Gauging the odds on an FTA, counting lost-opportunity costs

In February, the Obama administration pledged to “intensify” talks with Colombia on the free trade agreement  initially negotiated by the US in 2006. Now Senator Max Baucus (D-Montana), who is leading a trade mission to Bogota, is projecting confidence that the FTA will be approved by Congress this year – while warning that any further delay will add to already heavy lost-opportunity costs.

Colombia is the second-largest market in South America for agricultural goods and the third largest for manufactured goods from the US – but the relationship appears to be changing fast. A dispatch from the Colombian embassy on Baucus’s meeting with President Juan Manuel Santos notes that the US is losing share of the Colombian market for wheat to Argentina and Canada, dropping from 73% in 2008 to 43% in 2010.

Shaken by its break with erstwhile trading partner Venezuela, Colombia has been intent on diversifying its mix of export markets. That includes lessening its dependence on the US. Colombia just got another nudge in that direction when Congress allowed the Andean Trade Preference Act, under which Colombian flowers and leather goods enter the US duty-free, to lapse last month.

So Colombia has been negotiating FTAs with Canada, EU countries and, most recently, South Korea. Reuters reports that pacts with Japan and Turkey are next.

But it’s China that’s gained the most ground in Colombia so far. “While the United States has delayed this FTA, China has tripled its share of the Colombian market and is now Colombia’s second largest trading partner,” Baucus says in this Miami Herald report. We’ve noted China’s growing presence in Colombia (and elsewhere in Latin America) before: Take a look at this Datamyne chart that illustrates the change in Colombia’s top markets over three years here.

Earlier this year, Colombia said that while its trade relations with Venezuela would be restored, a return to previous  high trade volumes is not likely. Now President Santos says that if the US FTA remains stalled at the end of this year, his country will no longer press for ratification.

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