US Tight Oil Revolution Undermines Colombian US FTA Gains
Colombia’s Congress voted to table a free trade agreement with South Korea June 17. This was the third time the trade pact signed by the Colombian and South Korean governments in February 2013 failed to win Congressional ratification.
Concerned about the FTA’s negative impact on the automobile industry, among other domestic industries, the legislators decided the agreement needs more study, according to coverage by Colombia Reports.
Opponents also pointed to the sharp drop in exports after Colombia’s FTA with the US took effect May 2012 as good reason to be wary of striking any more free trade deals.
In fact, Colombian exports to the US peaked in first-half 2012 and then tumbled. The trade data couldn’t be clearer.
But did the FTA spur the decline in Colombian exports as some critics charge? Break out Colombia-to-US trade during this period by gross product category – 2-digit Harmonized System tariff code – and a quite different explanation emerges.
Hydrocarbon fuels account for most of Colombia’s outbound trade with the US, nearly three-quarters of the value of all exports in 2013. In the midst of a “tight oil revolution,” the US is extracting oil from sands and shale rock – and moving from buyer to seller in the global market for hydrocarbons. According to the International Energy Agency’s just-released Medium-Term Oil Market Report, the US was the world’s largest importer of refined oil products in 2005; it is today the world’s largest liquids producer, ahead of Saudi Arabia and Russia, and its largest product exporter.
Separate Colombia’s HS27 exports from the rest, as we do below, and much of the post-FTA decline is accounted for. Take away HS71 covering gold, Colombia’s second-ranked export to the US by value and another “extractive commodity,” and what remains is something closer to a flat line, with about a percentage point loss between 2012 and 2013.
This result is still undeniably disappointing – the FTA was supposed to give a boost to Colombia’s exports to the US.
The trade data yields some encouraging returns: there were Colombian US FTA gains in the agricultural, manufacturing and chemicals sectors. In fact, more than half of the 2-digit HS product categories Colombia sends to the US saw increases from 2012 to 2013. Here are some of the highlights:
Interested in more trade data on Colombia, or any of the other South American countries Datamyne covers? Just ask us.
Date posted: June 20, 2014