Sunday, March 14, 2010

Colombia's Stock Market and Economy Boom While the Colombia FTA Languishes into A Fourth Year

President Obama recently outlined his plans to "help U.S. businesses double their export sales and add what he said would be 2 million more jobs at home during the next 5 years."

To help increase U.S. exports, it would seem like passing the Colombia Free Trade Agreement (FTA) would be a real no-brainer. It was signed in November 2006 and has now been languishing for 1,209 days waiting for Congressional approval, according to the
Latin America Trade Coalition, which has helped to organize support of the FTA from:

1. More than 1,200 American companies, associations, and chambers of commerce.

2. All of the leading U.S. business and agriculture associations, representing literally millions of workers, farmers, and companies in every major sector of the U.S. economy: manufacturing, technology, services and farming.

3. More than 400 state and local chambers of commerce.

4. More than 50 organizations representing producers of agricultural commodities from apples to zucchini.

5. The entire textile and apparel supply chain, from cotton growers and yarnspinners to textile and apparel manufacturers.

6. The editorial boards of almost every
major newspaper including the Wall Street Journal, LA Times, Washington Post, Miami Herald and even the New York Times ("We don't say it all that often, but President Bush is right: Congress should pass the Colombian free-trade agreement now. We believe that the trade pact would be good for America's economy and workers.").

As the Colombia FTA stalls into a fourth year with almost universal support from every part of the economy, who or what is holding it up?

Apparently just one group: U.S. labor unions and their Democratic enablers in Congress. With the
public support of unions at a 72-year low, it's amazing that they can still exercise such power to withhold thousands of jobs from fellow Americans by stopping FTAs with not only Colombia, but with Panama and South Korea as well.

Take just one example: Illinois-based, and major exporter Caterpillar laid off 20,000 workers last year, at the same time it was pushing for passage of the Colombia FTA. According
to IBD, "Without free trade, 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 graph above shows Colombia's incredible booming bull market - Colombian stocks have more than doubled in the last year with a whopping 120% annual return, and the market has increased 8-fold since early 2004. This makes the failure to pass the Colombian FTA even more regrettable, since U.S. exporters like Caterpillar (and its thousands of laid-off workers) are missing out on the opportunity to gain from Colombia's booming economy.

If Obama was really serious about increasing both U.S. exports and U.S. jobs he would have pushed the Colombia FTA through already. At least he's been talking more about it lately, let's see how serious he really is about creating jobs (even if they're non-union) by passing the signed FTAs with Colombia, Panama and S. Korea this year. My prediction is a lot of talk, but no action.

31 Comments:

At 3/14/2010 12:49 PM, Anonymous Anonymous said...

FTAs? Whoo-hoo... NAFTA didn't seem to create a lot of private jobs last decade, it destroyed a lot of good-paying jobs in the '90s. The funny part about NAFTA is that it really didn't benefit Mexico a whole either. China took a lot of the jobs she had or was suppose to have.

 
At 3/14/2010 1:24 PM, Blogger Michael said...

This free trade is killing jobs in nonsense. The first company to make stainless steel cutlery was in America. The rust belt is littered with abandoned metal stamping plants.

There is no reason America can't produce stainless steel cutlery. Except the IAMAW wants a cut. The USW wants a cut.The UAW wants a cut.The SEIU wants a cut. The fed wants a cut. The state wants a cut. The city wants a cut. And all of the above want to tell the owners how to make stainless steel cutlery.

 
At 3/14/2010 2:56 PM, Anonymous Benny The Man said...

Odd, when the Republicans controlled the House, the Senate, The Executive Branch and the Supreme Court (2000-2006), why did they not pass a FTA with Columbia? Or Cuba for that matter?
Why only China?

 
At 3/14/2010 2:58 PM, Anonymous Anonymous said...

"This free trade is killing jobs in nonsense. The first company to make stainless steel cutlery was in America. The rust belt is littered with abandoned metal stamping plants."

Maybe that's so, but Alexander Hamilton didn't have much faith in "barrier-free" trade. After the Revolutionary War, America thought it was fit to find ways to produce its own musket rifles, rather than depend on France for the guns, and the rest of Europe for goods.

Could anyone imagine what Toyota would have become if the Japanese government - instead of protecting it - chose not to kick out GM and Ford in the 1930s; or chose not to implement protective tariffs; or chose to force a then inferior automaker to compete against the vastly larger, vastly better financed companies with far superior products?

 
At 3/14/2010 3:09 PM, Blogger Paul said...

"Odd, when the Republicans controlled the House, the Senate, The Executive Branch and the Supreme Court (2000-2006), why did they not pass a FTA with Columbia? Or Cuba for that matter?
Why only China?"

