The Proposed U.S.-Colombia Free Trade
Agreement: Economic and Political
Implications
M. Angeles Villarreal
Specialist in International Trade and Finance
April 16, 2010
Congressional Research Service
7-5700
www.crs.gov
RL34470
CRS Report for Congress
P
repared for Members and Committees of Congress
The Proposed U.S.-Colombia Free Trade Agreement: Economic and Political Implications
Summary
Implementing legislation for a U.S.-Colombia Free Trade Agreement (CFTA) (H.R. 5724/S.
2830) was introduced in the 110th Congress on April 8, 2008 under Title XXI (Bipartisan Trade
Promotion Authority Act of 2002) of the Trade Act of 2002 (P.L. 107-210). The House leadership
took the position that the President had submitted the legislation to implement the agreement
without adequately fulfilling the requirements of Trade Promotion Authority. On April 10 the
House voted 224-195 to make certain provisions in § 151 of the Trade Act of 1974 (P.L. 93-618),
the provisions establishing expedited procedures, inapplicable to the CFTA implementing
legislation (H.Res. 1092). It is currently unclear whether or how the 111th Congress will consider
implementing legislation for the pending U.S.-Colombia FTA.
The agreement would immediately eliminate duties on 80% of U.S. exports of consumer and
industrial products to Colombia. An additional 7% of U.S. exports would receive duty-free
treatment within five years of implementation and most remaining tariffs would be eliminated
within ten years of implementation. The agreement also contains provisions for market access to
U.S. firms in most services sectors; protection of U.S. foreign direct investment in Colombia;
intellectual property rights protections for U.S. companies; and enforceable labor and
environmental provisions.
The United States is Colombia’s leading trade partner. Colombia accounts for a very small
percentage of U.S. trade (0.8% in 2009), ranking 22nd among U.S. export markets and 27th as a
source of U.S. imports. About 90% of U.S. imports from Colombia enter the United States duty-
free, while U.S. exports to Colombia face duties of up to 20%. Economic studies on the impact of
a U.S.-Colombia free trade agreement (FTA) have found that, upon full implementation of an
agreement, the impact on the United States would be positive but very small because the size of
the Colombian economy is very small when compared to that of the United States (about 1.6%).
Numerous Members of Congress oppose the CFTA because of concerns about the violence
against labor union activists in Colombia. President Bush’s Administration believed that
Colombia had made significant advances to combat violence and instability and views the
pending trade agreement as a national security issue in that it would strengthen a key democratic
ally in South America.
President Barack Obama met with Colombian President Alvaro Uribe at the White House on June
29, 2009. After the meeting, President Obama stated that he had asked the United States Trade
Representative (USTR) to work closely with Colombian government representatives to see how
the two countries could move forward on the pending agreement. President Obama commended
Colombia for its progress in addressing the violence against labor union leaders. In March 2010,
USTR Ron Kirk stated that the Obama Administration is working on developing a finite list of
proposals to give to Colombia to resolve the issues that blocked congressional approval of a free
trade agreement with the United States and that the proposals would likely be related to worker
rights protection and the issue of persecution in Colombia. The Obama Administration also stated
in March 2010 that the pending FTAs with Colombia, Korea, and Panama are important to U.S.
national security, each for different reasons, because national security depends on economic
security and U.S. competitiveness. For Colombia, a free trade agreement with the United States is
part of its overall economic development strategy.
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The Proposed U.S.-Colombia Free Trade Agreement: Economic and Political Implications
Contents
Introduction ................................................................................................................................ 1
Rationale for the Agreement ........................................................................................................ 2
Review of the U.S.-Colombia Free Trade Agreement................................................................... 3
Key CFTA Provisions ........................................................................................................... 3
Market Access................................................................................................................. 3
Tariff Elimination and Phase-Outs................................................................................... 4
Agricultural Provisions ................................................................................................... 4
Information Technology .................................................................................................. 5
Textiles and Apparel........................................................................................................ 5
Government Procurement................................................................................................ 5
Services .......................................................................................................................... 5
Investment ...................................................................................................................... 6
IPR Protection................................................................................................................. 6
Customs Procedures and Rules of Origin......................................................................... 7
Labor Provisions ............................................................................................................. 7
Environmental Provisions ............................................................................................... 7
Dispute Settlement .......................................................................................................... 8
Bipartisan Trade Framework Amendments on Labor and Environment of May 10,
2007 .................................................................................................................................. 8
Amendments on Basic Labor Standards........................................................................... 9
Provisions on Environment ............................................................................................. 9
Other Provisions ........................................................................................................... 10
U.S.-Colombia Economic Relations .......................................................................................... 10
U.S.-Colombia Merchandise Trade...................................................................................... 11
Andean Trade Preference Act .............................................................................................. 13
U.S.-Colombia Bilateral Foreign Direct Investment............................................................. 15
Political Situation in Colombia.................................................................................................. 15
History of Violence in Colombia ......................................................................................... 16
Human Rights Issues........................................................................................................... 17
The Uribe Administration.................................................................................................... 17
U.S. Policy Toward Colombia ............................................................................................. 18
The Proposed CFTA: Issues for Congress.................................................................................. 19
Economic Impact ................................................................................................................ 19
Study Findings .............................................................................................................. 19
Agricultural Sector........................................................................................................ 21
Labor Issues........................................................................................................................ 22
Violence Issues ................................................................................................................... 23
Conclusion................................................................................................................................ 25
Figures
Figure 1. U.S. Merchandise Trade with Colombia ..................................................................... 13
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The Proposed U.S.-Colombia Free Trade Agreement: Economic and Political Implications
Tables
Table 1. Key Economic Indicators for Colombia and the United States ...................................... 11
Table 2. U.S. Trade with Colombia, 2009 .................................................................................. 12
Table 3. U.S. Imports from Colombia ........................................................................................ 14
Table 4. U.S. Imports from Colombia under ATPA .................................................................... 14
Table 5. U.S. Direct Investment Position in Colombia ............................................................... 15
Contacts
Author Contact Information ...................................................................................................... 27
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The Proposed U.S.-Colombia Free Trade Agreement: Economic and Political Implications
Introduction
The proposed U.S.-Colombia Free Trade Agreement (CFTA) is a bilateral free trade agreement
between the United States and Colombia which, if ratified, would eliminate tariffs and other
barriers in goods and services between the two countries. The CFTA negotiations grew out of a
regional effort to produce a U.S.-Andean free trade agreement among the United States,
Colombia, Peru, and Ecuador in May 2004. After negotiators failed to reach an agreement for an
Andean free trade agreement (FTA), Colombia continued negotiations with the United States for
a bilateral trade agreement. On February 27, 2006, the United States and Colombia concluded the
U.S.-Colombia FTA, and finalized the text of the agreement on July 8, 2006. On August 24, 2006,
President Bush notified the Congress of his intention to sign the U.S.-Colombia FTA. The two
countries signed the agreement on November 22, 2006.
The United States-Colombia Trade Promotion Agreement Implementation Act (H.R. 5724/S.
2830) was introduced in the 110th Congress on April 8, 2008. The bills were introduced under
Title XXI (Bipartisan Trade Promotion Authority Act of 2002) of the Trade Act of 2002 (P.L. 107-
210). This act makes expedited legislative procedures established in § 151 of the Trade Act of
1974 (P.L. 93-618) available for congressional consideration of legislation to implement free
trade agreements negotiated under authority of the 2002 Act. Under these statutory procedures,
known as “trade promotion authority” or “TPA” and sometimes called “fast track” procedures,
Congress has a maximum of 90 days to consider the implementing legislation, the measure is
privileged for consideration, the length of consideration is limited, and amendments are
precluded.1
The House must act first on the bill, because the legislation would affect revenue, and under the
act it must do so within 60 days; the Senate cannot act until the bill passes the House. The Senate
could, nevertheless, take up and pass its own implementing bill, then hold it at the desk pending
the arrival of the House companion. In that case, however, the expedited procedures of the statute
(limiting debate, precluding amendment, etc.) would not be applicable for the Senate’s
consideration of its measure (except by unanimous consent)
It is currently unclear whether the 111th Congress will consider implementing legislation for the
proposed U.S.-Colombia FTA. In the 110th Congress, the House leadership took the position that
President Bush had submitted the legislation to implement the CFTA without adequately fulfilling
the requirements of the Trade Act of 2002 for consultation with Congress, and on April 10 the
House, by a vote of 224-195, adopted H.Res. 1092, making certain provisions of the expedited
procedure inapplicable to the CFTA implementing legislation. H.Res. 1092 suspended the TPA
provision requiring that the committees of jurisdiction automatically be discharged from the
implementing bill if they had not reported it by 45 days of session after its introduction. It also
removed the TPA provision that making a motion to proceed to consideration of the bill highly
privileged and not debatable, thereby restoring the normal control exercised by the leadership
over the floor schedule if the committees of consideration were to report the implementing bill.
1 For more information on Trade Promotion Authority, see CRS Report RL33743, Trade Promotion Authority (TPA):
Issues, Options, and Prospects for Renewal, by J. F. Hornbeck and William H. Cooper.
