Home The Washington Diplomat August 2011 Colombia Reaches Crossroads With Free Trade Agreement

Colombia Reaches Crossroads With Free Trade Agreement

Colombia Reaches Crossroads With Free Trade Agreement

PALMIRA, Colombia — Off to the side of a highway 28 kilometers east of Cali, Fabiola Montealegre runs Palmitropicales, a rather sophisticated cut-flower and exotic foliage business. Her five-hectare farm is filled with ginger lily, golden opal, bird of paradise and other highly sought-after varieties destined for export to the United States.

The only problem is, she’s not exporting.

With the recent elimination of Andean trade preferences and no permanent U.S.-Colombia Free Trade Agreement to fall back on, Montealegre said shipments to her most lucrative market have screeched to a halt.

“We’re a small company, and my family has been in agriculture for a long time,” said the 43-year-old businesswoman, who used to work at the Organization of American States in Washington. “But without trade preferences and no FTA, our flowers have become too expensive, and importers are buying from cheaper sources like Costa Rica.”

Montealegre is only one of thousands of Colombian exporters frustrated with the perpetual lack of progress on the FTA, and irritated that the Obama administration let lapse the long-standing benefits under the Andean Trade Preference Act (ATPA) — which rewarded South American countries (Bolivia, Colombia, Ecuador, and Peru) that worked to eradicate drug trafficking by expanding alternative economic opportunities.

The pact quietly expired in February without much of an uproar in the United States, though it was a big deal for Colombian exporters and for markets like Miami, which enjoyed duty-free access to Andean products such as flowers under ATPA.

But today, the prospects for free trade on Capitol Hill are anything but rosy. After years of fits and starts, a widely anticipated July 1 deadline imposed by its most ardent supporters came and went — and still no FTA, not with Colombia, let alone South Korea or Panama (see related story). Now those supporters are reluctant to predict what will happen next on the Hill, where legislators are consumed with the battle over raising the debt ceiling, after which they’ll go on summer recess. Once they return in September, with all eyes looking toward the 2012 election, the idea of pushing free trade at a time of 9 percent domestic unemployment could be a political hot potato.

“There’s a natural skepticism in Colombia, and also in many sectors in the U.S., about the possibility of achieving FTA approval this year,” said Gabriel Silva Luján, Colombia’s ambassador to the United States. “That skepticism is understandable, because we have been waiting for five years.”

Photo: Larry Luxner
Ambassador Gabriel Silva Luján

Silva told The Diplomat that when he returned to Washington last fall as ambassador (he had previously served here as ambassador from 1993 to 1994), the odds were against FTA approval in 2011.

“No one really believed it was going to happen,” he admitted. “Maybe that’s why they sent me here. I always take jobs no one else wants.”

For example, he said, “I took over as CEO of the Colombian Coffee Growers’ Federation in 2002, in the midst of the worst coffee crisis in 150 years. Coffee was 40 cents a pound. Now it’s around $3 a pound. And I was minister of defense in the last year of President [Álvaro] Uribe’s term, after some very successful defense ministers. So no one wanted to be the last minister to run his most cherished policy, democratic security.”

Silva says his stint as ambassador in Washington is much more interesting this time around.

On May 31, Secretary of State Hillary Clinton held a high-level dialogue in Washington with her counterpart, Colombian Foreign Minister Maria Angela Holguín. The talks focused on energy, technology, education, culture and environmental issues.

“It’s like a dream come true,” said Silva. “When I came here the first time, the only issue was drugs, drugs and more drugs. The country was in the process of starting the fight against the cartels. That was the core issue of bilateral relations. Now we have a much broader agenda.”

The irony is that Silva talks about the FTA as if the odds are no longer stacked against its passage — but they clearly are. Even though it won approval in a mock markup by the Senate Finance Committee, as of press time, the agreement must still be approved in a similar markup by the House Ways and Means Committee. President Obama — who Republicans say has let the three FTAs languish since taking office — must then choose whether to accept or reject the committee’s recommendations before sending the final bill to Congress for a vote. Oh, and then Congress — where bitter partisan feuds have ground legislation to a virtual halt and Democrats and Republics remain sharply divided over how to address the country’s sluggish unemployment — must actually vote in favor of the Colombia pact, the most contentious of the three deals.

