The Next Phase in American Free Trade:

Colombia, Panama and South Korea

A Henry Jackson Society Strategic Briefing By Peter John Cannon November 2011

Executive summary: ◊ The US has finally ratified three free trade agreements with Colombia, Panama and South Korea, after several years of delay. ◊ The agreements were originally signed under the Bush administration, but the Obama administration has delayed their ratification until now. ◊ The delay has been damaging, particularly for relations with Colombia, the USA’s closest ally in South America. Colombia has sought alternative trading partners, particularly China. ◊ The ratification is a move in the right direction for US trade policy in Latin America. The US should continue to argue for the Free Trade Area of the Americas.

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Three agreements

it was the Obama administration which delayed these free trade agreements by several years. All

The United States has finally ratified three free trade

of these agreements were originally signed under

agreements with Colombia, Panama and South Korea.

the administration of George W Bush, in 2006 in the

These were approved by Congress on 12 October

case of the agreement with Colombia and in 2007

and approved by the president on 21 October. The

in the cases of Panama and South Korea. However,

administration argues that these agreements could

the Obama administration insisted on renegotiating

boost US exports by $13bn (£8.25bn) and support tens

the treaties, with protectionism having emerged as a

of thousands of American jobs.

theme of Obama’s presidential campaign.

The ratification was welcomed in Colombia, where

During his campaign, Obama attacked the North

president Juan Manuel Santos stated: “Today is a

American Free Trade Agreement with Canada and

historic day for relations between Colombia and the

Mexico as a “bad trade deal”, and he criticised his

United States.” He added that the agreement with

Democratic rival, Hillary Clinton, for having supported

his country would “generate much wellbeing for our

NAFTA when it was ratified by her husband. Obama

peoples.” In Panama, president Ricardo Martinelli

described the agreement, which removed tariff

commented: “We Panamanians have to prepare to

barriers in a third of the USA’s export market, as “an

take advantage of this agreement,” while Panama’s

enormous problem.” According to Obama, NAFTA,

Chamber of Commerce, Industries and Agriculture

far from benefiting the US, “ships jobs overseas.”

called it: “a historic moment for Panama.” 1

Obama’s solution was to “fix NAFTA so that it works for American workers,” with the threat that the US would

In a statement, US Secretary of State Hillary Clinton

opt-out if this was not done. Obama complained:

claimed “The Obama Administration is constantly

“year after year, politicians in Washington sign trade

working to deepen our economic engagement

agreements that are riddled with perks for big

throughout the world and these agreements are an

corporations but have absolutely no protections for

example of that commitment.” 2 United States Trade

American workers. It’s bad for our economy, it’s bad

Representative Ron Kirk described the agreements

for our country, and it will not happen when I am

as “the leading edge of a job-creating trade agenda “,

president.” 5

adding: “This President has gotten trade policy right.” 3 Similarly, the New York Times described the passage of

Many of these criticisms were misguided. Far from

the agreements as “a victory for President Obama.” 4

“shipping jobs overseas,” 1.3 million export-related jobs were created between 1994 and 1998, after

Three years of delay

NAFTA was signed. 6 NAFTA increased trade from $297 billion to $810 billion. 7 It was a claim of the Obama

The problem with this line of argument was that

campaign that trade policy was dictated by ‘special interests’ and only benefited Wall Street, but free

1  ‘US Congress backs free trade pacts with South Korea, Colombia and Panama’, The Guardian, 13th October 2011, http://www.guardian.co.uk/business/2011/oct/13/ us-free-trade-agreements-korea

trade has in fact been beneficial both to the people of the USA and its trading partners. While Obama

2  ‘South Korea, Colombia, Panama Free Trade Agreements’, Hillary Rodham Clinton, State Department, 12th October 2011, http://www.state.gov/secretary/ rm/2011/10/175348.htm