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The Proposed U.S.-Colombia Free Trade Agreement: Economic and Political Implications
The adoption of H.Res. 1092 removed the obligation for the House to vote on the CFTA within
60 days of session, although the House leadership retained the ability to schedule a vote at any
time under the general rules of the House. If it chose to do so, consideration would most likely
occur pursuant to a special rule reported by the Committee on Rules and adopted by the House,
which would presumably establish terms for consideration similar to those directed by the TPA.
H.Res. 1092 did not change the TPA provisions that the CFTA is not amendable once it comes up
(although in principle, this restriction could be altered by the terms of a special rule for
considering the implementing bill). Nor does it alter the applicability of TPA rules in the Senate.
Because the 110th Congress did not consider implementing legislation for the CFTA,
implementing legislation is not necessarily eligible for “fast track” consideration in the 111th
Congress. Under TPA, a trade agreement and its implementing legislation can be submitted to
Congress pursuant to the act only once, and it is the President’s initial submission of the
agreement that triggers the 90-day process under expedited procedures. For this reason, it is
generally understood that the eligibility of the CFTA for expedited consideration under the statute
would not carry over or be renewed in a subsequent Congress, although this procedural point has
not been “officially tested,” because the Speaker has made no formal ruling on the matter from
the chair.2 The CFTA implementing legislation, however, could still be re-introduced in the 111th
Congress under the general rules of both houses, and could be considered in the House under a
TPA-like procedure pursuant to a special rule reported by the Committee on Rules and approved
by the House.
Rationale for the Agreement
Since the 1990s, the countries of Latin America and the Caribbean have been a focus of U.S.
trade policy as demonstrated by the passage of the North American Free Trade Agreement
(NAFTA), the U.S.-Chile Free Trade Agreement, the Dominican Republic-Central America Free
Trade Agreement (CAFTA-DR), and the U.S.-Peru Trade Promotion Agreement. The Bush
Administration made bilateral and regional trade agreements key elements of U.S. trade policy.
U.S. trade policy in the Western Hemisphere over the past few years has been focused on
completing trade negotiations with Colombia, Peru, and Panama and on gaining passage of these
free trade agreements by the U.S. Congress. The U.S.-Peru FTA was approved by Congress and
signed into law in December 2007 (P.L. 110-138).3
A free trade agreement with Colombia would increase market access for U.S. goods and services
in the Colombian market, currently not the case under the Andean Trade Preference Act (ATPA).
ATPA is a unilateral trade preference program in which the United States extends preferential
duty treatment to select Colombian goods entering the United States. It is part of a broader U.S.
initiative with Latin America to address the illegal drug issue (see section on ATPA later in this
report). About 90% of U.S. imports from Colombia enter the United States duty-free under ATPA,
under other U.S. trade preferences, or through normal trade relations.
2 Inside U.S. Trade, “House Approves Fast-Track Rules Change for U.S.-Colombia FTA,” April 11, 2008.
3 For more information, see CRS Report RL34108, U.S.-Peru Economic Relations and the U.S.-Peru Trade Promotion
Agreement, by M. Angeles Villarreal.
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The major expectation among proponents of the pending free trade agreement with Colombia, as
with other trade agreements, is that it would provide economic benefits for both the United States
and Colombia as the level of trade increases between the two countries. Another expectation is
that it would improve investor confidence and increase foreign direct investment in Colombia,
which would bring more economic stability to the country. For Colombia, a free trade agreement
with the United States is part of the country’s overall development strategy and efforts to promote
economic growth and stability.
Review of the U.S.-Colombia Free Trade Agreement
Key CFTA Provisions4
The comprehensive free trade agreement would eliminate tariffs and other barriers to goods and
services. The agreement was reached after numerous rounds of negotiations over a period of
nearly two years. Some issues that took longer to resolve were related to agriculture. Colombia
had been seeking lenient agriculture provisions in the agreement, arguing that the effects of
liberalization on rural regions could have adverse effects on smaller farmers and drive them to
coca production. The United States agreed to give more sensitive sectors longer phase-out periods
to allow Colombia more time to adjust to trade liberalization. Sectors receiving the longest phase-
out periods included poultry and rice.5
This section summarizes several key provisions in the original agreement text as provided by the
United States Trade Representative (USTR), unless otherwise noted.6
Market Access
The agreement would provide for the elimination of tariffs on bilateral trade in eligible goods.
Colombia’s average tariff on U.S. goods is 12.5% while the average U.S. tariff on Colombian
goods is 3%. Colombia applies tariffs in the 0-5% range on range on capital goods, industrial
goods, and raw materials; 10% on manufactured goods with some exceptions; and 15% to 20%
on consumer and “sensitive” goods.7 Upon implementation, the agreement would eliminate 80%
of duties on U.S. exports of consumer and industrial products to Colombia. An additional 7% of
U.S. exports would receive duty-free treatment within five years of implementation and most
remaining tariffs would be eliminated within ten years after implementation.
4 The text of the U.S.-Colombia Free Trade Agreement (CFTA) is available online at the Office of the United States
Trade Representative (USTR) website: http://www.ustr.gov.
5 Bureau of National Affairs, International Trade Reporter, “Colombia and U.S. Reach FTA after Resolving
Agriculture Issues,” March 2, 2006.
6 USTR, Trade Facts, “Free Trade with Colombia: Summary of the United States-Colombia Trade Promotion
Agreement,” June 2007.
7 See USTR, 2008 National Trade Estimate Report on Foreign Trade Barriers, March 2008.
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Tariff Elimination and Phase-Outs
The pending CFTA would eliminate most tariffs immediately upon implementation of the
agreement and phase out the remaining tariffs over periods of up to 19 years. Tariff elimination
for major sectors would include the following:
• Upon implementation of an agreement, more than 99% of U.S. and almost 76%
of Colombian industrial and textile tariff lines would be free of duty. Virtually all
industrial and textile tariff lines would be duty-free ten years after
implementation.8
• All tariffs in textiles and apparel that meet the agreement’s rules-of-origin
provisions would be eliminated immediately (see section on Textiles and Apparel
below).9
• Tariffs on agricultural products would be phased out over a period of time,
ranging from three to 19 years (see section on Agricultural Provisions below).
Colombia would eliminate quotas10 and over-quota tariffs in 12 years for corn
and other feed grains, 15 years for dairy products, 18 years for chicken leg
quarters, and 19 years for rice.11
Agricultural Provisions
Under ATPA, almost all of Colombia’s agricultural exports enter the U.S. market free of duty. The
pending CFTA would make these trade preferences permanent. Colombia currently applies some
tariff protection on all agricultural products. The pending CFTA would provide duty-free access
on 77% of all agricultural tariff lines, accounting for 52% of current U.S. exports to Colombia,
upon implementation. Colombia would eliminate most other tariffs on agricultural products
within 15 years.12 U.S. farm exports to Colombia that would receive immediate duty-free
treatment include high-quality beef, cotton, wheat, soybeans, soybean meal, apples, pears,
peaches, cherries, and many processed food products including frozen french fries and cookies.
U.S. farm products that would receive improved market access include pork, beef, corn, poultry,
rice, fruits and vegetables, processed products, and dairy products. The agreement would also
provide duty-free tariff rate quotas on standard beef, chicken leg quarters, dairy products, corn,
sorghum, animal feeds, rice, and soybean oil.13
8 United States International Trade Commission (USITC), U.S.-Colombia Trade Promotion Agrement: Potential
Economy-wide and Selected Sectoral Effects, USITC Publication 3896, December 2006, pp. 2-1 and 2-2.
9 Ibid.
10 Tariff rate quotas are limits on the quantity of imports that can enter a country duty-free before tariff-rates are
applied.
11 United States Department of Agriculture (USDA), Foreign Agricultural Service, Fact Sheet: U.S.-Colombia Trade
Promotion Agreement Overall Agriculture Fact Sheet, August 2008.
12 Ibid.
13 USTR, Trade Facts: Free Trade with Colombia, Summary of the United States-Colombia Trade Promotion
Agreement,” June 2007.
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Colombia has a “price-band” import duty system on certain agricultural products. Under the price
band system, variable duties are imposed on top of ad valorem tariffs to keep domestic prices
within a predetermined range. This system results in higher duties for certain U.S. exports to
Colombia, including corn, wheat, rice, soybeans, pork, poultry, cheeses, and powdered milk. A
CFTA would remove Colombia’s price band system upon implementation of the agreement.
However, if the rates under the price band system result in a lower rate than that given under the
FTA, the United States will be allowed to sell the product to Colombia at the lower rates.14
Information Technology
Under a CFTA, Colombia would join the World Trade Organization’s Information Technology
Agreement (ITA), and remove its tariff and non-tariff barriers to information technology products.
Colombia would allow trade in remanufactured goods under the agreement, which would increase
export and investment opportunities for U.S. businesses involved in remanufactured products
such as machinery, computers, cellular telephones, and other devices.
Textiles and Apparel
In textiles and apparel, products that meet the agreement’s rules of origin requirements would
receive duty-free and quota-free treatment immediately. The United States and Colombia have
cooperation commitments under the agreement that would allow for verification of claims of
origin or preferential treatment, and denial of preferential treatment or entry if the claims cannot
be verified. The rules of origin requirements are generally based on the yarn-forward standard to
encourage production and economic integration. A “de minimis” provision would allow limited
amounts of specified third-country content to go into U.S. and Colombian apparel to provide
producers in both countries flexibility. A special textile safeguard would provide for temporary
tariff relief if imports prove to be damaging to domestic producers.