Moreover, because the summertime deadline for the three FTAs has essentially lapsed, all of this must now happen in a crowded fall calendar where every piece of legislation will be scrutinized for its impact on the 2012 election. And no matter its merits, free trade just doesn’t play well politically when American voters can’t find work.

But Silva hasn’t given up the FTA fight and hopes to turn that argument around on its head by showing that the pact — under which all tariffs on Colombian imports into the United States will be phased out over time, as would tariffs on U.S. exports to Colombia — will create, not kill, American jobs.

In recent weeks, the embassy has embarked on an email blitz to hammer that point home, sending out a barrage of press releases and news bulletins. The latest was a July 13 email headlined “The Message is Clear: It’s Time to Approve the U.S.-Colombia FTA,” which asserted that the FTA’s passage would boost American exports by $1.1 billion, increase the nation’s GDP by nearly $2.5 billion, and support thousands of jobs in both countries.

Silva warned that “every day and every month the FTA is delayed, it’s costing American jobs. The two economies don’t compete against each other. We don’t produce cars, planes or capital goods. The increase in trade enhances both countries’ economic growth. We are not taking market share from each other, and that makes Colombia unique.”

Moreover, Colombia is a strong U.S. ally in the region and bilateral relations have never been better, although the ambassador concedes that the FTA logjam has really soured the mood back home.

“There is still significant skepticism in Colombia for two reasons: this delay, and because the trade preferences that have supported us for 20 years — and that were approved when I was ambassador 17 years ago — were not renewed. It’s a critical trade policy that allowed free access for Colombian products in the U.S. as support for Colombia’s efforts against organized crime and drug trafficking. They expired in February, badly hurting our economy. So there are reasons to be skeptical. People are very bitter about this situation. It’s not enough that the president tells them this is part of U.S. domestic politics. They don’t care.”

Asked why ATPA benefits were allowed to run out, Silva suggested that “they were a victim of internal discussions between Republicans and Democrats on trade policy.” But, he added, “that’s domestic politics and we don’t get into that.”

In the event though that the Colombia FTA is eventually approved, then ATPA and another program that expired at the end of 2010, the Generalized System of Preferences — which is designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from more than 100 countries and territories — would be renewed as well.

Silva said that would be a boon to American workers. “Slowly but surely, Americans have realized that delaying the FTA is destroying jobs in America,” the ambassador insisted. Noting that Colombia must import 70 percent of its corn and 95 percent of its wheat due to limited domestic production, he pointed out that “in 2008, U.S. farmers were the largest providers of agricultural products to Colombia. The U.S. had 46 percent of the Colombian food import market. That’s since fallen to 20 percent.”

“We were not going to wait for the U.S., so we’ve signed free trade agreements with Mercosur, Chile and Mexico,” he added, referring to the Mercosur trade bloc comprising Argentina, Brazil, Uruguay and Paraguay. “We’ve renegotiated an agreement with Canada, and also one with the European Union. These countries compete head-to-head with American farmers, in particular Brazil and Argentina.”

That is why Bob Stallman, president of the American Farm Bureau Federation, is so gung-ho about passing the FTA — now.

“Time is of the essence,” he said. “It’s important that Congress acts quickly to vote on the package by August recess. If not, we stand to lose this opening and it will come at a cost to America’s farmers and ranchers. After more than four years, we cannot afford to miss this opportunity.”

Doug Wolf, president of the National Pork Producers Council, agrees, saying it’s imperative that the deal is approved before Congress adjourns for a month. “U.S. pork producers need new and expanded market access to remain competitive in the global marketplace,” he said. “And the way to get that is through free trade agreements.”

Yet after the July 1 deadline fell by the wayside, the likelihood of significant movement this summer began to fade. And even if the FTAs are taken up again when Congress starts in the fall, opposition still abounds.

