The U.S.-Colombia Free Trade Agreement: Economic and Political Implications
A U.S.-Colombia Free Trade Agreement:
Economic and Political Implications
Updated November 20, 2008
M. Angeles Villarreal
Specialist in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
A U.S.-Colombia Free Trade Agreement: Economic and
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
Congress will consider implementing legislation for the pending U.S.-Colombia FTA
in the future.
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
The United States is Colombia’s leading trade partner. Colombia accounts for
a very small percentage of U.S. trade (0.6% in 2007), ranking 26th among U.S. export
markets and 33rd as a source of U.S. imports. Approximately 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.
Numerous Members of Congress oppose the CFTA because of concerns about
the violence against labor union activists in Colombia. The Bush Administration
believes that Colombia has 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.
For Colombia, a free trade agreement with the United States is part of the
overall economic development strategy of Colombian President Alvaro Uribe’s
Administration. President Uribe has made a trade agreement with the United States
a key element in his vision to promote economic growth in Colombia and to help
bring more economic stability in the country. In his response to U.S. congressional
concerns, President Uribe has stated on several occasions that he would make every
effort to ensure that these concerns were addressed and that the situation in Colombia
had improved substantially under his administration. Some Members of Congress
have stated they would like to see evidence of progress in this area before supporting
the agreement. This report will be updated as events warrant.
In troduction ......................................................1
Rationale for the Agreement.........................................2
Review of the U.S.-Colombia Free Trade Agreement .....................4
Key CFTA Provisions..........................................4
Tariff Elimination and Phase-Outs............................4
Textiles and Apparel.......................................6
Customs Procedures and Rules of Origin.......................8
Bipartisan Trade Framework Amendments on Labor and Environment....9
Amendments on Basic Labor Standards........................9
Provisions on Environment.................................10
U.S.-Colombia Economic Relations..................................11
U.S.-Colombia Merchandise Trade...............................12
Andean Trade Preference Act...................................14
U.S.-Colombia Bilateral Foreign Direct Investment..................16
Political Situation in Colombia......................................17
History of Violence in Colombia.................................17
Human Rights Issues ..........................................18
The Uribe Administration......................................19
U.S. Policy Toward Colombia...................................20
Issues for Congress...............................................21
List of Figures
Figure 1. U.S. Merchandise Trade with Colombia.......................14
List of Tables
Table 1. Key Economic Indicators for Colombia and the United States......12
Table 2. U.S. Trade with Colombia, 2007.............................13
Table 3. U.S. Imports from Colombia................................15
Table 4. U.S. Imports from Colombia under ATPA......................16
Table 5. U.S. Direct Investment Position in Colombia ...................16
A U.S.-Colombia Free Trade Agreement:
Economic and Political Implications
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 Actth
(H.R. 5724/S. 2830) was introduced in the 110 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)
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.
It is currently unclear whether or how Congress will consider implementing
legislation in the future. The House leadership took the position that the President
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 suspends the TPA provision requiring that the committees
of jurisdiction automatically be discharged from the implementing bill if they have
not reported it by 45 days of session after its introduction. It also removes 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.
The adoption of H.Res. 1092 effectively removed the obligation for the House
to vote on the CFTA within 60 days of session, although the House leadership retains
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.
If Congress does not consider the CFTA during the current Congress, the
implementing legislation will likely lose its eligibility for “fast track” consideration
in the next 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 from2
the chair. The CFTA implementing legislation, however, could still be re-
introduced in the next 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
2 Inside U.S. Trade, “House Approves Fast-Track Rules Change for U.S.-Colombia FTA,”
April 11, 2008.
Trade Promotion Agreement. The Bush Administration has 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
An FTA 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.
The major expectation among proponents of the pending free trade agreement
with Colombia, as with other trade agreements, is that it will 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 overall
development strategy of Colombian President Alvaro Uribe’s Administration.