Government Procurement
In government procurement contracts, the two countries agreed to grant non-discriminatory rights
to bid on government contracts. These provisions would cover the purchases of Colombia’s
ministries and departments, as well as its legislature and courts. U.S. companies would also be
assured access to the purchases of a number of Colombia’s government enterprises, including its
oil company.
Services
In services trade, the two countries agreed to market access in most services sectors, with very
few exceptions. Colombia agreed to exceed commitments made in the WTO and to remove
significant services and investment barriers, such as requirements that U.S. firms hire nationals
rather than U.S. citizens to provide professional services. Colombia also agreed to eliminate
requirements to establish a branch in order to provide a service and unfair penalties imposed on
14 USITC Publication 3896, December 2006, p. 3-4.
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U.S. companies for terminating their relationships with local commercial agents. U.S. financial
service suppliers would have full rights to establish subsidiaries or branches for banks and
insurance companies. Portfolio managers would be able to provide portfolio management services
to both mutual funds and pension funds in the partner country, including to funds that manage
privatized social security accounts.
Investment
Investment provisions would establish a stable legal framework for foreign investors from the
partner country. All forms of investment would be protected, including enterprises, debt,
concessions and similar contracts, and intellectual property. U.S. investors would be treated as
Colombian investors with very few exceptions. U.S. investors in Colombia would have
substantive and procedural protections that foreign investors have under the U.S. legal system,
including due process protections and the right to receive fair market value for property in the
event of an expropriation. Protections for U.S. investments would be backed by a transparent,
binding international arbitration mechanism. In the preamble of the agreement, the United States
and Colombia agreed that foreign investors would not be accorded greater substantive rights with
respect to investment protections than domestic investors under domestic law.15
IPR Protection
The agreement would provide intellectual property rights (IPR) protections for U.S. and
Colombian companies. In all categories of IPR, U.S. companies would be treated no less
favorably than Colombian companies. In trademark protection the agreement would require the
two countries to have a system for resolving disputes about trademarks used in internet domain
names; to develop an on-line system for the registration and maintenance of trademarks and have
a searchable database; and have transparent procedures for trademark registration.
In protection of copyrighted works, the agreement has a number of provisions for protection of
copyrighted works in a digital economy, including provisions that copyright owners would
maintain rights over temporary copies of their works on computers. Other agreement provisions
include rights for copyright owners for making their work available on-line; extended terms of
protection for copyrighted works; requirements for governments to use only legitimate computer
software; rules on encrypted satellite signals to prevent piracy of satellite television
programming; and rules for the liability of Internet Service Providers for copyright infringement.
In protection of patents and trade secrets, U.S. companies are concerned that the Colombian
government currently does not provide patent protection for new uses of previously known or
patented products. The pending CFTA would limit the grounds on which a country could revoke a
patent, thus protecting against arbitrary revocation. In protection of test data and trade secrets, the
agreement would protect products against unfair commercial use for a period of five years for
pharmaceuticals and ten years for agricultural chemicals. In addition, the agreement would
require the establishment of procedures to prevent marketing of pharmaceutical products that
15 USTR, Trade Facts: Free Trade with Colombia, Summary of the United States-Colombia Trade Promotion
Agreement, June 2007.
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infringe patents, and provide protection for newly developed plant varieties. The parties
expressed their understanding that the intellectual property chapter would not prevent either party
from taking measures to protect public health by promoting access to medicines for all.
The United States is concerned with music and motion picture property piracy in Colombia. The
CFTA IPR provisions would include penalties for piracy and counterfeiting and criminalize end-
user piracy. It would require the parties to authorize the seizure, forfeiture, and destruction of
counterfeit and pirated goods and the equipment used to produce them. The agreement would
mandate both statutory and actual damages for copyright infringement and trademark piracy. This
would ensure that monetary damages could be awarded even if a monetary value to the violation
was difficult to assess.
Customs Procedures and Rules of Origin
The agreement includes comprehensive rules of origin provisions that would ensure that only
U.S. and Colombian goods could benefit from the agreement. The agreement also includes
customs procedures provisions, including requirements for transparency and efficiency,
procedural certainty and fairness, information sharing, and special procedures for the release of
express delivery shipments.
Labor Provisions
The labor and worker rights obligations are included in the core text of the agreement. The United
States and Colombia reaffirmed their obligations as members of the International Labor
Organization (ILO). The two countries agreed to adopt, maintain and enforce laws that
incorporate core internationally-recognized labor rights, as stated in the 1998 ILO Declaration on
Fundamental Principles and Rights at Work, including a prohibition on the worst forms of child
labor. The parties also agreed to enforce labor laws with acceptable conditions of work, hours of
work, and occupational safety and health. All obligations of the CFTA chapter on labor would be
subject to the same dispute settlement procedures and enforcement mechanisms as other chapters
of the agreement.
The agreement includes procedural guarantees to ensure that workers and employers would have
fair, equitable, and transparent access to labor tribunals or courts. It has a cooperative mechanism
to promote respect for the principles embodied in the 1998 ILO Declaration, and compliance with
ILO Convention 182 on the Worst Forms of Child Labor. The United States and Colombia agreed
to cooperative activities on laws and practices related to ILO labor standards; the ILO convention
on the worst forms of child labor; methods to improve labor administration and enforcement of
labor laws; social dialogue and alternative dispute resolution; occupational safety and health
compliance; and mechanisms and best practices on protecting the rights of migrant workers.
Environmental Provisions
The environmental obligations are included in the core text of the agreement. The agreement
would require the United States and Colombia to effectively enforce their own domestic
environmental laws and to adopt, maintain, and implement laws and all other measures to fulfill
obligations under covered multilateral environmental agreements (MEAs). Both countries
committed to pursue high levels of environmental protection and to not derogate from
environmental laws in a manner that would weaken or reduce protections. The agreement
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includes procedural guarantees that would ensure fair, equitable, and transparent proceedings for
the administration and enforcement of environmental laws. In addition, the agreement includes
provisions to help promote voluntary, market-based mechanisms to protect the environment and
to ensure that views of civil society are appropriately considered through a public submissions
process. All obligations in the environmental chapter of the agreement would be subject to the
same dispute settlement procedures and enforcement mechanisms as obligations in other chapters
of the agreement.
Dispute Settlement
The core obligations of the agreement, including labor and environmental provisions, are subject
to dispute settlement provisions. The agreement’s provisions on dispute panel proceedings
include language to help promote openness and transparency through open public hearings;
public release of legal submissions by parties; and opportunities for interested third parties to
submit views. The provisions would require the parties to make every attempt, through
cooperation and consultations, to arrive at a mutually satisfactory resolution of a dispute. If the
parties are unable to settle the dispute through consultations, the complaining party would have
the right to request an independent arbitral panel to help resolve the dispute. Possible outcomes
could include monetary penalties or a suspension of trade benefits.
Bipartisan Trade Framework Amendments on Labor and
Environment of May 10, 2007
In early 2007, a number of Members of Congress indicated that some of the provisions in pending
U.S. FTAs would have to be strengthened to gain their approval, particularly relating to core labor
standards. After several months of negotiation, Congress and the Bush Administration reached an
agreement on May 10, 2007 on a new bipartisan trade framework that calls for the inclusion of
core labor and environmental standards in the text of pending and future trade agreements. On
June 28, 2007, the United States reached an agreement with Colombia on legally-binding
amendments to the CFTA on labor, the environment, and other matters to reflect the bipartisan
agreement of May 10.
The amendments to the FTA were based on the agreement reached between the Bush
Administration and Congress on May 10, 2007 and are similar to the amendments that were made
to the U.S.-Peru free trade agreement, which was approved by Congress in December 2008. At
the time they were announced, the Bush Administration stated that, because the new
commitments would have to be “legally binding”, they could not have been incorporated into the
agreement as side letters. Some of the key amendments include obligations related to five basic
ILO labor rights, multilateral environmental agreements (MEAs), and pharmaceutical intellectual
property rights (IPR). These provisions would be fully enforceable through the FTA’s dispute
settlement mechanism. The Colombian government has approved the amendments. On October
30, 2007, the Colombian Senate “overwhelmingly” approved the labor and environmental
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amendments to the CFTA, marking the end of the approval process for the agreement in
Colombia.16
Amendments on Basic Labor Standards
After the bipartisan agreement, the Administration reached an agreement with Colombia to
amend the CFTA to require the parties to “adopt, maintain and enforce in their own laws and in
practice” the five basic internationally-recognized labor standards, as stated in the 1998 ILO
Declaration. The amendments to the agreement strengthened the earlier labor provisions which
only required the signatories to strive to ensure that their domestic laws would provide for labor
standards consistent with internationally recognized labor principles.
The amendments that resulted from the bipartisan trade framework were intended to enhance the
protection and promotion of worker rights by including enforceable ILO core labor standards in
the agreement. These include 1) freedom of association; 2) the effective recognition of the right to
collective bargaining; 3) the elimination of all forms of forced or compulsory labor; 4) the
effective abolition of child labor and a prohibition on the worst forms of child labor; and 5) the
elimination of discrimination in respect of employment and occupation. These obligations would
refer only to the 1998 ILO Declaration on the Fundamental Principles and Rights at Work.
