cover nontariff measures.
The F TA will allow Colombian businesses to achieve parity with companies in other countries that are direct
competitors in the U.S. market and
that already have an FTA. This is the
case with Mexico, Chile, Peru, and
Central America and the Dominican
Republic (covered under CAFTA-DR).
The delay in approving the FTA in
the U.S. undermined business confidence in Colombia and—in the short
term, at least—diverted investments
to other countries. One Colombian
businessman recently remarked that
the delay led him to invest in a Central American country and to reduce
his activities in Colombia. However,
following approval of the F TA, he decided to build a new plant in Colombia, investing more than $100 million
and creating more than 200 jobs in a
One of the expected effects of the
FTA is an increase in both domestic
and foreign investment. The size of
Colombia’s domestic market and the
diversification of its production structure make the country attractive to invest in to enter the American market.
Models that measure the impact of
Colombia’s F TA with the U.S. indicate
that there will be positive effects on
economic growth, well-being, employment, and tax revenues.
Studies have shown that the fall
in revenue from tariffs will be offset
by an increase in other tax revenue
as a result of higher GDP. Models indicate that GDP growth will increase
between 0.5 and 1 percentage points,
well-being by more than 1 point, and
employment by 300,000 to 500,000
jobs. In the case of finance, one scenario in a study by Patricia Martín
and Juan Mauricio Ramírez (“The Economic Impact of a Partial Free-Trade
Agreement Between Colombia and
the United States”) predicts a $289
million loss in tariff revenue, but a
net positive effect on the tax balance
sheet of $414 million.
The treaty will bear immediate
fruit. In the case of agricultural products, for example, under the ATPDEA,
52. 6 percent of Colombian exports
had tariff-free access to the U.S. market. The FTA added another 47. 3 percent of Colombian exports to the
tariff exemption, which practically
ensures full access for all Colombian
exports from the day the treaty goes
But domestically, some of Colombia’s agricultural producers still struggle to compete with farmers in the
United States. The FTA attempts to
address this in several ways. One
of them is the elimination of U.S.
export subsidies. Another is the
gradual elimination of tariffs, granting protection in several cases for
more than 10 years, giving Colombian agricultural producers enough
time to close the competition gap.
At the same time, under the agreement Colombia obtained tariff-free
access for 99. 9 percent of industrial
exports. There will be immediate tariff exemptions for 81. 8 percent of Colombia’s imports from the U.S., and
the remaining 18. 2 percent will be exempted in stages over the course of
five to 1 0 years. Of the portion with
immediate tariff exemptions, about
80 percent corresponds to capital
goods and raw materials that are not
produced in the country, and 20 per-
cent to goods that already compete
in international markets.
This balance will be very important
for Colombia in the global business
environment in the coming years.
The price boom in mining and energy products and the threat of global
food shortages present opportunities
and risks for the Colombian economy.
The government’s adoption of structural measures (such as those governing fiscal responsibility, fiscal rules
and the linkage of savings funds
and royalties) to cushion excessive
reliance on lucrative primary product exports (such as oil, natural gas
and key minerals) will be crucial to
the diversification of products in the
Preferential access to the U.S.
market complements this strategy.
Eliminating tariffs and preventing
discrimination in business will allow
different goods—not just raw
materials—to continue competing in the market. The reduction
of tariffs and the elimination of
nontariff barriers will help offset the risk of an appreciating
exchange rate that often results
from rising commodity exports.
Of course, there are challenges,
including developing infrastructure, shrinking the informal business
and labor sectors, streamlining customs services, and improving health
and phytosanitary standards.
The government, business and academic sectors are working together
within the framework of the National System for Competitiveness
to close these gaps. But the micro-level changes and gaps remain the responsibility of businesses: to advance
technology, improve internal and logistical processes, strengthen human
resources, and proactively seek out international markets.
Gabriel Duque Mildenberg is vice
minister of foreign trade of Colombia.
(CON TINUED FROM PAGE 18)
Gabriel Duque Mildenberg yes
The FTA will allow Colombian businesses
to achieve parity with companies in
other countries that are direct competitors
in the U.S. market.
20 Americas Quarterly WINTER 2012