It Is Time to Pass the Free Trade Agreement with Colombia

With good reasons, there is a great sense of optimism in Colombia today. After significant improvements in security over the past decade, President Juan Santos embraced the public desire for social progress that took a back seat to security during Álvaro Uribe’s presidency and unveiled a package of social and economic reforms. Reducing poverty is high on his agenda, and restoration of land to those forcibly displaced by armed groups has become his signature issue. Out of the more than two million displaced, his plan is to resettle about 160,000 families over the next two years.

There are even talks about land reform in Bogota, not merely land restoration. President Santos has shaken up the Ministry of Agriculture, historically an obstacle to meaningful agricultural reform and an institution that has privileged big landlords at the expense of small farmers, thus serving as a critical impediment to making alternative livelihood efforts for Colombia’s coca farmers more effective. The Santos government has also recognized the need to increase the state’s fiscal capacity: like in many Latin American countries, land and the rich are taxed very lightly, the poor often work in informal or illegal economies, and thus the middle class bears much of the tax burden. Such a tax policy has done little to generate jobs even during times of national economic growth.

One way to think of Colombia’s tortured history is as a precarious effort to sustain a strong and developed center on the back of a neglected and exploited periphery. Every so often the periphery’s seething socio-economic problems erupt and a periphery-based militancy starts encroaching on the center. The center mobilizes, suppresses the militancy, but fails to address the root causes of the troubles and to bring a stronger, more multifaceted, and more equitable state to the periphery. Eventually, seething problems and militancy start bubbling up again and spill over onto the center. Colombia now has a chance to break this pattern.

A free-trade agreement (FTA) with Colombia would give an important political boost to the reformist government of President Santos and to some extent directly facilitate socio-economic development in Colombia. Further holding up the FTA will accomplish little. Here are three reasons to pass the FTA.

  • The FTA is likely to promote economic growth in Colombia. However, how much such a growth would dominantly accumulate to capital-intense industries or trickle down to labor-intensive economies and stimulate job-generating growth in either the countryside or the cities depends heavily on fiscal policies in Colombia. Currently, these policies in Colombia do not privilege job creation or poverty reduction.

    In the absence of major fiscal and institutional reform in Colombia, the FTA on its own is thus unlikely to have profound effects on violence levels as it is unlikely to redress the lack of employment opportunities in Colombia or the continuing state absence in both rural and urban peripheries. However, a FTA with the United States in combination with fiscal and institutional reform in Colombia that stimulates job creation and expands economic access opportunities in the periphery (such as access to microcredit, for example), could have pronounced effects on employment, reduce violence, and better link Colombia’s citizens with its government.

    Far more so than its predecessor, the Santos administration is focusing on such socio-economic issues in Colombia and seeking to address the country’s deep-seated poverty. It has demonstrated a willingness to undertake the badly needed economic reforms to reduce poverty and marginalization.

    How comprehensively and effectively they will be implemented remains yet to be seen. But the FTA is likely to provide a political boost to the Santos administration that would facilitate its pushing for stronger reforms and give it some political capital to bargain with strong interest groups in Colombia opposed to such reforms.

  • While the political and economic implications of a Colombia FTA are likely to be more modest than often stated, it is not clear that further withholding the FTA will induce the government of Colombia to make any further concessions or modify its policies, such as regarding labor issues. There is very much a sense in the Colombian government and Colombian political system that Colombia already adjusted its policies to a full extent possible to accommodate U.S. concerns. Any further concessions are likely to be marginal.

    Although violence against union leaders and other community and social activists persists, it is far reduced from its critical levels in the 1990s and early 2000s. Moreover, the Santos administration appears genuinely determined to redress the historic discrimination and neglect of socially, politically, and economically marginalized segments of the Colombian population.

    The Santos administration has also shown a commitment to tackle illegal armed actors, including critically, the so-called bandas criminales which have emerged in the wake of the demobilization of paramilitary groups and sometimes directly originate in the old paramilitary groups.

  • Apart from the internal economic and political implications for Colombia, the FTA would strengthen Colombia’s relationship with the United States. The FTA is an important mechanism for the United States to recognize the progress Colombia achieved in the security and rule of law areas and the commitment of the Santos administration to take on socio-economic issues, such as land restitution.

    Even in the absence of the FTA, Colombia will, with frustration, continue to look to the United States as its key international ally, even as it seeks to expand the range of its alliances and strategic partnerships. But at least to some extent, the FTA is likely to reduce Colombia’s determination to diversify its alliances and focus away from the United States, such as on China.

Bottom-line: Without deeper internal reforms designed to address poverty and social marginalization, the FTA will likely have only modest effects on either economic patterns or violence levels in Colombia. If major reforms were undertaken in Colombia, as the Santos administration is attempting to do and which the FTA has a modest chance of facilitating at the political level, the FTA could have more pronounced and positive effects on violence levels and poverty and underdevelopment in Colombia. And the FTA will importantly strengthen U.S.-Colombia relations. Withholding the FTA was an important mechanism to get the government of Colombia to focus on social and human rights problems in Colombia. But it is now time to recognize Colombia’s progress and pass the FTA.