Colombia FTA gives competitive advantage to US exporters (but not for long)
by Bill Armbruster, blog anchor
The US free trade agreement with Colombia significantly expands opportunities for US exporters in South America’s third largest economy.
The deal, which took effect on May 15, 2012, immediately eliminated tariffs on 80% of US manufactured goods, with duties on the other 20% to be phased out between 1 and 17 years. Those tariffs had ranged on average from 7.4% to 14.6%. More than half of US agricultural exports became duty-free immediately, and virtually all remaining tariffs will be eliminated within 15 years, according to the US Trade Representative summary of the agreement.
Exporters looking to take advantage of the FTA should move quickly, however, in order to beat competitors from Europe and Korea to the punch. An FTA with the EU could take effect as early as mid-2013, while an FTA with Korea is likely to be implemented in 2014. Once that happens, the newly won tariff advantages for US exporters will disappear.
As Cameron Werker, senior commercial officer with the US Embassy in Colombia, put it to me in an e-mail interview, “now is the perfect time for US exporters to take advantage of the competitive advantages afforded them by our FTA.”
You can use the Commerce Department’s FTA Tariff Tool to find your product’s current tariff, if any, along with the old rate. For example, the duty on mechanical shovels and excavators, HS242952, used to be 10%, but now it’s zero. Colombia imported $289 million of that equipment between January and October of 2012, with 30% – $87 million worth – from the US, according to Datamyne statistics. Imports from countries that do not have FTAs with Colombia are still subject to the old tariff rates.
So there’s plenty of opportunity for US exporters to grow their share of a market that’s poised for significant growth as Colombia gears up for massive investments in transportation infrastructure – a sector desperately in need of improvement.
Transportation infrastructure – a sector desperately in need of improvement – is among the sectors offering the best growth potential. Colombia ranked a dismal 126th out of 144 countries in transport quality, according to a research report by the Argentine bank BBVA. Public and private spending on infrastructure will account for about 3% of Colombia’s GDP starting in 2014.
“The Colombian government is allocating more of its national budget than ever before to improving all modes of transportation, from roads to rail to ports to airports,” Werker confirms.
Conversely, the high cost of the country’s inland transport is one of the biggest challenges of doing business in Colombia. Exporters, or their partners, either have to absorb those costs or pass them on to the ultimate customer.
The cost to import a 20-foot container into Colombia totaled $2,830 last year, compared to an average of $1,612 for all of Latin America and the Caribbean, according to the World Bank’s Doing Business 2013 – and that does not even include ocean freight.
US goods exports to Colombia totaled $23 billion in the first 10 months of last year. Between the FTA, a population of 47 million, and an economy projected by BBVA to grow 4.4% this year, it’s an excellent potential market for US exports.
If you’re an exporter, I encourage you to take a close look at this market. A good place to start is my interview with Cameron Werker. We explored the best opportunities, the worst obstacles, and the help available to US exporters: The Datamyne blog will carry the entire interview in installments, starting with Part 1, our discussion of opportunities and resources for US companies.
You’ll also want to see what Datamyne trade data can reveal about the current Colombian market for US exports. For a sample, see its free report on Colombia’s top imports from the US. Or contact Datamyne for a free demo of its Colombia trade data.
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]
The opinions expressed in this article are those of its author and do not purport to reflect the opinions or views or Descartes Datamyne. In addition, this article is for general information purposes only and it’s not intended to provide legal advice or opinions of any kind and my not be used for professional or commercial purposes. No one should act, or refrain from acting, based solely on this article without first seeking appropriate legal or other professional advice.