5  ‘Democrats address economic fears’, John M. Broder and Jeff Zeleny, New York Times, 18th February 2008, http://www.nytimes.com/2008/02/18/world/americas/18ihtcampaign.5.10162895.html

3  ‘Statement By U.S. Trade Representative Ron Kirk On Congressional Passage Of Trade Agreements, Trade Adjustment Assistance And Key Preference Programs’, Office of the US Trade Representative, 12th October 2011, http://www.ustr.gov/aboutus/press-office/press-releases/2011/october/statement-us-trade-representative-ronkirk-congres

6  ‘10 Benefits of Free Trade’, World Trade Organisation, http://www.wto.org/english/ thewto_e/whatis_e/10ben_e/10b07_e.htm

4  ‘Congress Ends 5-Year Standoff on Trade Deals in Rare Accord’, Binyamin Appelbaum & Jennifer Steinhauer, New York Times, 12th October 2011, http://www. nytimes.com/2011/10/13/business/trade-bills-near-final-chapter.html

7  ‘NAFTA: A Strong Record of Success’, Office of the United States Trade Representative, March 2006, http://www.ustr.gov/sites/default/files/uploads/ factsheets/2006/asset_upload_file242_9156.pdf 3

was criticising the USA’s trade agreements, exports

Eric Farnsworth, vice-president of the Council of the

were adding a percentage point to American GDP

Americas, argued: “The delay in passing this called into

growth, offsetting the effects of the decline in home

question the United States’ reliability as a partner,”

construction at the time of the ‘credit crunch’.

Farnsworth says. “There’s a strategic component to this. It’s not just about economics and trade.”

This hostility towards NAFTA paved the way for opposition to the new agreements with Colombia,

In the meantime, Colombia has sought economic

Panama and South Korea. Democrats in the House

partners elsewhere. Colombia has negotiated a free

of Representatives have continually blocked the

trade agreement with the European Union and has

passing of a free trade agreement with Colombia,

sought to join the Asia Pacific Economic Cooperation

raising human rights concerns over the killing of trade

(APEC) forum. Colombia has signed free trade

unionists there. When Colombia took steps to address

agreements with Chile, Peru, Mexico, and Canada. 11

these concerns, the rhetoric would sometimes shift to

Canadian prime minister Stephen Harper remarked

the protection of “America’s working families”. 8

bluntly at the time: “We can’t block the progress of a country like this for protectionist reasons, and

The administration therefore insisted on renegotiating

you trying to use human rights as a front for doing

the agreements to secure greater labour rights and

that... I think there are protectionist forces in our

worker protections in Colombia and enhanced tax

country and in the United States that don’t care about

transparency and labour rights in Panama. 9 These

development and prosperity in this part of the world,

were the first trade agreements passed since the

and that’s unfortunate. No good purpose is served

agreement with Peru that was passed in 2007, the

in this country or in the United States by anybody

same year that Democrats ended Republican control

who is standing in the way of the development of the

of Congress.

prosperity of Colombia.” 12

As Hillary Clinton recognised in her statement on the

Of potentially more concern to Washington, Colombia

agreements: “The stakes are not just economic. South

also agreed plans with China for a rail link between

Korea, Colombia and Panama are three important

the Pacific and the Caribbean, with the potential for

partners in strategically vital regions.” That is why

drawing freight away from the Panama Canal. While

the delay in ratifying the agreements is a matter for

the US remains Colombia’s largest export market,

concern. 10

sales to China more than doubled in the last year and exports to Brazil have also risen rapidly. Colombian

A cooling of relations with Colombia

president Juan Manuel Santos has also pursued

Nowhere is this clearer than in the case of Colombia.

to Colombia and sought to isolate the country in

a more conciliatory policy towards Venezuelan leader Hugo Chavez, who has long posed a threat Latin America. One recent example of this was the

The long delay in ratifying the treaty with the USA’s

extradition of Venezuelan drug lord Walid Makled,

closest ally in South America did not go unnoticed.