President Uribe has made a free trade agreement with the United States a key element
in his vision to promote economic growth in Colombia and to help bring more
economic stability to the country. The Uribe Administration also views the pending
agreement as a way of increasing its presence in the global economy and strengthening
democratic conditions within the country.4 The Colombian government recognizes
that a free trade agreement in itself would be insufficient to alleviate the problem of
poverty and has planned other economic complementary reform measures, such as a
plan to lower corporate taxes to spur competition and create jobs. The government
is also taking steps to reduce the regulatory burden and strengthen protection for
foreign investors in Colombia.5 The Uribe Administration believes that a free trade
agreement with the United States is necessary to help move the country forward in its
efforts on domestic reforms. If the U.S. Congress approves the U.S.-Colombia free
trade agreement, the challenge for Colombia would be to continue domestic reforms
so that the trade benefits from the agreement reach all segments of the population,
especially the poorer regions of the country.
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.
4 San Francisco Chronicle, “The Struggle for Colombia,” June 13, 2007.
5 The Wall Street Journal, “Bogota Eyes the Irish Model,” March 24, 2008.
Review of the U.S.-Colombia Free Trade Agreement
Key CFTA Provisions6
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.7
This section summarizes several key provisions in the original agreement text as
provided by the United States Trade Representative (USTR), unless otherwise noted.8
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 and9
“sensitive” goods. 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
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.10
6 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].
7 Bureau of National Affairs, International Trade Reporter, “Colombia and U.S. Reach FTA
after Resolving Agriculture Issues,” March 2, 2006.
8 USTR, Trade Facts, “Free Trade with Colombia: Summary of the United States-Colombia
Trade Promotion Agreement,” June 2007.
9 See USTR, 2008 National Trade Estimate Report on Foreign Trade Barriers, March 2008.
10 United States International Trade Commission (USITC), U.S.-Colombia Trade Promotion
!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).11
!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 quotas12 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
ri ce. 13
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 agricultural14
products within 15 years. 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.15
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
Agrement: Potential Economy-wide and Selected Sectoral Effects, USITC Publication 3896,
December 2006, pp. 2-1 and 2-2.
12 Tariff rate quotas are limits on the quantity of imports that can enter a country duty-free
before tariff-rates are applied.
13 United States Department of Agriculture (USDA), Foreign Agricultural Service, Fact
Sheet: U.S.-Colombia Trade Promotion Agreement Overall Agriculture Fact Sheet, August
15 USTR, Trade Facts: Free Trade with Colombia, Summary of the United States-Colombia
Trade Promotion Agreement,” June 2007.
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.16
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 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,
16 USITC Publication 3896, December 2006, p. 3-4.
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.17
IPR Protection. The agreement would provide intellectual property rights18
(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
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 USTR states that although Colombia has made some progress in
strengthening IPR protection, it needs to make further improvements.19 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
17 USTR, Trade Facts: Free Trade with Colombia, Summary of the United States-Colombia
Trade Promotion Agreement, June 2007.
18 For more information, see CRS Report RL34292, Intellectual Property Rights and
International Trade, by Shayerah Ilias and Ian F. Fergusson.
19 See United States Trade Representative (USTR), 2008 National Trade Estimate Report
on Foreign Trade Barriers, March 2008.
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 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
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 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
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 amendments to the CFTA, marking the end of
the approval process for the agreement in Colombia.20
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
20 Bureau of National Affairs, Inc., International Trade Reporter, “Colombian Senate
Overwhelmingly Approves Labor-Related Amendments to FTA with U.S.,” November 1,
laws would provide for labor standards consistent with internationally recognized
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.
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.21
U.S.-Colombia Economic Relations
With a population of 47 million people, Colombia is the third most populous
country in Latin America, after Brazil and Mexico. Colombia’s economy is the fifth-
largest economy in Latin America. In 2006, approximately 45% of Colombians lived
in poverty according to State Department data. The United Nations Economic
Commission for Latin America and the Caribbean’s (ECLAC) data indicates a decline22
in both poverty and indigence (extreme poverty) rates since 1994. Between 1994
and 2005, the percentage of Colombians living in poverty decreased from 53% to
47%, while the percentage of those living in extreme poverty decreased from 19% to
and highest in rural areas. Rural Colombians, the indigenous, and Afro-Colombians
are much more likely to live in extreme poverty.23
Colombia’s ability to reduce poverty in recent years is most likely due to an
increase in the growth of the country’s gross domestic product (GDP). Colombia’s
economy has stabilized under President Alvaro Uribe, benefitting from prudent fiscal
management and rising commodity prices. Security improvements and a more stable
economy have likely led to the recent increase in foreign direct investment (FDI). FDI
grew to $4 billion during the first six months of 2007, three times the level for the
same period in 2006. The bulk of this new investment is in the oil and manufacturing
sectors. The leading sources of FDI in Colombia are the United States, Spain, and
The economy of Colombia is quite small compared to that of the United States.