They did pass CAFTA, and the Peru FTA. The Colombian agreement wasn't finally signed until 2006, when the Pelosi Democrats took over and put the kibosh on it at the behest of Big Labor and the Chavistas. Then people like you voted for Obama, and so here we are.

 
At 3/14/2010 3:16 PM, Anonymous Anonymous said...

Today we have more free trade than we have ever had. The taxes that John Kennedy cut to improve the economy were in full force during the Presidency of Dwight Eisenhower. Eisenhower had a good economy. Bill Clinton increased taxes. Clinton had a good economy. When the economy tanked late in Bush’s second term his tax cuts were in full force. Job growth under Clinton was impressive. Job growth under Bush was anemic.
Where I grew up if you can do it you ain’t bragging. Excuse me, but the tax cutters and the free traders are NOT getting the job done! You can see their failure in the U6 unemployment rate and the decline in Average Weekly Earnings which peaked in 1973.

Looking a Colombia, no way this FTA is going to do what Dr. Perry claims. First, with a 2008 GDP per capita of $8,400 a free trade deal with Colombia is not going to create much additional trade with the US in consumer goods. Tariffs on Cat’s machinery are less than 5 percent. Those Cat earth movers can sell for more that $5 million so a $100,000 less is not significant. Farm products are not labor intensive so few jobs there.

I am asked to believe that trade deficits do not matter. Declining real wages do not matter. Millions of manufacturing jobs lost do not matter. It seem that what we have today is a bunch of latter day David Farraguts saying “damn the unemployment, full outsourcing ahead” when what we need is the free trade and tax realism of Ronald Reagan. Reagan insisted that trade benefit the American people and was not afraid to use trade restrictions, including tariffs, to make it happen. Foreign cars makers manufacture in this country not because they wanted to but because he made them. And as my governor Ronald Reagan raised my taxes.

Aside from bigger bonuses where are the free trade successes? Where are the trade surpluses we had with tariffs? Where are the companies that can make profit while paying a fair share of the taxes we need to run our government? They could do that when Eisenhower was president.

 
At 3/14/2010 4:20 PM, Anonymous Anonymous said...

Bill Clinton increased taxes. Clinton had a good economy. When the economy tanked late in Bush’s second term his tax cuts were in full force. Job growth under Clinton was impressive. Job growth under Bush was anemic ... blah, bla-blah, bla-blah, bal-blah ...

So many words, so little sense. Economic performance under Bush was just as good as under Clinton, and in some ways better. And the economy tanked late in Clinton's second term, too. So what?

The fact is that Columbia is already shipping goods to the U.S. tariff free, while U.S. manufacturers must pay a tariff to ship goods there. Did you get that? We pay, they don't. Even someone like you can see the wisdom in correcting that little problem, can't you?

 
At 3/14/2010 4:55 PM, Blogger sethstorm said...


FTAs? Whoo-hoo... NAFTA didn't seem to create a lot of private jobs last decade, it destroyed a lot of good-paying jobs in the '90s. The funny part about NAFTA is that it really didn't benefit Mexico a whole either. China took a lot of the jobs she had or was suppose to have.

Take just one example: Illinois-based, and major exporter Caterpillar laid off 20,000 workers last year, at the same it was pushing for passage of the Colombia FTA. According to IBD, "Without free trade, 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 problem is that the lure of additional jobs is used for trade. They consistently are shuffled out of the US after the agreement is signed and the media attention is gone.

Caterpillar should put it in writing with the simple saying:
"Sign it and US jobs come back to stay in the US.". Otherwise, like all trade treaties, they'll lie through their teeth and ship them off. Hold them to their word, and make sure no labor is exported.

The same thing is to be expected of other businesses. "Sign the treaty, jobs come here and stay here in the US for more than a decade".

Otherwise, it will be the same thing that has happened - lie to the citizen until the jobs are gone. With this said, why do people still ask about objections?


I am asked to believe that trade deficits do not matter. Declining real wages do not matter. Millions of manufacturing jobs lost do not matter.

It seems that what we have today is a bunch of latter day David Farraguts saying “damn the unemployment, full outsourcing ahead” when what we need is the free trade and tax realism of Ronald Reagan. Reagan insisted that trade benefit the American people and was not afraid to use trade restrictions, including tariffs, to make it happen.

One of the places I'd want to agree w/ Reagan.

 
At 3/14/2010 5:06 PM, Anonymous gettingrational said...