Photo: Larry Luxner
Bogotá, Colombia’s capital city, is home to 7.5 million inhabitants and ranks as one of South America’s largest metropolitan areas. Colombia is also the third-largest economy in Latin America, and supporters of a free trade agreement between Bogotá and Washington argue that it would boost American exports by $1.1 billion and support thousands of jobs in both countries.

The ambassador says there’s still a chance for action, however slim. “The mood in Washington is brighter than in Colombia,” he told The Diplomat last month. “Things have changed significantly in the last six months, increasing the possibilities of having the FTA and the trade preferences approved this summer. Once it’s approved, it takes six months to a year to implement, so the trade preferences would be a bridge.”

Perhaps Silva, 53, is an incurable optimist. Or maybe he’s just putting his best face forward, hoping against hope that Congress will endorse the FTA in the face of strident opposition by labor unions and other groups deeply critical of Colombia’s weak track record on human rights and political violence.

Under President Juan Manuel Santos, Colombia has tried address those concerns, completing a so-called action plan in April to better protect labor union members and leaders, more than 3,000 of whom have been killed over the last three decades in anti-union violence.

In 2008, while running for president, Obama himself in fact blasted the pact in a speech to the Pennsylvania AFL-CIO’s annual convention — only days after then-President George W. Bush asked Congress to quickly pass it. Obama vowed to fight the FTA with all the resources at his disposal “because the violence against unions in Colombia would make a mockery of the very labor protections that we have insisted be included in these kinds of agreements.”

Even though Obama has since reversed course and is now urging its passage, some Republicans who’ve been pushing for the deal for years are now blocking it because Democrats are linking it to the Trade Adjustment Assistance (TAA) program, which retrains and provides health care to U.S. workers who lose their jobs because of free trade agreements. Democrats had attached the program, which spent roughly $2.5 billion in 2010, to the FTA to appease the unions and bring them on board.

While Republicans deride TAA as a taxpayer boondoggle, Democrats still have lingering concerns about worker rights not only in the United States but back in Colombia — worries that have stalled the FTA for years. Silva though says that anyone who opposes the pact on those grounds is “looking backwards” at a Colombia that no longer exists.

“They see the Colombia that was very violent, and changing those perceptions isn’t easy, particularly when you haven’t been there lately. But the numbers speak volumes. Today, Washington has a higher murder rate than Bogotá. In 2002, we had 1,600 kidnappings. Last year, we had not even 50 kidnappings, and still less this year.”

He added: “Most of their concerns have to do with violence against union leaders and murders of activists, and protection of labor rights. In general, the country has improved dramatically, but now with President Santos, we’re going even further — not because it’s required for the FTA but because of our own convictions.”

In fact, he points out that Vice President Angelino Garzón is “one of the most recognized labor leaders in decades,” and that shortly after his inauguration a year ago this month, Santos reinstated the Ministry of Labor, which had been dismantled by Uribe.

“The action plan that was agreed on between the Obama and Santos administrations codifies and organizes many of the initiatives that the government has already proposed,” the ambassador said, noting that even the AFL-CIO recognizes the “significant progress” made since Santos took office.

“Labor leaders in Colombia say this is a completely different reality, and that the action plan is probably the biggest advance in protecting labor rights in 20 years. These things are being done not because the U.S. is demanding them, but because President Santos has a very progressive agenda.”

He added that Colombia has been off the International Labor Organization’s annual blacklist for two years now, and that if his country’s newly stringent labor standards are good enough for Canada and the 27-member European Union — which have the toughest labor codes in the world — then they should be good enough for the United States as well.

“There are other considerations. Sometimes, the argument about labor rights hides other motivations like protectionism — or people who don’t want to break out of their old molds for ideological reasons,” Silva suggested without naming names.