Another change to the agreement relates to labor law enforcement. Any decision made by a
signatory on the distribution of enforcement resources would not be a reason for not complying
with the labor provisions. Under the amended provisions, parties would not be allowed to
derogate from labor obligations in a manner affecting trade or investment. Labor obligations
would be subject to the same dispute settlement, same enforcement mechanisms, and same
criteria for selection of enforcement mechanisms as all other obligations in the agreement.
Provisions on Environment
In the original text of the agreement, the parties would have been required to “effectively
enforce” their own domestic environmental laws; this was the only environmental provision that
would have been enforceable through the agreement’s dispute settlement procedures. Other
environmental provisions in the original text, that were not enforceable, included provisions on
environmental cooperation, procedural guarantees for enforcement of environmental laws, and
provisions for a public submissions process. Under the amended version of the proposed FTA, the
United States and Colombia agreed to effectively enforce their own domestic environmental laws,
and to adopt, maintain, and implement laws and all other measures to fulfill obligations under the
seven covered multilateral environmental agreements (MEAs). The amended agreement states
that all obligations in the environment chapter would be subject to the same dispute settlement
procedures and enforcement mechanisms as all other obligations in the agreement.
16 Bureau of National Affairs, Inc., International Trade Reporter, “Colombian Senate Overwhelmingly Approves
Labor-Related Amendments to FTA with U.S.,” November 1, 2007.
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Other Provisions
Other amendments to the proposed FTA include provisions on intellectual property, government
procurement, and port security. On intellectual property rights (IPR) protection, some Members
of Congress were concerned that the original commitments would have prevented the poor from
having access to medicines to treat AIDS or other infectious diseases. The amended agreement
was a way of trying to find a balance between the need for IPR protection for pharmaceutical
companies to foster innovation and the desire for promoting access to generic medicines to all
segments of the population. The amended text of the agreement maintains the five years of data
exclusivity for test data related to pharmaceuticals. However, if Colombia relies on U.S. Federal
Drug Administration (FDA) approval of a given drug, and meets certain conditions for
expeditious approval of that drug in Colombia, the data exclusivity period would expire at the
same time that the exclusivity expired in the United States. This could allow generic medicines to
enter more quickly into the market in Colombia.
In government procurement, the amended provisions would allow U.S. state and federal
governments to condition government contracts on the adherence to the core labor laws in the
country where the good is produced or the service is performed. Government agencies also would
be allowed to include environmental protection requirements in their procurements. Concerning
port security, a new provision would ensure that if a foreign-owned company were to provide
services at a U.S. port that would raise national security concerns, the CFTA would not be an
impediment for U.S. authorities in taking actions to address those concerns.17
U.S.-Colombia Economic Relations
With a population of 46 million people, Colombia is the third most populous country in Latin
America, after Brazil and Mexico. Colombia’s economy, the fifth-largest economy in Latin
America, is quite small when compared to that of the United States. Colombia’s gross domestic
product (GDP) in 2009 was $235 billion, about 1.6% of U.S. GDP of $14.3 trillion in 2009 (see
Table 1). Colombia’s exports accounted for 17% of GDP in 2009, while imports accounted for
19%. The United States is the leading export market for Colombian imports and exports. Any
change in U.S. demand for Colombian products could have a noticeable effect on Colombia’s
economy.
17 Office of the United States Trade Representative, Trade Facts, “Bipartisan Trade Deal,” Bipartisan Agreement on
Trade Policy, May 2007, pp. 4-5.
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Table 1. Key Economic Indicators for Colombia and the United States
Colombia
United States
1999 2009a 1999 2009a
Population (millions)
40 46 279 307
Nominal GDP ($US billions)b 97
235
9,354
14,258
GDP, PPPc Basis ($US billions) 212
403
9,354
14,258
Per Capita GDP ($US)
2,449
5,080
33,520
46,480
Per Capita GDP in $PPPc
5,3330 8,690 33,520 46,480
Total Merchandise Exports (US$ billions) 12
33
696
1,057
Exports as % of GDPd 15%
17%
11%
11%
Total Merchandise Imports (US$billions)
11 33
1,025
1,558
Imports as % of GDPd
17% 19% 13% 14%
Source: Compiled by CRS based on data from the Economist Intelligence Unit (EIU) on-line database.
a. Some figures for 2009 are estimates.
b. Nominal GDP is calculated by EIU based on figures from World Bank and World Development Indicators.
c. PPP refers to purchasing power parity, which attempts to factor in price differences across countries when
estimating the size of a foreign economy in U.S. dollars.
d. Exports and Imports as % of GDP are derived by the EIU and include trade in both goods and services.
U.S.-Colombia Merchandise Trade
The United States is Colombia’s leading trade partner. In 2009, 39% of Colombia’s exports went
to the United States, compared to 37% in 2008 and 34% in 2007. Twenty-nine percent of
Colombia’s imports were supplied by the United States in 2009, the same as in 2008 but slightly
higher than the 2007 figure of 27%. Venezuela is Colombia’s second most significant trade
partner, accounting for 12% of Colombia’s exports and 3% of Colombia’s imports. Other major
trade partners for Colombia are China, Mexico, and Brazil.
Colombia accounts for a very small percentage of U.S. trade (0.8% in 2009). Colombia ranks 22nd
among U.S. export markets and 27th in the world as a source of U.S. imports. U.S. exports to
Colombia totaled $8.8 billion in 2009, while U.S. imports totaled $11.2 billion. As shown in
Table 2, the dominant U.S. import item from Colombia is crude oil (43% of U.S. imports from
Colombia in 2009), followed by coal (10% of total), and gold (9% of total). The leading U.S.
export items are petroleum oils, other than crude, (14% of U.S. exports to Colombia in 2009),
machinery parts (4% of total), and corn (3% of total).
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Table 2. U.S. Trade with Colombia, 2009
U.S. Exports
U.S. Imports
Leading Items
Leading Items
(HTS 4 Digit
(HTS 4 Digit
Level)
$ Millions
Sharea
Level)
$ Millions
Sharea
Petroleum oils
1,187.6 14%
Crude
4,812.6 43%
and oils from
petroleum oils
bituminous
and oils from
minerals (other
bituminous
than crude) and
minerals
products
Machinery parts
364.0
4% Coal and coal
1,079.0 10%
for trucks,
products
bulldozers,
snowplows, etc.
Corn (maize)
219.4
3% Gold
1,026.8
9%
Self-propelled
204.8 2%
Coffee
and
716.1 6%
bulldozers and
coffee products
related products
Aircraft,
199.6
2% Cut flowers and
506.7 5%
spacecraft, and
buds
parts
Al Other
6,576.7
75% Al Other
3,068.2
27%
Total Exports
8,752.1
— Total Imports
11,209.4
—
Source: Compiled by CRS using USITC Interactive Tariff and Trade DataWeb at http://dataweb.usitc.gov: HTS
4-digit level.
a. Totals may not add up due to rounding.
After increasing from $6.3 billion in 2003 to $13.1 billion in 2008, U.S. imports from Colombia
decreased to $11.2 billion in 2009. U.S. exports to Colombia also decreased in 2009 to $8.8
billion. Exports to Colombia had increased from $3.5 billion in 2003 to $10.6 billion in 2008
(see Figure 1). In the five-year period prior to 2003, both U.S. imports from and exports to
Colombia had gone through some fluctuations, without significant changes.
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Figure 1. U.S. Merchandise Trade with Colombia
14
12
10
s
8
n
6
llio
4
$ Bi
2
US
0
-2
-4
-6
1998
2000
2002
2004
2006
2008
Exports
Imports
Trade Balance
Source: Compiled by CRS using USITC Interactive Tariff and Trade DataWeb at http://dataweb.usitc.gov.
Andean Trade Preference Act
The United States currently extends duty-free treatment to imports from Colombia under the
Andean Trade Preference Act (ATPA), a regional trade preference program.18 Under the ATPA,
the United States also extends trade preferences to imports from Bolivia, Ecuador, and Peru.
ATPA was enacted on December 4, 1991 (Title II of P.L. 102-182), and was renewed and
modified under the Andean Trade Promotion and Drug Eradication Act (ATPDEA; Title XXXI of
P.L. 107-210) on August 6, 2002. Additional products receiving preferential duty treatment under
ATPDEA include certain items in the following categories: petroleum and petroleum products,
textiles and apparel products, footwear, tuna in flexible containers, and others. The most recent
extension of ATPA (P.L. 110-436) extended preferences for Colombia, Ecuador, and Peru through
the end of 2010. Bolivia’s designation as a beneficiary country was suspended in December 2008
because the country failed to meet the eligibility requirements set forth by the ATPA.
ATPA, as amended by ATPDEA, is part of a broader U.S. initiative with Andean countries to
address the drug trade problem with Latin America. It authorized the President to grant duty-free
treatment or reduced tariffs to certain products from Bolivia, Colombia, Ecuador, or Peru that met
domestic content and other requirements. The act (as a complement to crop eradication,
interdiction, military training, and other counter-narcotics efforts) is intended to promote
economic growth in the Andean region and to encourage a shift away from dependence on illegal
drugs by supporting legitimate economic activities. Increased access to the U.S. market is
18 For more information see CRS Report RS22548, ATPA Renewal: Background and Issues, by M. Angeles Villarreal.
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expected to help create jobs and expand legitimate opportunities for workers in the Andean
countries in alternative export sectors.
