Newspapers across Canada are recalling the events and the issues related to the U.S.-Canada Free Trade Agreement (FTA) of 1987. Yes, it’s been 25 years, and the general impression in the reports seems more positive than negative. Canada’s premier newspaper, The Globe and Mail, titled it the “deal that freed Canada’’.
The FTA was later transformed into the North American Trade Agreement with Mexico (NAFTA) in 1993. While there remain some detractors on both sides of the border, no one is really questioning its existence, and if anything, both the U.S. and Canada have actually expanded their free trade impetus to other parts of the world.
It is worthwhile to recount that the FTA was not a deal without its obstacles and difficulties in Canada. The unions generally were opposed because of its feared impact on jobs and existing social programs such as Medicare. Some provincial premiers, including David Peterson of Ontario, and the federal leaders of both opposition parties in the national parliament (John Turner of the Liberal Party and Ed Broadbent of the National Democratic Party—NDP) resisted Canadian Prime Minister Brian Mulroney‘s initiative with U.S. President Ronald Reagan, and are still to this day somewhat unenthusiastic about the deal and its promise.
The truth is that while the results may be mixed, the absence of the FTA would have deprived the Canadian economy of greater access to the world’s largest market at a time when both countries were coming out of a recession. In the early years, until 2000, the trade level rose dramatically—exports to the U.S. tripled, and imports from the U.S. increased significantly. With Canada getting its government deficit and debt problems under control in the 1990’s, Canadians entered the new millennium poised for better days. The FTA was in effect delivering on its promises, at least in its early days.
Colombian President Juan Manuel Santos traveled to Cuba this morning to meet with Cuban President Raúl Castro and Hugo Chávez in a visit the Colombian government says has two objectives. The first is to discuss the questions of Cuba’s participation next month in the Organization of American States’ Summit of the Americas in Cartagena, Colombia. The second is to formally sign an outstanding bilateral trade agreement with President Chávez who is in Cuba recovering from surgery since February 24th.
Although the United States has thus far opposed any possible role for Cuba in the summit, other regional leaders, such as Ecuador President Rafael Correa, have supported inviting Cuba to attend, saying, “it is unheard of that in the twenty-first century, something is called the Summit of the Americas and for certain hegemonic countries some of us are Americans and some of us are not.” Correa further stated that the regional trade alliance, Alianza Bolivariana para los Pueblos de Nuestra América (ALBA), would boycott the event if Cuba was not somehow involved. As host of the Summit, Colombia will likely have ultimate say over the question of Cuba’s participation.
The Mexican Senate on Thursday approved the free-trade agreement (FTA) between Mexico and Peru by a count of 55 votes in favor of the legislation and 47 against. The agreement was signed by the presidents of both countries in April of this year, but stalled in the Senate due to concerns over the potential impact on Mexico’s agricultural sector.
The FTA was praised by Mexican Economy Minister Bruno Ferrari, who said that Peru is growing rapidly and “is a natural option for Mexican producers who are looking to expand their business in Latin America.” Trade between Mexico and Peru has increased 13 percent annually, from $414 million to $1.46 billion between 2000 and 2010, according to the Peruvian Trade and Tourism Ministry. The agreement offered an opportunity for Mexico to diversify its trade agenda, as 80 percent of its exports currently go to the United States.
But opponents of the bill, including Heladio Ramirez Lopez, former head of the National Peasant Confederation and president of the Rural Development Commission, warned that the FTA would threaten Mexico’s ability to export at least 30 of its agricultural products, and may create health risks for the Mexican population. If the treaty had not passed, it could have jeopardized Mexico’s participation in the Pacific Alliance, a new regional trade agreement that includes Peru, Chile, Colombia and Panama- all of which signed an agreement on April 28 to integrate trade production.
Colombian President Juan Manuel Santos drew laughter and applause when he placed the U.S.-Colombia free-trade agreement (FTA) in the “hands of God” at an AS/COA program last month. But now that the White House has submitted the long-pending pact to Congress, its earthly fate lies just where it belongs.
House Speaker John Boehner has pledged quick consideration of the agreements with Colombia, Panama and South Korea, in tandem with the Senate-passed legislation reauthorizing Trade Adjustment Assistance. This afternoon the Ways and Means Committee favorably reported out all three implementing bills, leaving supporters and opponents to gear up for a floor debate and vote expected as early as next Wednesday.
That debate will center on job creation on the one hand and labor concerns on the other—particularly in the case of Colombia, which remains the most controversial of the three countries. The Obama Administration has rightly emphasized the economic arguments that carry weight on Capitol Hill in the context of 9 percent unemployment. But it’s worth remembering that the FTAs are just as important to U.S. geopolitical interests.
“I’ve got a flag on my lapel, not a maple leaf,” U.S. Trade Representative Ron Kirk exclaimed at a Senate Finance Committee hearing in March. Today, as Canada’s free-trade agreement (FTA) with Colombia enters into force, it is the maple leaf that represents competitive pressures on U.S. market share and the political influence that goes with it.
Canada and Colombia are two of our closest friends in the Western Hemisphere, and their strengthened commercial ties clearly benefit their mutual interests as well as Washington’s broader goal of promoting open markets and economic development. Yet U.S. businesses and their congressional advocates are keenly aware that Canada has beat us to the punch, leaving U.S. exporters to an important emerging market at a competitive disadvantage.
The implications of delayed ratification of the U.S.-Colombia FTA are not lost on either Colombia or Canada. As Colombian President Juan Manuel Santos bluntly put it in a recent interview with Americas Quarterly, “American products are being replaced in the Colombian market because other countries have free-trade agreements. If the FTA is not approved shortly, the U.S. will continue losing market share.” Those losses will be particularly acute in the agricultural sector, where duty-free Canadian wheat will likely replace U.S. imports.
As U.S. trade policy has returned to the headlines in 2011, much of the discussion is focused on packaging the three pending pacts (Colombia, Panama and South Korea) into one large bill or sequencing the consideration of each individual free-trade agreement (FTA). And more recently talk is centered on the impasse over Trade Adjustment Assistance (TAA). But less attention is on other components of the broader trade agenda awaiting congressional action, namely extension of trade preference programs.
Back in February, Republicans scrapped a House of Representatives vote on extension of the Andean Trade Preferences Act (ATPA) to protest the lack of a firm timetable for moving the Colombia and Panama FTAs. The result: duty-free treatment expired for Colombian and Ecuadorian imports. Since then, the Obama administration has pressed for renewal, even as the future of this 20-year-old program remains in doubt. Could the next renewal of ATPA be its last?
Initial ATPA participants included Colombia, Peru, Bolivia, and Ecuador. The goal was a noble one: to encourage a shift away from illegal drug production by expanding alternative export sectors and promoting economic growth. In 2008, Bolivia was suspended from the program when the Bush Administration deemed it incompliant with eligibility criteria related to counter-narcotics cooperation, and in 2010, Peru was dropped from the list of beneficiaries following approval of its FTA with the United States.
Now, only Colombia and Ecuador are left. In Colombia’s case, the argument for one more renewal is sound. Exporters are counting on a retroactive extension that will cover tariff costs since February, and they’ll continue to need the preferences until the FTA enters into force, assuming all goes well in Congress this summer. The bigger picture is that Colombia is a key U.S. ally that deserves better than the uncertainty created by short-term extensions. The most recent ATPA renewal, in December 2010, lasted only six weeks.