Colombia’s gross domestic product (GDP) in 2007 was $173 billion, about 1.2% of
U.S. GDP of $13.8 trillion in 2007 (see Table 1). In 2007, Colombia’s GDP growth
remained steady from the previous year’s of 6.8%. Economic growth is expected to
slowdown to 5.0% in 2008 and 4.3% in 2009.24 Colombia’s exports accounted for
21 Office of the United States Trade Representative, Trade Facts, “Bipartisan Trade Deal,”
Bipartisan Agreement on Trade Policy, May 2007, pp. 4-5.
22 United Nations Economic Commission for Latin America and the Caribbean (ECLAC),
Anuario Estadistico de América Latina y El Caribe 2007, March 2008..
23 Approximately 80% of Afro-Colombians live in conditions of extreme poverty, and 74%
of Afro-Colombians earn less than the minimum wage. For more information, see CRS
Report RL32713, Afro-Latinos in Latin America and Considerations for U.S. Policy.
24 Based on estimates and forecasts by The Economist Intelligence Unit, March 2008.
40% of Colombia’s exports, thus any change in U.S. demand for Colombian products
could have a noticeable effect on Colombia’s economy.
Table 1. Key Economic Indicators
for Colombia and the United States
Nominal GDP ($US billions)b1071738,30413,843
GDP, PPPc Basis 1903188,30413,843
Per Capita GDP ($US)2,6683,68030,42945,820
Per Capita GDP in $PPPs4,7546,78030,42945,820
Total Merchandise Exports12296891,163
Exports as % of GDPd15%20%12%12%
Total Merchandise Imports15338701,954
Imports as % of GDPd21%24%13%17%
Source: Compiled by CRS based on data from the Economist Intelligence Unit (EIU) on-line database.
a. Some figures for 2007 are estimates.
b. Nominal GDP is calculated by EIU based on figures from World Bank and World Development
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
U.S.-Colombia Merchandise Trade
The United States is Colombia’s leading trade partner. In 2007, 34% of
Colombia’s exports went to the United States, down from 40% in 2005 and 2006. In
the same year, 26% of Colombia’s imports were supplied by the United States, the
same percentage as in 2006. Venezuela is Colombia’s second most significant trade
partner, accounting for 18% of Colombia’s exports and 4% of Colombia’s imports.
Other major trade partners for Colombia are Mexico, China, Brazil, and Ecuador.
Colombia accounts for a very small percentage of U.S. trade (0.6% in 2007).
Colombia ranks 26th among U.S. export markets and 33rd as a source of U.S. imports.
U.S. exports to Colombia totaled $7.9 billion in 2007, while U.S. imports totaled $9.3
billion. As shown in Table 2, the dominant U.S. import item from Colombia is crude
oil (36% of U.S. imports from Colombia in 2007), followed by coal (13% of total),
and coffee (7% of total). The leading U.S. export items are corn (7% of U.S. exports
to Colombia in 2007), machinery parts (6% of total), and petroleum oils (other than
crude) and products (3% of total).
Table 2. U.S. Trade with Colombia, 2007
U.S. ExportsU.S. Imports
Leading Items$ Mill.ShareaLeading Items $ Mill.Sharea
(HTS 4 Digit Level)(HTS 4 Digit Level)
Corn (Maize)519.07%Petroleum oils and oils3,358.936%
Machinery parts for449.46%Coal and coal products1,244.613%
Petroleum oils and oils238.23%Coffee and coffee681.77%
minerals (other than
crude) and products
Acyclic hydrocarbons222.53%Cut flowers507.75%
Wheat and meslin209.43%Petroleum oils and oils416.45%
minerals (other than
crude) and products
All Other6,245.979%All Other3,030.533%
Total Exports7,884.4--Total Imports9,239.8--
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.