Table 3. U.S. Imports from Colombia
($ Millions)
2003 2004 2005 2006 2007 2008 2009
Total
Imports 6,346.2 7,360.6 8,770.3 9,239.8 9,251.2 13,058.8 11,209.4
Al
Duty-Free 4,109.2 6557.8 7,892.5 8,531.5 8,447.1 12,044.1 9,962.9
%
of
Total
65% 89% 90% 92% 91% 92% 89%
ATPAa
2,908.7 3,888.9 4,653.2 4,791.2 4,527.7 7,339.2 5,589.5
%
of
Total
46% 53% 53% 52% 49% 56% 50%
Source: Compiled by CRS using USITC data.
a. Includes imports under ATPA and ATPDEA.
Almost 90% of U.S. imports from Colombia receive duty-free treatment through preference
programs or normal trade relations (see Table 3). In 2009, 50% of total U.S. imports from
Colombia received preferential duty treatment under ATPA. Of those, the leading imports were
crude oil, cut flowers and buds, petroleum oil products (other than crude), and men’s woven
apparel. The trade preference program contributed to a rapid increase in ATPA imports from
Colombia. Between 2003 and 2008, total imports from Colombia increased by 106%, while ATPA
imports from Colombia increased by 153%. The rapid increase in import value was partially due
to an increase in the volume of imports caused by the trade preferences act, but rising prices of
mineral and energy-related imports were also a major factor. Crude oil and petroleum oil products
accounted for 77% of ATPA imports from Colombia in 2008 (see Table 4).
Table 4. U.S. Imports from Colombia under ATPA
($ Millions)
Import Itema
2003 2004 2005 2006 2007 2008 2009
Crude
Oil
1,692.9 2,299.7 2,897.1 3,183.7 3,152.6 5,813.9 4,318.2
Cut
Flowers
and
Buds 343.1 414.4 417.5 448.1 506.3 498.6 505.9
Oil and Products
321.2 405.5 454.6 202.5 141.2 375.3 249.0
(other than crude)
Men’s
Apparel
89.9 147.9 211.9 182.0 139.6 128.6 67.4
Total ATPAb
2,908.7 3,888.9 4,653.2 4,791.2 4,527.7 7,339.2 5,589.5
Source: Compiled by CRS using USITC data.
a. HTS 4-digt level.
b. Includes imports under ATPA and ATPDEA.
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U.S.-Colombia Bilateral Foreign Direct Investment
U.S. foreign direct investment in Colombia on a historical-cost basis totaled $6.3 billion in 2008
(see Table 5). The largest amount is in mining, which accounted for 52%, or $3.2 billion, of total
U.S. FDI in Colombia in 2008. The second largest amount, $1.3 billion (21% of total), is in
manufacturing, followed by $466 million in wholesale trade.
Table 5. U.S. Direct Investment Position in Colombia
(Historical-Cost Basis: 2008)
Industry Amount
% of Total
(U.S.$ Millions)
Mining 3,234 51.6%
Manufacturing
1,333
21.3%
Wholesale Trade
466
7.4%
Total 6,263
Source: Bureau of Economic Analysis, International Economic Accounts.
The proposed U.S.-Colombia FTA is expected to improve investor confidence in Colombia and
would likely increase the amount of U.S. FDI in the country. Investors from other countries
would also be expected to increase investment in Colombia as the FDI environment improves.
According to one study, FDI in Colombia is expected to increase by more than $2 billion from
2007 through 2010 as a result of the proposed CFTA.19
Political Situation in Colombia20
Much of the debate surrounding the proposed CFTA in the United States has focused on the issue
of violence in Colombia, particularly against labor union leaders. The issue of violence in
Colombia is complex and requires an understanding of the political situation in Colombia to be
put in perspective. Colombia is a democratic nation with a bicameral legislature. In spite of its
democratic tradition, Colombia has suffered from internal conflict for over 40 years. This conflict
and drug violence present unique challenges to Colombia’s institutions and threaten the human
rights of Colombian citizens. The Liberal and Conservative parties, which dominated Colombian
politics since the 19th century, have been weakened by their perceived inability to resolve the
19 United States International Trade Commission (USITC), U.S.-Colombia Trade Promotion Agreement: Potential
Economy-wide and Selected Sectoral Effects, Investigation No. TA-2104-023, USITC Publication 3896, December
2006, p. 7-3.
20 Unless otherwise noted, information on the economic and political situation in Colombia is from CRS Report
RL32250, Colombia: Issues for Congress, by June S. Beittel.
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roots of violence in Colombia. In 2002, Colombians elected an independent, Alvaro Uribe,
president, largely because of his aggressive plan to reduce violence in Colombia. President Uribe,
now in the final year of his second presidential term, retains widespread support in Colombia
although his support has declined somewhat due to the economic decline of 2009. His popularity
derives from the progress his government has made in improving the security situation in
Colombia. The next presidential election in Colombia will be on May 30, 2010, and President
Uribe will not run for a third term because the Constitutional Court of Colombia ruled against it.
History of Violence in Colombia
Colombia has a long tradition of civilian, democratic rule, yet has been plagued by violence
throughout its history. The U.S. Secretary of State has designated three Colombian groups as
foreign terrorist organizations. The three groups are the Revolutionary Armed Forces of Colombia
(FARC), the National Liberation Army (ELN), and the United Self-Defense Forces of Colombia
(AUC). Although the AUC disbanded in 2006, it remains a designated foreign terrorist
organization. According to the State Department’s April 2008 Country Report on Terrorism, the
Colombian government has made significant achievements against terrorist leadership targets in
Colombia. The report states that Colombia has maintained and strengthened its “Democratic
Security” strategy, which combines military, intelligence, police operations, and efforts to
demobilize combatants. It also provides public services in rural areas previously dominated by
armed groups. Kidnappings in Colombia by criminal groups significantly decreased in 2008. 21
The threat of extradition to the United States has been a strong weapon against drug traffickers
and terrorists. In 2008, Colombia extradited a record 208 defendants to the United States for
prosecution, most of which were Colombian nationals.22
Violence in Colombia has its roots in a lack of state control over much of Colombian territory,
and a long history of poverty and inequality. Conflicts between the Conservative and Liberal
parties have existed for more than 100 years and have killed hundreds of thousands of
Colombians. While a power-sharing agreement between the Liberal and Conservative parties
ended a civil war in 1957, it did not address the root causes of the violence. Numerous leftist
guerrilla groups inspired by the Cuban Revolution formed in the 1960s as a response to state
neglect and poverty. Rightwing paramilitaries were formed in the 1980s to defend landowners,
many of them drug traffickers, against guerrillas. Most of the rightist paramilitary groups were
coordinated by the AUC, which disbanded in 2006 after more than 30,000 of its members
demobilized. The AUC has been accused of gross human rights abuses and collusion with the
Colombian Armed Forces in their fight against the FARC and ELN. The AUC also participated in
narcotics trafficking. Major armed groups today are the FARC, the ELN, and the new generation
of paramilitary groups.
21 United States Department of State, Office of the Coordinator for Counterterrorism, Country Reports on Terrorism
2008, April 2009, pp. 11 and 155.
22 Ibid, p. 164.
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Human Rights Issues
The debate on U.S. policy toward Colombia and on the proposed free trade agreement with
Colombia has often focused on allegations of human rights abuses by the FARC and ELN,
paramilitary groups, and the Colombian Armed Forces. Human rights groups have reported a rise
in extrajudicial killings by Colombian security forces in recent years. U.S. policy has supported
the creation and assistance for a Human Rights Unit within the Colombian Attorney General’s
office, although some non-governmental groups have questioned its effectiveness.23
Relations between the Uribe Administration and human rights organizations have often been
tense because of the groups’ doubts about President Uribe’s commitment to human rights. There
was some speculation that President Uribe would not renew the United Nations High
Commissioner for Human Rights (UNHCHR) mandate in 2006. However, President Uribe
extended the UNHCHR’s mandate until October 30, 2010. The UNHCHR in its annual report has
criticized the paramilitary demobilization process and the government, along with paramilitaries
and leftist guerrillas, for human rights violations.
The March 2008 UNHCHR report credited the Colombian government with improving security
in the country and giving visibility to human rights issues. The UNHCHR acknowledged the
work of the Colombian Supreme Court in investigating possible ties between public officials and
business leaders with the paramilitaries. It described the significant challenges faced by the
Attorney General’s office in its attempts to indict demobilized paramilitaries under the framework
of the Justice and Peace Law, with no indictments issued in 2007. UNHCHR acknowledged that,
although it continued to receive complaints of extrajudicial killings by security officers,
Colombian military and civilian officials have developed new directives to deal with allegations
of abuses by security officials. As in the 2007 report, UNHCHR expressed concerns about the
activities and abuses committed by paramilitary forces that have rearmed, and by the FARC. The
report described the continued vulnerability of groups like women, children, Afro-Colombians,
the indigenous, journalists, union leaders, and human rights workers.24
The Uribe Administration
On August 7, 2006, independent Alvaro Uribe was sworn into his second term as president. Pro-
Uribe parties won a majority of both houses of congress in elections held in March 2006, giving
President Uribe a strong mandate as he started his second term. With the next presidential in
Colombia scheduled for May 30, 2010, President Uribe is coming to the end of his final term. A
referendum proposal that would have allowed him to run for a third term was rejected by
Colombia’s Constitutional Court in a 7-2 ruling on February 26, 2010. President Uribe has been
popular with the Colombian public for his strong stance against the FARC. He was successful in
23 Amnesty International and Human Rights Watch, “Colombia: U.S. Congress Should Maintain Hold on Military
Aid,” October 18, 2007 and Human Rights Watch, “A Wrong Turn: The Record of the Colombian Attorney General’s
Office,” November 2002.