"Could anyone imagine what Toyota would have become if the Japanese government - instead of protecting it - chose not to kick out GM and Ford in the 1930s; or chose not to implement protective tariffs; or chose to force a then inferior automaker to compete against the vastly larger, vastly better financed companies with far superior products?"

3/14/2010 2:58 PM


This is non-sense and not true. Japan produces very good cars BUT they have had very restrictive non-tariff barriers. U.S. manufactured vehicles have had to go through rigourous individual inspections to be sold in Japan. In additon the certification standards would change constantly for what the vehicle was being tested for. It would take a very determined seller or buyer to not be worn down by this expensive process.

 
At 3/14/2010 5:17 PM, Blogger sethstorm said...


Odd, when the Republicans controlled the House, the Senate, The Executive Branch and the Supreme Court (2000-2006), why did they not pass a FTA with Columbia? Or Cuba for that matter?
Why only China?

Elaine Chao, the labor secretary that had a bit too many connections with the Orient.

 
At 3/14/2010 5:42 PM, Blogger OA said...

I hope intrade has a contract on the doubling of exports in 5 years. Because it's a sure bet it isn't going to happen if we continue to see 'government knows best initiatives' such as:

"-Create an Export Promotion Cabinet that includes the secretaries of Agriculture, Commerce, Labor, State and Treasury to focus administration efforts."

"-Order ambassadors to stress "commercial diplomacy" and then to tour the U.S. when they return home to tell businesses here about opportunities abroad."

"-Bring up to 300 procurement officers from other countries here to meet with U.S. companies."

"-Launch more trade missions to other countries. As a start, Obama said he'd use a trip next week to Indonesia and Australia to pitch trade with U.S. companies. "I will be a strong and steady advocate for our workers and companies abroad," he said."

If this weren't real it would be comical. Awareness isn't holding back exports. Companies will find markets without any taxpayer assistance. What they do need is less bureaucratic hurdles, and less financial burdens. In the next 5 years it's pretty clear that US regulatory and tax burdens are going up. Unless some of the other burdens come down, how is all this growth going to happen?

Of course just a snap back to the 2008 level would give 20%, and 5 years of inflation would give another double digit increase. But there's still another 60% or so needed to double.

 
At 3/14/2010 6:20 PM, Anonymous Anonymous said...

“The fact is that Columbia is already shipping goods to the U.S. tariff free, while U.S. manufacturers must pay a tariff to ship goods there. Did you get that? We pay, they don't. Even someone like you can see the wisdom in correcting that little problem, can't you?”

How did that situation of Colombia exporting to us without tariffs and our goods going there are taxed happen in the first place? I say that happened because of our government’s callous disregard for the well being of American workers. The same callous disregard for Americans that is shown in this new and worse FTA. A spoon full of sugar to make the outsourcing go down! No thank you!

What say you?

 
At 3/14/2010 6:34 PM, Blogger PeakTrader said...

The U.S. created 17.6 million jobs between 1993-98, and created only 3.7 million jobs between 2001-06. However, U.S. real GDP growth was only slightly higher from 1993-98 than from 2001-06. So, the U.S. became much more productive in the 2000s, i.e. using fewer inputs to produce more output.

However, GDP only reflects the production side of the economy. When the consumption side is included, U.S. living standards rose at a steeper rate in the 2000s than the 1990s, which is remarkable, given the structural bear market began in 2000, after a spectacular 18-year bull market.

In the 2000s, there was disinflation, falling interest rates, lower taxes, and rising real compensation, along with full employment between recessions. The virtuous U.S. cycle of consumption and investment turned into a boom, which was unsustainable. Yet, the U.S. economy held up well, even through the biggest oil shock in history, in 2007-08.

 
At 3/14/2010 6:43 PM, Anonymous Anonymous said...

"This is non-sense and not true. Japan produces very good cars BUT they have had very restrictive non-tariff barriers. U.S. manufactured vehicles have had to go through rigourous individual inspections to be sold in Japan."

You're confusing timelines. Toyota originally started off as Toyoda Automatic Loom a manufacturer of textile machinery - a perfect fit for what was then Japan's largest export, silk.

They got into autos in 1933. At that time, GM and Ford were well-established as the world's premiere auto manufactures; they were vastly superior in both production and quality. Japan, however, decided autos and industry were more important than silk, and decided to kick out GM and Ford in 1939.

Toyota continued to make lousy cars for decades. In 1949, the Japanese government even had to bail the company out. In 1958, Toyota finally managed to export its first car to the US - the Toyopet, a horrendous piece of junk.

Anyway, the story continues with Japan's protected auto makers continuing to churn out junk (but slowly implementing Edwards Deming's ideas) until eventually, they get things right. Had the Japanese government listened to the free trade crowd, forcing a pint-size Toyota to compete against the US behemoths, the auto company would have been wiped off the face of the planet.