To be sure, he said, “Colombia has been affected by negative stereotypes, but we have made tremendous progress in the last 10 years defeating violence, improving human rights and reducing the presence of organized crime. On the economic side, Colombia has had consistent growth in the last decade, and is now the third-largest economy in Latin America. Ten years ago, Colombia could be dismissed as a small opportunity for American companies. Now, it’s critical.”

Photo: Larry Luxner
Soldiers take a break along a roadside kiosk in Valle del Cocora, Colombia. In recent years, the Colombian military has made impressive gains in its decades-long fight against FARC rebels trying to overthrow the government.

Under Plan Colombia — a U.S. financial and military aid program aimed at helping the country fight drug trafficking and end a guerrilla insurgency that’s gone on since the 1960s — Colombia has received more than $7 billion in assistance in the last 12 years. While annual allocations have dropped in the last few years, Colombia remains the largest single recipient of U.S. aid in Latin America.

As a result, the government has scored some major defeats against the country’s largest rebel group, the communist-inspired Revolutionary Armed Forces of Colombia (FARC). It has also broken most of the country’s major drug cartels, forcing the business to relocate to Mexico and Central America.

“If you go to Colombia now, you’ll see now that it was worth it,” said Silva, who is adamantly opposed to the decriminalization of marijuana and other illegal drugs. “Without that fight, we would have lost the country.”

For the last seven years, the country has been receiving $10 billion to $15 billion annually in foreign direct investment, particularly in the mining sector. Colombia provides 67 percent of all coal imported by the United States and now ranks as the world’s fourth-largest coal producer. It’s also the third-largest source of petroleum in Latin America after Mexico and Venezuela, with significant increases in gold and nickel production as well. As a result, Colombia is the sixth-largest market in the world for Caterpillar, a manufacturer of bulldozers and other earthmoving equipment.

“In the last eight years, since that Berlin Wall of violence and fear fell in Colombia, people have discovered how diverse our country is. It’s like when people flocked into East Germany. Now they’re flocking to Colombia because of all the opportunities.”

Agriculture represents one of the biggest such opportunities. In fact, while running the Colombian Coffee Growers’ Federation, Silva presided over the opening of the nation’s first Juan Valdez Café, at the Organization of American States Washington headquarters at 19th and F Streets. Since then, the chain has grown to nearly 180 outlets, 150 of which are in Colombia. There are also Juan Valdez outlets in Ecuador, Chile and Spain.

“The coffee federation is a very unique organization. It’s a model of how you can organize small farmers for their own benefit,” Silva said. “In countries like Colombia, the small farmer rules, and the federation protects the farmer from commercial interests that are not as fair as they should be.”

To help Colombia sell its side of the story, the embassy has hired two firms to advise it. Peck, Madigan, Jones & Stewart has signed a four-month, $100,000 contract with Proexport Colombia, the country’s trade and tourism agency, to “work toward opening the U.S. market and services to Colombia by seeking the approval of the FTA,” according to Justice Department records. The contract began April 13 and expires Aug. 12.

In addition, Proexport has hired Elmendorf | Ryan to lobby for the FTA’s passage, making it the first foreign government client for the firm, which is noted for its ties to pro-business Democrats. Proexport is paying Elmendorf | Ryan $140,000 for its services over a four-month period.

Silva is also personally reaching out to Capitol Hill. During his second tenure as ambassador, he’s brought 40 members of Congress, both Democrats and Republicans, to Colombia.

“We have taken those members who opposed the FTA, and they continue to oppose it. That’s perfectly OK,” he said. “But I believe that now, the U.S. understands that the FTA is not a concession to Colombia. It’s a win-win agreement.”

What happens, though, if all of Silva’s lobbying efforts fail and the FTA doesn’t get considered — much less approved — this year, or even next?

“My attitude toward life is that I never predict disasters. I don’t act on the basis of what won’t happen. I don’t even ask myself,” he replied. “But we trust this administration and our friends in Congress, both Democrats and Republicans. It’s difficult, it’s hard and we still have a long way to get there, but I’m convinced it’s going to work.”

About the Author

Larry Luxner is news editor of The Washington Diplomat.