24 United Nations General Assembly-Human Rights Council, “Report of the United Nations High Commissioner for
Human Rights on the Situation of Human Rights in Colombia,” February 29, 2008.
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reclaiming large areas of land held by the FARC, bringing more security to roads and cities in
Colombia, and luring back foreign investors with tax incentives and increased security.25
One major aspect of the Uribe Administration is the framework for paramilitary demobilization
under the Justice and Peace Law.26 President Uribe took a hard-line approach to negotiations with
armed groups, declaring that the government would only negotiate with those groups who are
willing to give up terrorism and agree to a cease-fire, including paramilitary groups, with which
former President Pastrana had refused to negotiate. There are indications that this hard-line
approach has produced measurable results. Some 30,000 paramilitaries have demobilized. Police
are now present in all of Colombia’s 1,098 municipalities, including areas from which they had
been previously ousted by guerrilla groups. Homicides fell from a high of nearly 30,000 in 2002
to just over15,000 in 2006, including deaths from the armed conflict. The number of kidnappings
also fell significantly, from nearly 3,600 reported cases in 2000 to just under 700 reported cases in
2006. In a political scandal in early 2008, Colombia’s Secretary General ordered the arrest of
former Colombian Senator Mario Uribe, a second cousin of President Uribe, on suspicion of
conspiracy for “agreements to promote illegal armed groups.”27 While some critics of President
Uribe view the scandal as evidence of the corruption in Colombia, the Uribe Administration
views the arrest as a demonstration of its efforts to pursue the law and combat corruption.
U.S. Policy Toward Colombia
The focus of U.S. policy toward Colombia has been to curb narcotics production and trafficking.
The United States also seeks to promote democracy and economic development in order to
strengthen regional security. Colombia’s spacious, rugged and sparsely populated territory
provides ample isolated terrain for drug cultivation and processing, and contributes to the
government’s difficulties in exerting control throughout the nation. The country is known for a
long tradition of democracy but has had to contend with continuing violence from leftist guerrilla
insurgencies dating from the 1960s and persistent drug trafficking activity. Plan Colombia, a
multi-year effort to address Colombia’s key challenges, has been the centerpiece of U.S. policy
toward Colombia since 2000.
The United States has made a significant commitment of funds and material support to help
Colombia and the Andean region fight drug trafficking since the development of Plan Colombia
in 1999. In support of the plan, Congress passed legislation providing $1.3 billion in assistance
for FY2000 (P.L. 106-246) and has provided more than $6 billion to support Plan Colombia from
FY2000 through FY2008 in both State Department and Defense Department accounts. Since
2002, Congress has granted the State Department expanded authority to use counternarcotics
funds for a unified campaign to fight both drug trafficking and terrorist organizations in
Colombia. In 2004, Congress raised the statutory cap on U.S. personnel allowed to be deployed to
Colombia in support of Plan Colombia. The three main illegally armed groups in Colombia
25 Financial Times, “Colombian Court Blocks Uribe Campaign,” February 28, 2010.
26 Colombia’s Justice and Peace Law, upheld by Colombia’s Constitutional Court in 2006, calls on demobilized
fighters to provide a voluntary account of their crime and to forfeit illegally acquired assets in exchange for an
alternative, more lenient prison penalty.
27 Chicago Tribune, “Uribe Cousin Ordered Jailed, Denied Asylum,” April 23, 2008.
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participate in drug production and trafficking and have been designated foreign terrorist
organizations by the State Department.
There is on-going debate concerning U.S. policy in Colombia. Proponents of current U.S. policy
point to inroads that have been made with regard to the eradication of illicit drug crops and
improved security conditions. However, nongovernmental organizations argue that U.S. policy
does not rigorously promote human rights, provide for sustainable economic alternatives for drug
crop farmers, and has not reduced the amount of drugs available in the United States.
The Proposed CFTA: Issues for Congress
Economic Impact
If and when fully implemented, the U.S.-Colombia FTA would likely have a have a small, but
positive, net economic effect on the United States. Colombia’s economy is small compared to the
U.S. economy (1.6%) and the value of U.S. trade with Colombia is a very small percentage of
overall U.S. trade. Most of the economy-wide trade effects of trade liberalization from the FTA
would arise from Colombia’s removal of tariff barriers and other trade restrictions.
Approximately 90% of U.S. imports from Colombia enter the United States duty-free, either
unconditionally or under the ATPA or other U.S. provisions; hence, the marginal effects of the
FTA on the U.S. economy likely would not be significant.
Study Findings
A study by the United States International Trade Commission (USITC) assessed the potential
effects of a U.S.-Colombia FTA on the U.S. economy. The study found that, in general, the
primary impact of an FTA with Colombia would be increased U.S. exports to Colombia as a
result of enhanced U.S. access to the Colombian market.28 Major findings of the USITC study on
the likely effects of a U.S.-Colombia FTA on the U.S. economy, should the agreement be fully
implemented, include the following:29
• U.S. exports to Colombia would increase by $1.1 billion (13.7%) and U.S.
imports from Colombia would increase by $487 million (5.5%). U.S. GDP would
increase by over $2.5 billion (less than 0.05%).
• The largest estimated increases in U.S. exports to Colombia, by value, would be
in chemical, rubber, and plastic products; machinery and equipment; and motor
vehicles and parts. In terms of percentage increases, the largest increases in U.S.
exports would be in rice and dairy products.
28 United States International Trade Commission (USITC), U.S.-Colombia Trade Promotion Agreement: Potential
Economy-wide and Selected Sectoral Effects, Investigation No. TA-2104-023, USITC Publication 3896, December
2006. (Hereinafter USITC, December 2006).
29 USITC, December 2006, pp. 2-1 and 2-2.
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• The largest estimated increases in U.S. imports from Colombia, by value, would
be in sugar and crops not elsewhere classified. The largest estimated increases in
U.S. imports, by percent, would be in dairy products and sugar.
• On an industry level, the FTA would result in minimal to no effect on output or
employment for most sectors of the U.S. economy. The U.S. sugar sector would
be the only sector with an estimated decline of more than 0.1% in output or
employment. The largest increases in U.S. output and employment would be in
the processed rice, cereal grains, and wheat sectors.
The USITC reviewed seven studies that it found on the probable economic effects of a U.S.-
Colombia FTA.30 The results of the studies reviewed by USITC varied. One study found that U.S.
exports to Colombia would increase by 2.4% to 8.3%, while another study assessed that the
expected increase would be 44%. Two studies found that the largest increases in U.S. exports
would be in agriculture products, metal and wood, and food products. In assessing the impact on
U.S. imports from Colombia, the results of the studies also varied. One study found that U.S.
imports from Colombia would increase by 2.0% to 6.2%, while another found that U.S. imports
would increase by 37%. The largest increases would be in apparel and leather goods, textile
products, and metal and wood. The studies also assessed that an FTA would result in small overall
welfare gains for both the United States and Colombia and a positive impact on the U.S.
agricultural sector despite an increase in U.S. sugar imports.31
The non-governmental Institute for International Economics (IIE) also has a study assessing the
possible impact of a U.S.-Colombia FTA on both the U.S. and Colombian economies.32 The study
found that the proposed U.S.-Colombia FTA would be expected to result in an increase in total
trade between the two countries. The total value of U.S. imports from Colombia would increase
by an estimated 37% while the value of U.S. exports to Colombia would increase by an estimated
44%.33 In terms of welfare gains, the study assessed that a U.S.-Colombia FTA would result in
small welfare benefits for both partners, though the gains would be larger for Colombia. On a
sectoral level, the study found that an agreement would have a minor sectoral effect on the U.S.
economy, but the effect would be more significant for Colombia because it is the smaller partner.
The study indicated that Colombia would face certain structural adjustment issues with a
displacement of low-skilled workers in some sectors, but that these workers would all be able to
find job possibilities in the expanding sectors.34
30 In its review of the seven economic studies, the USITC noted that these studies analyzed a proposed, possible, or
hypothetical U.S.-Colombia free trade agreement (FTA) and not the final text of the actual FTA that was the subject of
its investigation. Therefore, the underlying assumptions made in the reviewed studies may be different than those of the
USITC’s analysis.
31 USITC, December 2006, pp. 7-1 to 7-4.
32 Jeffrey J. Schott, editor, Institute for International Economics (IIE), Trade Relations Between Colombia and the
United States, August 2006. (Hereinafter IIE, August 2006).
33 IIE August 2006, Chapter 4, “Potential Benefits of a U.S.-Colombia FTA,” by Dean A. DeRosa and John P. Gilbert.
This chapter uses empirical and applied methods of economic analysis to examine the potential quantitative impact of a
U.S.-Colombia FTA and is one of the studies reviewed by the USITC in its assessment of a U.S.-Colombia FTA.