U.S. imports from Colombia have been increasing steadily since 1996, from $4.4
billion in 1996 to $9.2 billion in 2007, a 109% increase. Since 1996, the U.S. trade
balance with Colombia went from a surplus to a deficit of $1.4 billion in 2007 (see
Figure 1). Both imports and exports have been rising since 2002, however, and the
trade deficit has been fluctuating since that time.
Figure 1. U.S. Merchandise Trade with Colombia
1996 1998 2000 2002 2004 2006
U.S. ExportsU.S. ImportsU.S. Trade Balance
Source: Compiled by CRS using USITC Interactive Tariff and Trade DataWeb at
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 trade25
preference program. 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. On October 16, 2008, the 110th Congress enacted
legislation to extend ATPA trade preferences until December 31, 2009 for Colombia
and Peru, and until June 20, 2009 for Bolivia and Ecuador (P.L. 110-436). Trade
preferences may be extended for Bolivia and Ecuador for an additional six months
under certain conditions.
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
25 For more information see CRS Report RS22548, ATPA Renewal: Background and Issues,
by M. Angeles Villarreal.
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
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
2001 2002 2003 2004 2005 2006 2007
% of Total60%53%65%89%90%92%91%
AT PAa 718.0 404.1 2,908.7 3,888.9 4,653.2 4,791.2 4,527.7
% of Total13%8%46%53%53%52%49%
Source: Compiled by CRS using USITC data.
a. Includes imports under ATPA and ATPDEA.
Over 90% of U.S. imports from Colombia receive duty-free treatment through
preference programs or normal trade relations (see Table 3). In 2007, 49% 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 2001 and
2007, U.S. total imports from Colombia increased by 64%, while imports under
ATPA increased by 567%. 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 a major factor. Crude oil and
petroleum oil products accounted for 73% of ATPA imports from Colombia in 2007
(see Table 4).
Table 4. U.S. Imports from Colombia under ATPA
Men’s 0.0 0.0 89.9 147.9 211.9 182.0 139.6
Source: Compiled by CRS using USITC data.
a. HTS 4-digt level
b. Includes imports under ATPA and ATPDEA.
U.S.-Colombia Bilateral Foreign Direct Investment
U.S. foreign direct investment in Colombia on a historical-cost basis totaled $5.6
billion in 2007 (see Table 5). The largest amount is in mining, which accounted for
35.59%, or $2.1 billion, of total U.S. FDI in Colombia in 2007. The second largest
amount, $1.6 billion (29.41% of total), is in manufacturing, followed by $570 million
in professional, scientific, and technical services.26
Table 5. U.S. Direct Investment Position in Colombia
(Historical-Cost Basis: 2007)
IndustryAmount% of Total
Mining 2,106 37.59%
Source: Bureau of Economic Analysis, International Economic Accounts.
26 Based on data from the U.S. Bureau of Economic Analysis, see [http://www.bea.gov].
A 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 a CFTA.27
Political Situation in Colombia28
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 Conservativeth
parties, which dominated Colombian politics since the 19 century, have been
weakened by their perceived inability to resolve the 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. High public approval ratings,
likely due to reductions in violence, prompted Colombia to amend its constitution in
2005 to permit the consecutive re-election of presidents. Members of Congress from
the pro-Uribe Partido de la U (Party of the U) agreed in February 2008 to pursue
measures that would allow President Uribe to seek a third term in office. President
Uribe has not responded to this latest effort, but he reportedly stated in late 2007, that
he would only consider a third term in the event of a disaster.
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 2007 Country Report on Terrorism, while these
groups have been weakened as a result of aggressive actions taken by the Colombian
military and police, they continue to murder, kidnap, and terrorize Colombian citizens.
