President Obama recently recognized this week, May 16-22,
to be World Trade Week. Despite this supposed display of support,
Congress and President Obama have repeatedly refused
opportunities to advance trade legislation. Three pending Free
Trade Agreements (FTAs) — particularly one with Colombia (CFTA)
— is costing U.S. consumers and businesses billions in lost
opportunities.
The U.S. International Trade Commission estimates that the
CFTA would increase U.S. GDP by $2.5 billion. Exports to Colombia
would increase by $1.1 billion if tariffs — ranging from 10 to
35 percent per good — were lifted. And this trade agreement
would do just that. On the import side, 90 percent of Colombian
goods already enter the United States without any tariffs.
Imports from Colombia are projected to increase by $487 million
annually if the agreement is approved.
Economists from across the political spectrum have argued
that reducing trade barriers is one of the most effective ways to
spark economic growth. The Copenhagen Consensus, a Danish think
tank, argues that completing the World Trade Organization’s Doha
Round of trade talks could boost growth in the world’s poorest
countries by 1.4 percent per year.
The Colombia FTA is a small but important piece of that
puzzle. It is also low-hanging fruit. Negotiations were completed
three years ago. All that’s left are votes by the House and
Senate. Congress needs to pluck this fruit to help the economy
get going again.
These agreements are not perfect. They contain a number of
trade-unrelated provisions, mainly labor and environmental
standards. But the benefits of increased trade are huge.
Henry Ford’s assembly lines, where each worker had a
specialized task, produced more cars more cheaply than his
competitors, which had little to no such specialization. What
Henry Ford did was apply Adam Smith’s theory of division of labor
to the factory floor.
The finer the division of labor, the more specialized
workers can be. That’s how productivity increases and countries
grow rich. The division of labor is limited to the extent of the
market. Barriers to international trade keep markets artificially
small and limit worker productivity.
All this is old hat to economists. But the general public
is ambivalent on trade. Polls show a wide gap between economists
and the public on trade issues.
A common objection non-economists have to freer trade is
that they think it ships jobs overseas. Such people are at a loss
to explain why more than 20 million net jobs have been created in
the U.S. since NAFTA passed. Trade doesn’t affect the number of
jobs. It affects the types of jobs. Trade allows each person to
create more wealth than each could create on his own.
The AFL-CIO cites violence against union members as a
reason for opposing the CFTA. While Colombia has a high (but
decreasing) murder rate, union members are in no more danger than
the general population. Around two percent of Colombians are
union members; they comprised less than 0.5 percent of the 17,000
murder victims in 2007. They are actually about four times safer
than the general population.
This violence is tragic. But restricting access to
trade will do absolutely nothing to decrease it. If anything,
trade restrictions make violence worse since they keep people in
poverty.
One cannot help but wonder if American labor leaders are
exploiting the violence in Colombia as a means of hiding from
competition.
Meanwhile, Colombia has been busy passing FTAs with other
countries — Canada, Argentina, and parts of Europe. Imports to
Colombia from those countries have soared at the expense of U.S.
exports and workers. The longer we delay in passing this
agreement, the more difficult it will be for U.S. businesses to
regain those markets lost to other countries.
U.S. Trade Representative Kirk and President Obama need to
press Congress to liberalize trade with Colombia. Similar
agreements with South Korea and Panama also deserve to be passed.
There are long-term consequences to holding America back from the
benefits of freer trade. The world is moving forward in
globalized trade relations; the United States cannot afford to be
left behind.