34 IIE, August 2006, p. 112.
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One of the drawbacks to a bilateral free trade agreement is that it may result in trade diversion
because it is not fully inclusive of all regional trading partners.35 Trade diversion results when a
country enters into an FTA and then shifts the purchase of goods or services (imports) from a
country that is not an FTA partner to a country that is an FTA partner even though it may be a
higher cost producer. In the case of the United States and Colombia, for example, goods from the
United States may replace Colombia’s lower-priced imports from other countries in Latin
America. If this were to happen, the United States would now be the producer of that item, not
because it produces the good more efficiently, but because it is receiving preferential access to the
Colombian market. The IIE study assessed that a CFTA probably would not cause trade diversion
in the United States, but that it could cause some trade diversion in Colombia. The IIE study
estimated that an FTA with the United States would result in a decrease in Colombia’s imports
from other countries of approximately 9%.36
Agricultural Sector
The USITC study found that one of the impacts of a U.S.-Colombia FTA would be increased U.S.
agriculture exports to Colombia as a result of enhanced U.S. access to the Colombian market.37 In
the agricultural sector, key findings of the study include the following:
• The removal of tariff and nontariff barriers would likely result in a higher level of
U.S. exports of meat (beef and pork) to Colombia. U.S. imports of meat from
Colombia would eventually increase, but are currently restricted by Colombia’s
lack of certification to export fresh, chilled, or frozen beef or pork to the United
States.
• Colombia’s elimination of trade barriers and certain government support
measures under a CFTA would likely result in increased U.S. grain exports to
Colombia. Rice would account for most of the increase, with yellow corn and
wheat accounting for the remaining balance.
• U.S. exports to Colombia in soybeans, soybean products, and animal feeds would
likely increase under a CFTA.38
According to the IIE study, the main gains to Colombia in agricultural trade would likely be more
secure and preferential market access to the U.S. market. U.S. agricultural exports would gain a
small but not insignificant preference in the Colombian market for temperate-zone agricultural
produce. The study’s authors state that the long time periods for phasing out tariffs for sensitive
products and safeguard provisions that would replace Colombia’s price band system would lessen
the impact of increased imports from the United States. One section of the study describes the
35 When a trade agreement lowers trade barriers on a good, production may shift from domestic producers to lower cost
foreign producers and result in substituting an imported good for the domestic good. This process is called trade
creation. Trade creation provides economic benefits as consumers have a wider choice of goods and services available
at lower costs. Trade creation also results in adjustment costs, however, usually in the form of domestic job losses as
production shifts to another country.
36 IIE, August 2006, pp. 88-89.
37 USITC Publication 3896, p. xv.
38 Ibid, pp. xvi-xvii.
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results of a global applied general equilibrium model on the pending FTA. In terms of the overall
effects on Colombia’s economy, the results of the study imply that, in the medium term,
Colombia would lose a net amount of $63 million, or about 0.06% of GDP. In the longer term,
however, Colombia would gain $550 million each year, or about a 0.5% permanent increase to
GDP.39
Labor Issues
The proposed CFTA includes the new trade-labor policy priorities that were established under the
May 10, 2007, “New Trade Policy for America” that was negotiated and agreed upon by the
Congress and the Bush Administration. This agreement incorporated key Democratic priorities
relating to labor and other issues on U.S. trade policy. Key concepts in the new trade-labor policy
include fully enforceable provisions that (1) incorporate ILO core labor standards as stated in the
1998 ILO Declaration on Fundamental Principles and Rights at Work (henceforth referred to as
the ILO Declaration);40 and (2) prohibit partner countries from weakening laws relating to ILO
core labor standards in order to attract trade or investment.
A number of U.S. labor groups oppose the idea of a free trade agreement with Colombia. They
maintain that Colombia’s labor movement is under attack through violence, intimidation, and
harassment, as well as legal channels. In a letter to Congress opposing the U.S.-Colombia FTA, a
number of trade unions voiced their concern about the violence against Colombian trade
unionists.41 The American Federation of Labor and Congress of Industrial Organizations (AFL-
CIO) is opposed to the agreement and has issued statements saying that Colombian labor union
members face daily legal challenges to their rights to organize and bargain collectively and that
these challenges threaten the existence of the Colombian labor movement. While the AFL-CIO
has acknowledged that President Uribe has made progress in protecting union members, it
continues to have concerns regarding the government’s commitment to “genuinely protect the
rights of workers to freely form unions and bargain collectively.”42
The official position of Colombian labor unions on the U.S.-Colombia FTA is in opposition to the
agreement, but the feelings among labor unionists are mixed. In May 2007, seventeen Colombian
unionists representing the textiles, flower, mining, and other Colombian industries visited the
U.S. Congress to speak out in favor of the agreement. Their main argument was that an FTA
would provide jobs for Colombia. However, another group of Colombian unions, consisting
mostly of government employees, have spoken out against the agreement, saying a CFTA would
39 IIE, August, 2006.
40 These are: “(a) the freedom of association and the effective recognition of the right to collective bargaining; (b) the
elimination of all forms of forced or compulsory labor; (c) the effective abolition of child labor; and (d) the elimination
of discrimination in respect of employment and occupation.” The ILO Declaration does not include in (c) the “worst
forms of child labor,” but the new text of the CFTA adds them to this list “for purposes of this agreement.”
41 A Letter to Congress from U.S. Trade Unions Opposing More U.S. Aid to the Colombian Military and the U.S.-
Colombia Free Trade Agrement, June 11, 2007.
42 AFL-CIO, Executive Council Statement, No Free Trade with Colombia Until Workers’ Rights Are Respected March
4, 2008.
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interfere with the Colombian government’s right to govern the country, and would have a
negative effect on Colombia’s agriculture sector and the economy in general.43
A high-level delegation from the ILO visited Colombia in November 2007 to assess the progress
being made there toward protecting workers’ rights. It was the first ILO-initiated mission to
Colombia since June 2006 when the Colombian government and representatives of Colombia’s
main employer and worker organizations signed the so-called Tripartite Agreement on Freedom
of Association and Democracy, which is aimed at securing the fundamental rights of workers.
Some observers viewed the ILO mission as a possible decision-making factor for some Members
of Congress who were concerned about the worker rights situation in Colombia.44 Following the
mission, the ILO Governing Body reviewed the Tripartite Agreement and “acknowledged that
there had been progress in social dialogue and freedom of association in the country due to the
Tripartite Agreement”, but also added that the situation needed improvement.45
In response to U.S. concerns regarding labor rights in Colombia, the Embassy of Colombia in the
United States issued a report in 2007 outlining the progress that Colombia had made in
strengthening the rights, benefits, and security of unions in Colombia. The report describes
government reforms in Colombia since 2002 that have helped protect Colombian worker rights to
form unions, bargain collectively, and strike. The report mentions government efforts to open
dialogue with union members, including meetings with the President and Vice President of
Colombia; a 2006 tripartite agreement made by workers, businesses, and government
representatives on freedom of association and democracy; steps taken by the Colombian
government to implement policies to protect labor union members; and judicial reforms in
Colombia to increase prosecutions.46 Despite the progress made by the Colombian government,
many observers continue to be concerned about the violence against trade unionists in the
country.
Violence Issues
A number of Members of Congress oppose the FTA with Colombia because of concerns about
violence against union members and other terrorist activity in Colombia. In a press release issued
in 2007, the House leadership issued a statement regarding the concerns regarding the “violence
in Colombia, the impunity, the lack of investigations and prosecutions, and the role of the
paramilitary.” The House Members stated that there must be “concrete evidence of sustained
results on the ground in Colombia” before they could support the FTA. In June 2007, several
43 Confederación General del Trabajo, letter to House Speaker Nancy Pelosi and House Ways and Means Committee
Chairman Charles Rangel, January 30, 2006. Central Unitaria de Trabajadores de Colombia (CUT), Rechazamos el
TLC Por Ello, Desautorizamos toda Opinión Sindical que Contrarie la Postura Institucional, April 12, 2007. CUT,
TLC: Todos Limosnearemos Comida, April 2008.
44 Bureau of National Affairs (BNA), International Trade Reporter, “Fate of U.S. Free Trade Pact with Colombia
Could Hinge in Part on ILO Visit This Month,” November 22, 2007.
45 International Labour Organization, “ILO Governing Body concludes 301st session - Considers labour situation in
Myanmar, Colombia and other countries, welcomes growing links with World Bank,” Press Release, March 20, 2008.
46 Embassy of Colombia, Washington, D.C., Colombia: A Progress Report: Strengthening the Rights, Benefits, and
Security of Unions, October 2007.