Another company with a somewhat similar story is Samsung of S Korea.

 
At 3/14/2010 6:57 PM, Blogger Craig said...

Bill Clinton increased taxes. Clinton had a good economy.

Bill Clinton had a tepid economy (2 - 2/5% GDP growth annually) until he signed a capital gains tax cut in 1997. Hmmm, boom came after.

Of course, that bit of history has disappeared down the Democrat/media rathole.

 
At 3/14/2010 7:04 PM, Anonymous Anonymous said...

PeakTrader,

Do you trust government productivity figures? They are biased toward outsourcing.

Suppose a company has a product that takes a 1000 man hours to complete and it has a subassembly that requires 50 man hours to build. Now suppose the company outsources the subassembly to a foreign company that is going to take 75 man hours to build but their labor is so much cheaper that it is a good deal. The way the government productivity numbers score this the company is more productive by 50 man hours. That is they are now producing the same product with 950 man hours of labor where it took a 1000 in the past.

You have to be very careful with government numbers these days. Unemployment used to count so called “discouraged workers” that no longer count. Inflation number are even more suspect. They have decided that if the price of something go up they will quit counting it under the assumption that people will buy less of it. I go shopping with my wife every once and a while. The government inflation numbers are not to be trusted.

 
At 3/14/2010 7:41 PM, Blogger PeakTrader said...

Anon, you could also say productivity is biased in emerging industries, because they tend to be less productive or unproductive. That means they're using a lot of inputs for little or no output. The U.S. leads the world in emerging industries. Does that also mean you can't trust government data?

If you went shopping with your wife, over the past five years or so, then you'd know there've been more bargains than ever before, in part, because of diminishing marginal utility.

 
At 3/14/2010 7:45 PM, Anonymous Anonymous said...

At least sethstorm and his new commie buddy recognize, like the Soviet Commissars, that if you're going to have state socialism, you have to build walls. If not, productive people and assets leave. The only way that the losers can compete, is if the government ties the competition down.

 
At 3/14/2010 8:01 PM, Blogger Paul said...

"Bill Clinton had a tepid economy (2 - 2/5% GDP growth annually) until he signed a capital gains tax cut in 1997. Hmmm, boom came after."

That, along with the artificial Y2K boom(forcing massive tech upgrades) and the dot com bubble. The roof caved in after 2000, sending hordes of tech workers packing.

 
At 3/14/2010 8:02 PM, Blogger PeakTrader said...

Also, here's what the BLS says about productivity and offshoring:

The Effect of Outsourcing and Offshoring on BLS Productivity Measures
March 26, 2004

If the outsourcing is from manufacturing to businesses located abroad (“offshoring”), business sector output is lowered by the amount of value-added that is no longer produced in the U.S.

In the case of offshoring, both business sector output and hours will fall. Again, the net effect on business sector labor productivity depends on the relative productivity of the lost output to the remaining output and any new output created. It is reasonable, however, to suppose that in this type of situation lost production may have taken place in plants with relatively low levels of productivity. If so, then offshoring might raise labor productivity, but as with domestic outsourcing the effect of this compositional effect is expected to be modest.

 
At 3/14/2010 10:36 PM, Blogger juandos said...

"FTAs? Whoo-hoo... NAFTA didn't seem to create a lot of private jobs last decade, it destroyed a lot of good-paying jobs in the '90s"...

LOL!

You're an Obamanomics fan, eh?

The Effects of NAFTA on Exports, Jobs, and the Environment: Myth vs. Reality

NAFTA Myth of the Day

 
At 3/15/2010 1:01 AM, Blogger Michael said...

You all can toss Bush and Clinton around all you want, but congress writes the laws.

Clinton campaigned on tax cuts and a balanced budget. As president, as agreed to tax increases, dropped balancing the budget and went after the health care sector.

A lot of freshmen Republicans got elected in 94 and held his feet to the fiscal fire. Congress drove Clinton.

Obama is a good example of this. He doesn't have a heath care bill. Nor an outline or even a few ideas jotted down on a napkin.

Congress is writing the bill, Obama's only responsibility is to sign his name to the bill. And then ask Holder to defend it from the endless law suits.

 
At 3/15/2010 2:20 AM, Anonymous Anonymous said...

juandos,

Where are you free traders hiding those NAFTA jobs? 9.7 percent of the workforce would like to know. The rest of us would like to know why Canada and some of our other free trade partners are setting recent all time highs in real wages while the last time the we set an all time high was 1973?

