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Still Waiting in the Wings

Category: Trade Policy

KORUS kicks in as Colombia, Panama FTAs cool their heels

by Bill Armbruster, blog anchor

The Korean-US free trade agreement enters into force tomorrow, March 15. As I wrote here last month, the progress of FTAs is stately indeed: After President Obama signed the legislation committing the US to the four-year-old deal on Oct. 21 it took four more months to set a date to implement KORUS – pretty fast by FTA standards.

Certainly fast in comparison with the other two in the troika of FTAs approved by the US Congress last year.

The Colombia FTA can’t take effect until both houses of its legislature approve three treaties relating to intellectual property protection. The pacts must then be reviewed by its Constitutional Court.

Colombia’s ambassador to the US, Gabriel Silva, told a forum in Washington last month that his government has “no doubt” that its Congress will approve the IPR treaties once it returns from recess on March 16. “But the court review can take between “three months to six months, depending on the workload of the court,” he said, according to a report by Inside U.S. Trade.

“Our hope is that that process will be completed by midsummer,” Silva said. He stressed, however, that under Colombian law, the government cannot ask the court when it will publish a decision.

Another reason for the delay in Colombia is that some details with regard to labor rights, the big issue all along, still need to be nailed down.

US merchandise exports to Colombia, the third largest economy in South America, totaled $14.3 billion last year, up from $12 billion in 2010. The US International Trade Commission estimates that the FTA will increase those exports by at least $1.1 billion by eliminating huge disparities in tariffs. Almost all of its imports into the US are duty-free under provisions of the Andean Trade Preference Act, according to the Latin America Trade Coalition. Exports of US manufactured goods to Colombia face average tariffs of 15% and US farm goods face even higher tariffs.

“As a result, Colombia today collects $100 in tariffs on US exports for every $1 the United States collects in tariffs on Colombian goods. A similar lopsidedness holds back American export sales to Panama,” the coalition states. It estimates that US exports have faced more than $4 billion in tariffs that would have been eliminated if the FTA had taken effect when it was signed in 2007.

Over 80% of US exports of consumer and industrial products to Colombia will become duty free immediately upon the FTA entering into force, with remaining tariffs phased out over 10 years.

More than half of current US farm exports will become duty-free immediately, and virtually all remaining tariffs will be eliminated within 15 years, including wheat, the largest US farm export to Colombia, which produces almost no wheat. The US used to dominate this market, accounting for 72% of Colombia’s wheat imports, according to Nigh of the American Farm Bureau Federation. But that share slipped to 44% in 2010, one year after Colombia’s FTA with the Mercosur nations – Brazil, Argentina, Uruguay and Paraguay took effect.

US wheat farmers have been losing even more business since a new FTA between Canada and Colombia took effect last August. The Datamyne blog covered that game changer when Nutresa, Colombia’s leading food processor and parent of Compania de Galletas and Productos Alimenticios Doria SA (two of the top five Colombian importers of US wheat) announced it would begin sourcing from Canada.

The accord with Panama, Latin America’s fastest growing economy, appears to be moving at an even slower pace than the Colombia FTA. At issue are Panamanian laws and regulations relating to issues such as labor policy and tax transparency.

The Congressional Research Service provides a detailed recounting of the history and issues pending with the Panama FTA as of October 27, 2011 here, and the Colombia FTA as of November 11, 2011 here.

Bill Armbruster, the anchor for the Datamyne Blog has covered shipping and trade for 30 years as a reporter and editor with The Journal of Commerce and Shipping Digest. “I’ll be blogging on headline news and current issues in oceangoing commerce, trying to shed some light on the backstories and, wherever I can, supply some sound advice for shippers.” Write Bill care of [email protected].

Date posted: March 14, 2012

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