The US-Colombia PTA is not about economics

If you approach the subject as an economist, the US-Colombia PTA’s political deadlock is tough to understand. As I noted repeatedly 30 months ago (1, 2, 3, 4) when the PTA was in the news, Colombia’s only meaningful benefit would be making its regularly renewed tariff preferences permanent. US exporters would face lower tariffs in a few areas. Thus, the deal won’t cause substantial change in the economic environment. The PTA’s significance lies in its foreign-policy role, not its economic content.

Nonetheless, writing in the WSJ, Mary O’Grady tries to make the trade deal about economics:

But to make sense of the Obama administration’s opposition to a Colombia FTA—when the U.S. is already open to Colombian exports under the Andean Trade Preference Act (ATPA)—takes real mind-bending.

The advantage for Colombia of the trade agreement is that it will codify ATPA, so it doesn’t have to be renewed every few years. In exchange, Colombia commits to opening to U.S. foreign investment and exports. Consumers, producers and investors in both countries come out winners.

There are also geopolitical gains for the U.S., which benefits from the institutionalization of open markets…

Next year, Ottawa’s Colombia free trade agreement will enter into force, and Canadian producers will join the list of competitors who have an advantage over Americans in the Colombian market. The European Union and South Korea have also signed FTAs with Colombia and will have advantages on the industrial production front.

It’s hard to understand what Mr. Obama is thinking about besides his loyalty to the AFL-CIO. But Colombia’s plans are clear. It wants to trade with the U.S. But if it is rejected, it will simply buy and sell with the rest of the world.

The economics are clear. But I think O’Grady has missed part of the politics. News coverage suggests that Democrats are worried about human rights issue in Colombia, American unions are concerned about violence against Colombian union leaders, and Colombia is arguing that its labor conditions have improved. No one seems to be worried about a flood of Colombian imports hurting US jobs. If that’s the case, then it’s likely fruitless to talk about the economics rather than the politics of the trade deal.

1 thought on “The US-Colombia PTA is not about economics

  1. Pingback: Obama on PTAs with Korea, Colombia, and Panama « Trade Diversion

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