who was arrested on a US warrant, to Venezuela rather than to the United States. 13

8  ‘Change we should not believe in’, Peter Cannon, Infinity Journal, December 2008, http://www.infinityjournal.com/article.php?article=53

11  ‘Is Free Trade Good for Colombia, and is it Good for the United States? Has the Free Trade Agreement Between Colombia and the U.S. Reached a Cross Roads?’, Robert Valencia, Council on Hemispheric Affairs, 30th September 2011

9  ‘Statement By U.S. Trade Representative Ron Kirk On Presidential Signature Of Trade Legislation’, Office of the US Trade Representative, 21st October 2011, http:// www.ustr.gov/about-us/press-office/press-releases/2011/october/statement-us-traderepresentative-ron-kirk-preside

12  ‘Harper lashes out at critics of Canada-Colombia free-trade deal’, Steve Rennie, The Canadian Press, 10th August 2011, http://ca.news.yahoo.com/harper-colombiatalk-trade-deal-kicks-next-week-080009885.html

10  ‘South Korea, Colombia, Panama Free Trade Agreements’, Hillary Rodham Clinton, State Department, 12th October 2011, http://www.state.gov/secretary/ rm/2011/10/175348.htm

13  ‘Colombia With a U.S. Trade Treaty It May No Longer Need’, Eric Martin & Blake 4

The delay in ratifying the trade agreement has

“Singapore of Latin America.” With corruption and

therefore contributed to a cooling in relations with

weak institutions remaining a problem, it is expected

the closest ally of the United States in South America.

that the free trade agreement will make public

When the agreement was originally signed, Colombia

procurement more open and transparent. 15 The

was fairly isolated in the Latin American Region and

agreements should therefore be beneficial for both

struggling to fight against leftist guerrillas and drug

Latin American states.

cartels. Now it is the United States which finds itself

In the Americas, the United States now has free trade

more isolated and struggling economically.

agreements with Canada and Mexico, the Central American states (excluding Belize, but now including

A more positive path?

Panama) and the Dominican Republic, Chile, with

Despite the setbacks, that the agreements with

Peru and Colombia. This is good progress, and the

Colombia and Panama were ratified indicates that

US should continue to speak in favour of the idea of

the Obama administration did finally recognise the

the Free Trade Area of the Americas at next year’s

economic and political logic of completing the free

Summit of the Americas in Cartagena, Colombia,

trade agreements signed by the previous government.

despite the opposition of the ALBA (Bolivarian Alliance for the Americas) bloc and most of the Mercosur

It is to be hoped that the final ratification of the

(Southern Common Market) group. It is encouraging

agreements signals a more constructive approach to

that the United States has now moved back in favour

trade and diplomacy with Latin America, and a move

of free trade in the Americas. While the delays have

away from protectionism.

been damaging, US policy is now moving in the right direction.

For Colombia, exports to the United States could increase as much as 14 % over the next three years,

Peter John Cannon is the Latin America Section Director of

according to a study by the country’s central bank.

the Henry Jackson Society

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Panama, meanwhile, is the fastest growing economy in Latin America, and has been described as the Schmidt, Business Week, 27th October 2011, http://www.businessweek.com/magazine/ colombia-gets-a-us-trade-treaty-it-may-no-longer-need-10272011.html ‘How Obama is losing Colombia’, José R. Cárdenas, Foreign Policy, 25th April 2011, http://shadow.foreignpolicy.com/posts/2011/04/25/how_obama_is_losing_colombia 14  ‘New trade deals bring challenges and opportunities’, Jim Wyss, Miami Herald, 12th October 2011, http://www.miamiherald.com/2011/10/12/2451429/new-trade-dealsbring-challenges.html

15  ‘A Singapore for Central America?’, The Economist, 14th July 2011, http://www. economist.com/node/18959000

© 2011 The Henry Jackson Society, Project for Democratic Geopolitics. All rights reserved. http://www.henryjacksonsociety.org

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