The US-Colombian “free trade” agreement

Regular readers will notice that my coverage of PTAs has fallen off over the years. With respect to the US-Korea deal, this is completely excusable, as I can just claim to have yielded to Ben Muse’s dedicated effort. But I’ve been awfully silent on the US-Colombia deal. Why?

The US-Colombian free trade agreement is not a free trade agreement — it’s a preferential trade agreement. Calling it a PTA instead of an FTA will satisfy both Jagdish Bhagwati and Dean Baker.

But is it even a trade agreement? As Tim Lee notes, “there’s lots of other stuff in here that has nothing to do with free trade.” Sadly, this has characterised the state of American trade policy for a number of years. Back in 2003, Bernard Gordon wrote:

These cases highlight the problems of incorporating non-trade issues into trade agreements. Labor and environmental standards began the practice, but no clear end-points now exist. That recalls Jagdish Bhagwati’s famous warning that “the spaghetti bowl effect” (by which he meant overlapping rules of origin) would make FTAs hopelessly complex and impossible to administer. Today we would add the “Christmas Tree Effect,” the term used in Congress for the many items, each individually attractive though unrelated to a bill’s main purpose, that are added to satisfy special interests. Similar baubles and ornaments characterize today’s world of proliferating FTAs, and will be sought by powerful negotiating partners. Along with the profoundly dangerous capacity of FTAs to revive a world of blocs, they are among the best reasons to maintain instead the global trade system.

These kind of provisions really bother free trade purists (as they should). They fight to prevent mission creep at the WTO, and developing countries succeed in taking the Singapore issues off the table at Doha. But it’s a losing battle — TRIPS made it into the WTO and PTAs include numerous non-trade provisions.

The real questions about this trade deal is: Why is Colombia offering lots of promises on non-trade issues in negotiations? Recall one possible explanation: the US is a huge export market, and this gives it lots of leverage.

But it seems to me that the thing which we’ll have to face up to is that many of these bilaterals are used by lobbies in the West, to some extent your country, all the time in our country, to establish [inaudible]. You get a little country by itself in a bilateral negotiation, then you can ram anything down its throat. Those guys will sell both their grandmothers to be able to sign on to such an agreement because this is a big market, preferential, we also can give goodies on other dimensions or we can give punishments on other dimensions. We are the [inaudible] which can really procure that consensus very quickly with little doubt.

Now, our job intentionally is to say, “Look, you agree to this”—maybe labor standards, maybe intellectual property standards—which are way in excess of what can be negotiated in Geneva, when there are too many players and so on, who will fight a little bit anyway; then use of capital controls, which you ran through a little bit, with Singapore and Chile. The game goes on. But you see, that you can do one by one. It’s a sort of Leninist policy of divide and conquer all opposition.

Now, if you believe that our lobbies are always doing the right thing, that’s fine. Right? I mean, you can argue that. I don’t—I mean, there are good lobbies, bad lobbies, you can go in excess, but the rest of the world now sees that the bilateral is really an instrument of imposition of non-trade or weakly trade-related issues, and they’re beginning to see the game for what it is. And it’s not really a trade game, it’s a non-trade game.

But what possible market access gains could Colombia hope for? As Matt Yglesias notes:

As best I can tell (peruse the text if you’re interested) this actually involves very little changes on the US side at all. In essence, Colombian goods already flow very freely into the United States except for in our more famously protected sectors (agriculture, etc.) and what we’re offering Colombia here is a very solemn promise to keep it that way.

Right (although recall that a solemn promise does actually mean something: when Bush hiked up steel tariffs for a few years, our NAFTA partners were exempted). Is Colombia being strong armed to accept elements it dislikes to win market access? I highly doubt it. The US has very low MFN tariffs, except for sectors like agriculture, steel, and textiles, and Colombia has no hope of winning access in those areas.

The most plausible explanation I’ve encountered is that offered by Dan Drezner: PTAs are a political commitment device. They have “little to do with economics and everything to do with our bilateral and regional relationships.”

That’s why I’ve said so little about the US-Colombian preferential trade agreement. I study international economics, not international relations.