If Youngstown Ohio loses 300 high wage factory jobs to NAFTA and 30 people get hired to import the product that is now made in Mexico and the former workers get Mac jobs the Heritage Foundation counts that as a plus 30 job gain for NAFTA.

 
At 3/15/2010 2:50 AM, Blogger PeakTrader said...

Anon, in 2007, 20% of U.S. households earned at least $100,000 a year. Many of them worked in high-tech jobs. The U.S. leads the rest of the world combined in the Information and Biotech revolutions (in both revenues and profits). You may want to ask them. Also, the U.S. needed more retail stores, and retail workers, because of more goods to sell. Of course, workers can earn a high wage to produce little, like the inflationary 1970s. The U.S. is a most dynamic economy. Otherwise, 90% of the workforce would still be farmers.

 
At 3/15/2010 7:16 AM, Blogger juandos said...

Hello anon @ 3/15/2010 2:20 AM...

"Where are you free traders hiding those NAFTA jobs? 9.7 percent of the workforce would like to know"...

What the free traders want to know is why so many people don't have the skills to hold a job today...

"The rest of us would like to know why Canada and some of our other free trade partners are setting recent all time highs in real wages"...

Hmmm, you have something credible to link to to back that statement up, right?

"If Youngstown Ohio loses 300 high wage factory jobs to NAFTA and 30 people get hired to import the product that is now made in Mexico and the former workers get Mac jobs the Heritage Foundation counts that as a plus 30 job gain for NAFTA"...

ROFLMAO!

Obviously those Youngstown, Ohio 300 priced themselves out of the market in their particular job skills...

If those Youngstown 300 thought their skills were so valuable then why didn't they start their own plant and continue producing the product they were making?

Thanks for playing...

 
At 3/15/2010 9:55 AM, Anonymous gettingrational said...

Anon. 3/14/2010, I see your point with that timeline and thus, we don't disagree except that non-tariff barriers took over for tariffs by the Japanese.

Non-tariff barriers such as certifications/inspections are much more effective now. They are much harder to monitor and enforce via trade agreements. They further provide the protecting country the ability to gain tech transfer through documentation provided by the would-be importer.

 
At 3/15/2010 10:48 AM, Blogger bobble said...

juandos:"Obviously those Youngstown, Ohio 300 priced themselves out of the market in their particular job skills..."

true, but the market is somewhat rigged. with the yuan 20-40% undervalued, its hard for any workers in any other country match their prices.

yes, i understand that we get cheap steel. do you understand that, added to the price of those cheap products, is massive U.S. unemployment? TNSTAAFL!

 
At 3/15/2010 5:16 PM, Blogger PeakTrader said...

Bobble, would you complain if you got free steel?, and complain you're not working to produce steel that's free?

 
At 3/15/2010 5:27 PM, Anonymous Anonymous said...

"LOL!

You're an Obamanomics fan, eh?

The Effects of NAFTA on Exports, Jobs, and the Environment: Myth vs. Reality

NAFTA Myth of the Day

3/14/2010 10:36 PM"

Well, Juandos, I never said I was an Obamanomics fan, but... indeed - LOL! Bush had some pretty impressive job creation statistics, huh? (And don't use the "fully employment" argument either; it's common knowledge that unemployment statistics don't paint an accurate pictures, plus Clinton - with his high job creation - had a lower unemployment rate.)

Yup, those guys at the Heritage Foundation totally know what they're talking about. Gold brick roads in Ohio, fully employment in Michigan...

Anon 6:43 PM made an interesting point... about Toyota I wonder how they'd turn out if they listed to the Heritage folks...

 
At 3/15/2010 8:55 PM, Blogger bobble said...

PT:"Bobble, would you complain if you got free steel?, and complain you're not working to produce steel that's free?"

but, its not free. if it was, there would be no problem. we could all quit our jobs and live on the free stuff from china.

unfortunately, we all still need to earn a living, and for an increasing percentage of americans, that's not possible.

economists, when writing about how free trade benefits countries, always add, as an afterthought, that it doesn't benefit everyone equally. there will be winners and losers. then they mumble something about the need to compensate the losers in the free trade bargain. then everybody forgets all about that aspect.

 
At 3/16/2010 2:28 AM, Blogger PeakTrader said...

So, because steel is free, you don't have a job.

Article:

Unlimited wants and needs are one half of the fundamental problem of scarcity that has plagued humanity since the beginning of time. The other half of the scarcity problem is limited resources.

People always want and need more than they have...The pursuit of satisfaction, the act of satisfying wants and needs...it motivates people to take action...a vast number of alternative needs remain unsatisfied.

 

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