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 over a hundred 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
27 United States International Trade Commission (USITC), U.S.-Colombia Trade Promotion
Agreement: Potential Economy-wide and Selected Sectoral Effects, Investigation No. TA-
28 Unless otherwise noted, information on the economic and political situation in Colombia
is from CRS Report RL32250, Colombia: Issues for Congress, by Clare Ribando Seelke and
Colleen W. Cook.
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.
Human Rights Issues
Recent debate on U.S. policy toward Colombia has mostly focused on the issue
of illegal drugs, but has also 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.29
Congress has annually required that the Secretary of State certify to Congress that
the Colombian military and police forces are severing their links to the paramilitaries,
investigating complaints of abuses, and prosecuting those who have had credible
charges made against them. In the latest certification, issued on April 4, 2007, the
Secretary of State asserted that the Colombian government and armed forces are
meeting the statutory requirements with regard to human rights. While recognizing
that more progress needs to be made, the certification noted the commitment of
President Uribe to improve the country’s human rights record. The certification noted
the United States’ commitment to work with the Colombian government to sever
military paramilitary ties and to investigate human rights violations. The certification
was met with criticism from human rights organizations that claimed Colombia’s
record does not meet recognized standards of respect for human rights.30
Relations between the Uribe Administration and human rights organizations have
often been tense with human rights organizations 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.
29 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.
30 The certification is available at the State Department’s website,
[http://www.state.gov/r/pa/prs/ps/2007/apr/82824.htm]. Opposing views can be found at
[http://hrw/org], Amnesty International and human Rights Watch, “Colombia: U.S. Congress
Should Maintain Hold on Military Aid,” October 18, 2007.
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.31
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. The domination of pro-Uribe parties, most of them new, appears to have further
weakened the traditionally dominant Liberal and Conservative parties which
dominated Colombian politics since the 19th century.
One major aspect of the Uribe Administration is the framework for paramilitary
demobilization under the Justice and Peace Law.32 President Uribe has taken 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
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.”33 While some critics of President Uribe view the
scandal as evidence of the corruption in Colombia, the Uribe Administration views
31 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.
32 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.
33 Chicago Tribune, “Uribe Cousin Ordered Jailed, Denied Asylum,” April 23, 2008.
the arrest as a demonstration of its efforts to pursue the law and combat corruption.
After five years in office, President Uribe retains widespread support in
Colombia, with support typically ranging from 60% to 70%. For his second term,
President Uribe has pledged to continue implementing his security strategy, which has
included a plan to demobilize paramilitary groups and holding peace talks with the
leftist National Liberation Army (ELN), the smaller of Colombia’s two guerrilla
groups. In a change from his first term, Uribe has demonstrated a willingness to
discuss a prisoner exchange with the FARC. President Uribe also introduced land
reform legislation to combat rural poverty.
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 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.
Issues for Congress
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 relatively small (1.2% of the U.S. economy) and the value of U.S. trade
with Colombia is small when compared to overall U.S. trade. U.S. trade (imports plus
exports) with Colombia accounts for about 0.8% of total 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.34 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:35
!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
!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
34 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
35 USITC, December 2006, pp. 2-1 and 2-2.
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.36 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.37
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.38 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%.39
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
36 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
37 USITC, December 2006, pp. 7-1 to 7-4.
38 Jeffrey J. Schott, editor, Institute for International Economics (IIE), Trade Relations
Between Colombia and the United States, August 2006. (Hereinafter IIE, August 2006).
39 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.
40 IIE, August 2006, p. 112.
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.41 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%.42
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 a43
result of enhanced U.S. access to the Colombian market. 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
!U.S. exports to Colombia in soybeans, soybean products, and animal44
feeds would likely increase under a CFTA.
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
41 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.
42 IIE, August 2006, pp. 88-89.
43 USITC Publication 3896, p. xv.
44 Ibid, pp. xvi-xvii.
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
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.45
On May 10, 2007, after much negotiation, Congress and the Administration
announced an agreement for a “New Trade Policy for America,” which incorporated
key Democratic priorities relating to labor and other issues. 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);46 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.47 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
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
45 IIE, August, 2006.
46 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
47 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.
48 AFL-CIO, Executive Council Statement, No Free Trade with Colombia Until Workers’
Rights Are Respected March 4, 2008.