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Democratic House members said that the high rate of violence against trade unionists in
Colombia, made Colombia an “unfit free trade agreement partner for the United States.”47
Republican and some Democratic supporters of the FTA take issue with these charges, stating that
Colombia has made progress in recent years to curb the violence in the country. Certain Members
have stated that Colombia is a crucial ally of the United States in Latin America and that if the
FTA with Colombia is not passed, it may lead to further problems in the region. In a report issued
by USTR, a number of quotes by Members of Congress in support of a trade agreement with
Colombia were compiled. They were generally quoted as saying that the agreement had
implications for the economic and security interests of the United States in Colombia and that
Colombia had made significant progress in cutting down on the number of murders and other
criminal activities.48
The Bush Administration took the position that Colombia had made significant advances to
combat violence and instability under the Uribe Administration. A March 2008 fact sheet issued
by the Press Secretary of the White House states that President Uribe has “responded decisively
to concerns over the situation in Colombia that have been raised by some Members of
Congress.”49 The fact sheet states that President Uribe has demobilized tens of thousands of
members of paramilitary fighters; established an independent prosecutor’s unit; created a special
program to protect labor activists; and revised the pending FTA to include more rigorous labor
protections. The fact sheet also states that under President Uribe’s leadership, Colombia has been
a “strong and capable partner in fighting drugs, crime, and terror.”50
President Uribe has stated that, while there continued to be killings in Colombia, the situation had
improved under his administration and the Colombian government has made strong efforts to
curb violence against union members. According to data from the Colombian government the
number of assassinations of labor union activists and teachers decreased by 87% between 2002
and 2007, from 190 in 2002 to 26 in 2007. Total homicides in Colombia decreased from 26,540
in 2000 to 17,198 in 2007. Homicides of labor union members account for a very small
percentage of total homicides in Colombia: 0.2% of total homicides in 2007.51
Data on the number of labor leaders murdered in any given year vary widely. In 2002, the
Colombian government estimated that 196 labor activists were killed, while the National Labor
School (ENS, a Colombian NGO) estimated that 186 labor activists were killed. In 2006, the
Colombian government estimated that 60 labor activists were killed, while ENS estimated that 72
labor activists were killed. One reason for the discrepancy is that the Colombian government
counts deaths of unionized teachers separately from other labor union deaths.52
47 BNA, International Trade Reporter, “Five Democratic Lawmakers Blast Proposed Colombia FTA Due to Violence,”
June 14, 2007.
48 Office of the United States Trade Representative, Broad Support for U.S.-Colombia Free Trade Agreement: What
They’re Saying, March 2008.
49 The White House, Office of the Press Secretary, Fact Sheet: U.S.-Colombia Free Trade Agreement Essential To Our
National Security,” March 12, 2008.
50 Ibid, p. 2.
51 Colombia’s Observatorio del Programa Presidencial de DDHH y DIH, Vicepresidencia de la República, April 2008.
52 See CRS Report RL32250, Colombia: Issues for Congress, by June S. Beittel.
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Regarding the impunity issue, President Uribe has said that, in addition to working with the
Colombian Congress to expand the Office of the Prosecutor General, the government had made
important progress in strengthening Colombia’s judicial system and in increasing the budget for
the judicial system.53 According to the Colombian government, resources for both the judicial
branch and the Office of the Prosecutor General have increased annually since 2002. In 2008, the
government estimated a 75% increase in funding. The government reported that prosecutions
between 2001 and 2007 had increased and resulted in 106 convictions and 65 sentences.54
There is a lack of evidence regarding whether or not labor activists were killed because of their
union activity. Very few investigations have been completed—of the 470 union murders that have
occurred since President Uribe first took office in 2002, 97% remain unsolved. More than 2,000
killings between 1991 and 2006 remain unsolved. In January 2007, the Colombian Attorney
General’s Office set up a unit of 13 prosecutors and 78 investigators to investigate 200 priority
cases. In 2007 36 people were convicted on charges related to the murder of union members,
more than were convicted from 2004 through 2006.55
Conclusion
President Barack Obama met with Colombia’s President Alvaro Uribe at the White House on
June 29, 2009. President Obama stated after the meeting that he had asked U.S. Trade
Representative (USTR) Ron Kirk to work closely with Colombian government representatives to
see how the two countries could proceed on the pending FTA. In March 2010, USTR Kirk stated
to the Senate Finance Committee that the Obama Administration is working on developing a
finite list of proposals to give to Colombia to resolve the issues that blocked congressional
approval of a free trade agreement with the United States. He said that the Administration is
developing a workable list of legislative and other issues that the two countries can work through
and that it would not be fair to “keep moving the goal posts” for Colombia. The proposals would
likely be related to worker rights protection and persecution.56
The Obama Administration reportedly will make a case for moving the pending FTA with
Colombia as part of the national security agenda, at the appropriate time, according to Michael
Froman, deputy national security adviser for international economic affairs and deputy assistant
to the president.57 In April 2010, U.S. Defense Secretary Robert M. Gates met with President
Alvaro Uribe and Defense minister Gabriel Silva Luján in Colombia to discuss bilateral
collaboration on national security issues, and stated that his talks extended to the importance of
getting an FTA between the two countries ratified. Secretary Gates spoke very positively about
53 Caracol Radio personal interview with President Alvaro Uribe, “Se Hara Todo el Esfuerzo Para Que No Se Le
Niegue el TLC a Colombia, Anuncia el Presidente de Colombia en Entrevista a Caracol Radio,” May 3, 2007.
54 Embassy of Colombia, pp. 11-12.
55 Frank Bajak, “U.S. Unionists Alarmed by Colombia Woes,” Miami Herald, February 13, 2008; and “Trade, Death
and Drugs,” The Economist, May 19, 2007.
56 BNA, International Trade Reporter, “Kirk Says Obama Administration Working on Proposals for Colombia to
Unblock FTA,” March 11, 2010.
57 BNA, International Trade Reporter, “Obama Administration sees FTAs as Part of National Security,” March 18,
2010.
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the progress that Colombia had made in lowering violence in the country and expressed that an
FTA between the two countries would be beneficial for both countries.58
The former Bush Administration also made the argument that the U.S.-Colombia FTA was a
national security issue. The Bush Administration stated that passage of an agreement “would
bring increased economic opportunity to the people of Colombia through sustained economic
growth, new employment opportunities, and increased investment.”59 It also believed that an FTA
would “reinforce democracy by fighting corruption, increasing transparency, and fostering
accountability and the rule of law”.60
The debate surrounding the pending U.S.-Colombia FTA has mostly centered on the violence
issues in Colombia. Many proponents of the agreement see it as having important political
implications for Colombia and U.S. interests in the region. They believe that an FTA with
Colombia would go beyond the U.S.-Colombia economic relationship because it would be
viewed by other Latin American nations as indicative of how the United States views its
relationship with the region. Some Members of Congress who have voiced support for the
agreement believe that the United States needs to support its ally in the region and that if the
Congress does not pass the trade agreement, it could be used by Venezuela or Ecuador to turn
Colombia against the United States.
The leaders of several countries in Latin America have voiced support for the pending free trade
agreements with Colombia and Panama, stating that the passage of these agreements would bring
economic benefits to these countries and improve the overall U.S. relationship with Latin
America.61 In contrast, the President of Venezuela has criticized FTAs with the United States and
has launched his own idea for trade policy through a socially oriented trade block that would
include mechanisms for poverty reduction.62
In the United States, opponents of an agreement with Colombia argue that passing an FTA would
be rewarding the government for its shortcomings in its struggle against drug trafficking, illegally
armed groups, protecting worker rights, and the history of violence in the country. Some argue
that the pending agreement would increase drug production and violence in the country and that it
could increase Colombia’s ongoing civil conflict because it would result in rural displacement.
They argue that trade liberalization would drive down the prices of agricultural products in
Colombia and put many farmers out of business.63 They maintain that small farmers would have
no choice but to migrate to urban areas, work in the drug cultivation zones, or affiliate with
illegally armed groups.64 Some opponents of a CFTA believe that trade agreements have negative
58 American Forces Press Service, “Gates Praises Colombia as ‘Exporter of Security’,” April 15, 2010.
59 The White House, Office of the Press Secretary, Fact Sheet: U.S.-Colombia Free Trade Agreement Essential To Our
National Security,” March 12, 2008.
60 Ibid.
61 Letters from the Presidents of Costa Rica, El Salvador, Honduras, Nicaragua, and Mexico to the leadership of the
House of Representatives, October 2007.
62 See CRS Report RL32488, Venezuela: Political Conditions and U.S. Policy, by Mark P. Sullivan.
63 Public Citizen and the Washington Office on Latin America, Peru and Colombia FTAs Projected to Increase Drug
Trafficking, Violence, and Instability in the Andes, undated.
64 Ibid.
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socioeconomic impacts. They argue that agreements such as NAFTA and CAFTA-DR, upon
which the CFTA is based, are failed models and have jeopardized the environment, undermined
worker rights, and caused job losses in the United States.
Much of the U.S. business community supports a free trade agreement with Colombia. They view
the pending agreement as a big opportunity for U.S. businesses and for exports of U.S.
agricultural products. The National Pork Producers Council, for example, argues that a trade
agreement would provide significant new export opportunities for U.S. pork producers and is
leading a coalition of U.S. agricultural organizations in support of the trade agreement65. The
business community often states that an FTA with Colombia would “level the playing field” with
Colombia by providing U.S. producers of goods and services the same access to the Colombian
market that Colombian businesses currently have in the U.S. market. They also believe that a
trade agreement would give U.S. businesses a competitive edge in Colombia over other foreign-
owned businesses. A U.S. Chamber of Commerce representative said that an agreement would
help Colombia fight narco-trafficking and violence “by developing sustainable economic
alternatives to the drug trade.”66
Author Contact Information
M. Angeles Villarreal
Specialist in International Trade and Finance
avillarreal@crs.loc.gov, 7-0321
65 National Pork Producers Council, NPCC Applauds President for Sending Trade Deal to Congress, April 7, 2008.
66 U.S. Chamber of Commerce, U.S. Chamer Hails u.S.-Colombia Trade Deal, February 27, 2006.
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