcing the administration’s hand. Former trade representative under
President Bush, Sen. Rob Portman (R-OH), suggested of the Republican strategy,
“We’re trying to help the president to do what he has talked about, of doubling
exports over the next five years.” Mr. Portman continued, “We can only do it by
opening more markets to U.S. workers and farmers and service providers. And these
three agreements are a great way to do it.”

Chairman of the Finance Committee, Sen. Max Baucus (D-MT), counters, “This tactic is
a diversion from our goal and is simply not the way to ensure their passage…It is time
for us to work together to approve these agreements.”

The hyper-partisan atmosphere on Capitol Hill has put a number of common sense
initiatives on hold.

Traditionally, trade and arms control agreements could be insured easy passage.

The Republican Senate wins in the 2010 midterm election insures that the GOP’s voice
is heard. Democrats, in the past legislative session, only needed the support of a
handful of GOP senators to pass controversial pieces of legislation.
Despite the stalled negotiations over the Colombia Free Trade Agreement (FTA), the
U.S. still believes that an agreement can be reached with the Columbian government.

Enforcement of labor laws and effective prosecution of crimes committed against trade
unionists have been the major sticking points. U.S. officials believe that Columbian
President Juan Manuel Santos has taken the necessary steps to implement labor laws
and other measures that would placate American human rights and pro-union
activists.

During a meeting of the National Lieutenant Governors Association, the general

council at the U.S. Trade Representative’s Office, Tim Reif, said, “We remain hopeful…
But there are core values that the American people expect to be included in their trade
policy.” Meetings between U.S. and Columbian officials have been ongoing and will
continue until an agreement is reached.

During President Obama’s first ever trip to the Americas, Chilean President Sebastian
Pinera, personally urged Mr. Obama to push for completion of the Colombian and
Panamanian free trade agreements that were holdovers from the former Bush
administration. President Obama has said that the agreements must be completed in a
way that is “consistent with our values and with our interests.”

Arguments for free trade agreements have resonance with policymakers. Therefore, the
final agreement with Colombia is likely to pass quickly. Exports from Colombia to the
U.S. are typically duty-free so any agreement would open potential markets for U.S.
producers. Policymakers are already attuned to the idea of generating revenues and
other measures to increase economic growth without having to address the need to
raise taxes. It has been estimated by the U.S. International Trade Commission that a
Colombian trade agreement would see U.S. exports to Colombia rise by $1.1 billion
yearly. While this initial economic benefit would be small by comparison to the overall
U.S. economy, the long-term effects would be beneficial. Further, the U.S. International
Trade Commission argues, “[T]he overall effect of the U.S.-Colombia [trade deal] is
likely to be small because of the small size of the Colombian market relative to total
U.S. trade and production.”

When passed, the agreement will see Colombia remove trade barriers on a variety of
products and services.

Additionally, according to the U.S. State Department, “Colombia will remove barriers
to trade in services, provide a secure, predictable legal framework for U.S. investors
operating in Colombia, provide for effective enforcement of labor and environmental
laws, protect intellectual property, and provide an effective system to settle disputes.
In 2007, the U.S. imported $9.3 billion in goods from Colombia and exported goods
valued at $8.6 billion to Colombia.”

When NAFTA was negotiated by the Clinton administration, efforts were made to win
over unions and other domestic opponents of free trade. Today, unions are much
weaker than they were in the 1990s. The White House and policymakers will face less
blowback by passing three significant trade agreements. Human rights activists have
important concerns about abuses in Colombia and Panama. However, economic
arguments in favor of efforts to generate economic activity will inevitably prevail in
any debate. Specifically, policymakers are going to favor efforts to increase economic
activity when many of their constituents are unemployed.

The Panamanian free trade agreement much like the Colombian agreement was
agreed to by the Bush administration. However, the Senate did not take up passage of
either agreement. According to the State Department, “The agreement will eliminate
nearly 90% of Panama’s tariffs on industrial goods immediately, with remaining tariffs
phased out over 10 years. In 2007, the U.S. exported $3.7 billion in goods to Panama
while importing $361 million in Panamanian products.”

Additionally, the agreement will provide U.S. firms with more access to the
Panamanian economy. Bilateral trade agreements often carry more economic benefits
than multilateral trade agreements. While membership in institutions like the WTO
carries significant economic benefits, bilateral agreements are narrower in scope and
therefore address specific issues related to trade.

The Obama administration’s attempt to push for the completion of the Panamanian,
Colombian and Korean trade agreements is a win-win for the administration. Any
Democratic opposition is likely to be nullified by support from Democrats and
Republicans who are free trade advocates. The administration can also rely on support
from the U.S. Chamber of Commerce. The chamber’s president, Thomas Donohue, has
said, “Four years of delay on these trade agreements with Colombia and Panama have
cost thousands of American jobs and battered U.S. market share in these countries…
The time for talk is over. To create American jobs, we need to see action.”

Brian Wingfield of Forbes makes a point about the inevitability of passage of the
agreements by pro-business Republicans, “the House Ways & Means Committee held
a hearing to discuss the Korea, Colombia and Panama trade deals. Republicans, who
set the agenda for the hearing, invited witnesses from the National Association of
Manufacturers, FedEx, MetLife, Ford Motor Company and the American Farm Bureau
Federation. All of favored passage of the three pending agreements.” Support from the
business community is key to their passage.

Finally, what inevitably could be a final component to insure passage of these

agreements in the Senate would be renewed focus by President Obama. Mr. Obama’s
foreign trip to the Americas illustrates that his administration considers relations with
the Americas to be key to America’s economic future. To insure that this is the case,
the Obama administration should put a renewed focus on passing these agreements
that are advantageous to the U.S., Panama, Colombia and South Korea.

This would also insure that the key position of the Commerce Secretary is filled in the
near term.

John Lyman is the Editor-in-Chief of Foreign Affairs Journal.