Professor Mark J. Perry's Blog for Economics and Finance
Days since U.S.-Colombia Free Trade Agreement (FTA) signed (the FTA awaits Congressional approval): 1,156
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
6 Comments:
The Colombian FTA is a no-brainer, and would reward staunch ally Uribe while seriously pissing off Chavez, the FARC,Big Labor, and the Democrats.
Paul is right. Don't hold your breath for a yea vote. Especially after Coakley almost lost the union vote in Mass. The Democrats are going to be scrambling more than ever to try to curry back labor's favor.
According to the numbers the daily tariff collected here is $2,500,046,000/1156 days or $2,162,670 per day.
According to the data at http://www.census.gov/foreign-trade/statistics/product/enduse/exports/c3010.html the total exports to Colombia for 2008 was $11,437,270,000.
That means that the daily export rate is about $11,437,270,000/365 or $31,334,986 per day.
That means that the average tariff imposed on U.S. exports is 6.9 percent.
That is not large enough to have a large impact of trade. Add a 2008 GDP per capita of $8,400 and a free trade deal with Colombia is not going to create much additional export trade with the U.S.
You can see it in the text of the Colombia free trade agreement which is online at http://www.ustr.gov/trade-agreements/free-trade-agreements/colombia-fta/final-text
This agreement is promoted to be about trade without tariffs. That is their goods come here without us imposing a tax and our goods go there without them imposing a tax. If that was what the agreement was about then it would be unnecessary. Under the current agreement we do not impose tariffs on imports from Colombia while they impose tariffs on our products. Colombia could bring about free trade between our two countries unilaterally by removing their tariffs. Why do they not do this? Because the US-Colombia Free Trade Agreement is not about trade in goods between our countries.
It is about outsourcing of U.S. jobs and foreign direct investment. Both of which are detrimental to the American people. If you look at the table of contents of the agreement you see some things that you would expect in a trade agreement. Then there are things you would not expect. Item 10 “Investment” for example. Why have provisions about investment in an agreement about goods flowing between the two countries? Because this is where Colombia agrees that when American firms build factories in Colombia to outsource jobs Colombia will not confiscate them without compensation. Note that Latin American countries have a long history of doing just that.
Our government has a long history of negotiating bad trade deals and the existing agreement with Colombia is a prime example. The man from our government, who was negotiating to help Americans, agreed to a trade deal where we would remove our tariffs and Colombia would keep their tariffs. The proposed new deal is even worse for Americans. There is nothing in the new US-Colombia FTA for the citizens of the U.S. but fewer jobs and a larger trade deficit.
"There is nothing in the new US-Colombia FTA for the citizens of the U.S. but fewer jobs and a larger trade deficit."
Nonsense. According to IBD, "Caterpillar is stuck paying around $100,000 in tariffs for each earthmover it sells to Colombia, a big mining country that’s one of Caterpillar’s best markets." The National Association of Manufacturers says, "Every day that Congress continues to
delay in passing the Colombia agreement, for example, costs U.S. manufacturers about $2 million in
additional import penalties they have to pay to sell U.S.-made goods in Colombia."
If you're so worried about outsourcing, then I guess we better cancel NAFTA and CAFTA, pronto!
Besides, we have strategic reasons, and moral obligations to help out Colombian allies (while helping ourselves.) Americans buy the drugs that arm the murdering FARC and other criminals who have made life a living hell for millions of Colombians for 40 years.
Paul,
As I noted in the calculation the actual tariffs that Colombia imposes are smaller than the spin would indicate. This is particularly true of Caterpillar which has pushed hard for the free trade deal with Colombia. Caterpillar’s claims of the good the end of Colombia’s tariffs will bring are suspicious. The Office of the United States Trade Representative issues an annual report on trade barriers. The Colombia chapter of the “2009 National Trade Estimate Report on Foreign Trade Barriers” is at http://www.ustr.gov/sites/default/files/uploads/reports/2009/NTE/asset_upload_file166_15465.pdf
The report on Colombia tariffs contains the following statement:
Most duties have been consolidated into three tariff levels: 0 percent to 5 percent on capital goods, industrial goods, and raw materials not produced in Colombia; 10 percent on manufactured goods, with some exceptions; and 15 percent to 20 percent on consumer and "sensitive" goods.
Caterpillar falls into the 0 to 5 percent category of capital goods. The rhetoric coming out of Caterpillar does not match the numbers. I conclude that there is something in the agreement more valuable than a small tariff reduction.
Yes I would like to cancel NAFTA and CAFTA pronto. Free trade has NEVER worked very well. In practice it has always fallen short of what the free trade theories of Adam Smith and David Ricardo would predict. The adverse impact of free trade on people pushed Great Britain into socialism, China into Communism, and now us very close to socialized medicine. Before job outsourcing pushed wages down and caused many to lose health insurance the push to socialized medicine was inconsequential.
Colombia was a living hell for millions long before FARC and their war on drugs has been a costly, to us, failure. Since 1986, 2,700 union leaders have been murdered in Colombia. In an attempt to advance this trade agreement Colombia has reduced the murder rate of union leaders by changing the definition of who is a union leader. The killing goes on. I see no moral strategic or moral obligation to help Colombia.
"The rhetoric coming out of Caterpillar does not match the numbers."
Huh? They would like to sell more machinery to Colombians, who would in turn become more productive and prosperous. Caterpillar is one of many global players in their market, the Colombians will end up turning elsewhere and we will lose out. I have no idea why you think some massive conspiracy is going on here.
"The adverse impact of free trade on people pushed Great Britain into socialism, China into Communism, and now us very close to socialized medicine."
Bizarre analysis. Mao Tse Tung and his fellow "agrarian reformers" won a civil war with the help of our own State Dept. Obama and his fellow collectivists are pushing us into socialized medicine. Nothing at all to do with trade.
"Before job outsourcing pushed wages down and caused many to lose health insurance the push to socialized medicine was inconsequential."
Uh, Medicare was passed in the 60's. Democrats have worked for decades for a complete takeover, regardless of any trade issues. They don't say "health care is a right..now that globalism has reduced us all to paupers."
But this garbage takes the cake:
"Since 1986, 2,700 union leaders have been murdered in Colombia. In an attempt to advance this trade agreement Colombia has reduced the murder rate of union leaders by changing the definition of who is a union leader. The killing goes on. I see no moral strategic or moral obligation to help Colombia."
According to CUT's OWN NUMBERS, the union murder rate has dropped off a cliff under the leadership of Uribe. As has the murder rate, violent crime, and pretty much everything else bad. Meanwhile, he's sent the FARC scurrying into the jungle and into the loving arms of Hugo Chavez. This is indisputable. Who do you work for? The Steelworkers?
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