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, a number of Colombian unions, consisting mostly of government
employees, have spoken out against the agreement, saying a CFTA would 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.49
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.50 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.51
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.52 Despite the progress made by the Colombian government,
many observers continue to be concerned about the violence against trade unionists
in the country.
49 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.
50 Bureau of National Affairs, International Trade Reporter, “Fate of U.S. Free Trade Pact
with Colombia Could Hinge in Part on ILO Visit This Month,” November 22, 2007.
51 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.
52 Embassy of Colombia, Washington, D.C., Colombia: A Progress Report: Strengthening
the Rights, Benefits, and Security of Unions, October 2007.
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
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
S t at es.”53
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.54
The Bush Administration believes that Colombia has made significant advances
to combat violence and instability. 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.”55 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.”56
In his response to U.S. congressional concerns regarding the violence in
Colombia, President Uribe made public statements that he would “make every effort”
to ensure that the United States would not reject the idea of a free trade agreement
53 Bureau of national Affairs, International Trade Reporter, “Five Democratic Lawmakers
Blast Proposed Colombia FTA Due to Violence,” June 14, 2007.
54 Office of the United States Trade Representative, Broad Support for U.S.-Colombia Free
Trade Agreement: What They’re Saying, March 2008.
55 The White House, Office of the Press Secretary, Fact Sheet: U.S.-Colombia Free Trade
Agreement Essential To Our National Security,” March 12, 2008.
56 Ibid, p. 2.
with Colombia.57 During a visit to Washington in May 2007, President Uribe stated
that, while there continued to be killings in Colombia, the situation had improved
under his administration. He talked about the progress in Colombia to curb violence
against union members, saying that in 2001, there had been 205 assassinations of labor
union activists and teachers, and that this number had declined to 40 by 2005. He
acknowledged, however, that killings increased to 60 in 2006. Colombian
government data show that the number of unionists who were murdered decreased to
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.59
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.60 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
sent ences. 61
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
57 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.
58 Colombia’s Observatorio del Programa Presidencial de DDHH y DIH, Vicepresidencia
de la República, April 2008.
59 See CRS Report RL32250, Colombia: Issues for Congress, by Colleen W. Cook, pp. 31-
60 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.
61 Embassy of Colombia, pp. 11-12.
people were convicted on charges related to the murder of union members, more than
were convicted from 2004 through 2006.62
The Bush Administration views the FTA as a national security issue, stating that
passage of an agreement would strengthen a key democratic ally and send a clear
message to the region of U.S. support for democratic nations in Latin America and a
strengthening of the economic relation with Colombia. The Administration has stated
that an FTA with Colombia “would bring increased economic opportunity to the
people of Colombia through sustained economic growth, new employment
opportunities, and increased investment.”63 The Administration believes that an FTA
would “reinforce democracy by fighting corruption, increasing transparency, and
fostering accountability and the rule of law” and that it would “bolster one of our
closest friends in the hemisphere and rebut the antagonists in Latin America who say
the United States cannot be trusted to keep its word.”64
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 the agreement goes beyond the U.S.-Colombia economic relationship and
that the direction that the United States takes on this agreement would be viewed by
other Latin American nations as an indication 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.65 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 for66
62 Frank Bajak, "U.S. Unionists Alarmed by Colombia Woes," Miami Herald, February 13,
63 The White House, Office of the Press Secretary, Fact Sheet: U.S.-Colombia Free Trade
Agreement Essential To Our National Security,” March 12, 2008.
65 Letters from the Presidents of Costa Rica, El Salvador, Honduras, Nicaragua, and Mexico
to the leadership of the House of Representatives, October 2007.
66 See CRS Report RL32488, Venezuela: Political Conditions and U.S. Policy, by Mark P.
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.67 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.68 Some opponents of a CFTA believe
that trade agreements have negative 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 agreement69. 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.”70
67 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.
69 National Pork Producers Council, NPCC Applauds President for Sending Trade Deal to
Congress, April 7, 2008.
70 U.S. Chamber of Commerce, U.S. Chamer Hails u.S.-Colombia Trade Deal, February 27,