Latin Trade Deals Must Not Lose Out to Korean Pact

President Barack Obama makes a statement on a year-end bipartisan agreement to extend expiring tax cuts, 06 Dec 2010
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BY DANIEL GRISWOLD – President Obama can continue the success of the bipartisan tax extension bill he signed in late December by working with the new Congress in 2011 to advance the long-stalled U.S. trade agenda.

Trade should be an important component of the congressional agenda in the new year. Robust trade growth, of imports as well as exports, has been a key component of past economic expansions. If U.S. businesses hope to continue to expand output and resume hiring, they will need to sell in growing markets abroad and to import the raw materials, intermediate inputs and capital machinery they need to fuel production.


If the president and congressional leaders want to give the economy a boost and deepen ties with important allies, high on the agenda should be passage of pending trade agreements with South Korea, Colombia and Panama.

To his credit, Mr. Obama is actively promoting the Korea agreement. The U.S.-Korea trade agreement, signed in 2007, would eliminate most barriers to goods trade between the two countries, with a few exceptions. It also would reduce regulatory and investment barriers to the export of U.S. services to our nation’s seventh-largest customer.

The administration did extract concessions from Seoul earlier this month that will make the deal acceptable to the Detroit Three automakers — Ford, Chrysler and General Motors — and the United Auto Workers union. In the revised agreement, the South Korean government agreed to a more protracted phaseout of U.S. tariffs on Korean cars and light trucks, a move that will not help sell a single extra American-made car in Korea but will help sell the deal on Capitol Hill.

With one of the agreements headed for a vote in the new Congress, the fate of the other two is up in the air. While neither the Colombian nor the Panamanian agreement is as commercially significant as the Korean agreement, both are important for trade as well as U.S. foreign policy. Neither should be sacrificed in a rush to pass the Korean deal.

The Panamanian agreement is the smallest of the three. Its biggest selling point in Congress is the improved access for U.S. companies offering goods and services to help on the Panama Canal expansion, one of the world’s largest public-works projects.

The trade agreement with Colombia was signed in November 2006. The most vocal opponent of the agreement is the leadership of the AFL-CIO, which claims union members are special targets of violence in Colombia and that the perpetrators are not prosecuted. Democratic leaders in the House agree, and they have kept the agreement on the shelf since 2008, when President George W. Bush requested an up-or-down vote on the agreement.

Colombia has been a staunch ally of the United States, perhaps our best friend in a region where Venezuela’s Hugo Chavez has been working to spread his brand of anti-American “21st-century socialism.” Colombia also is a robust democracy that has just elected a new president, Juan Manuel Santos, who is committed to reducing violence in the country and promoting the rule of law while battling the remnants of the vicious Marxist insurgency, the FARC.

Under his predecessor, Alvaro Uribe, the FARC was routed from most of the country, homicides dropped by 40 percent, and killings of trade unionists dropped 80 percent. Mr. Santos has vowed to build upon that success.

Passing the agreement would solidify our ties to Colombia while rewarding a pro-American democracy. It also would eliminate almost all barriers to U.S. exports to Colombia, promoting an additional $1 billion in exports, according to the U.S. International Trade Commission. Colombia is an especially good market for U.S. manufacturing equipment useful in that country’s resource-rich economy. American companies such as Caterpillar Inc. face significant tariffs in Colombia. As Colombia negotiates and implements free-trade agreements with Canada, the European Union and Brazil, U.S. producers will be at a competitive disadvantage. Market share will be lost if Congress fails to act.

On Friday, White House spokesman Robert Gibbs said the administration would not seek a vote on the Colombia agreement anytime soon “because it doesn’t have the votes.” That’s debatable. Incoming Republican House leaders are keen to move ahead with all three agreements and could be expected to work hard to round up the votes.

It sounds more like a convenient and self-fulfilling prophecy on the part of the administration. If the votes are not there for the Colombian agreement, it is only because Mr. Obama so far has failed to exercise the same leadership he recently displayed in moving the Korean agreement toward passage.

Daniel Griswold is director of the Cato Institute’s Center for Trade Policy Studies and author of the 2009 book, Mad About Trade: Why Main Street America Should Embrace Globalization.