Showdown on U.S.-Colombia Free Trade Agreement

Free trade agreements are supposed to be great ways to deepen friendships with U.S. allies. Alas, the theory doesn’t seem to be working very well in the case of Colombia.

A battle royale is underway in Congress over the U.S.-Colombia free trade agreement, and Colombian leaders are spitting mad that the pact may be the first such deal to get voted down on Capitol Hill. Then there’s the spectacle surrounding Mark Penn, Senator Hillary Clinton’s former campaign strategist, who had to quit after the revelation that he met with the Colombian ambassador in his capacity as president of a public relations firm. His description of the meeting as an “error in judgment” did not go over well in Bogota; the government terminated its contract with his firm, citing a “lack of respect to Colombians.”

Maybe this time, we’ll finally learn that trade deals of this ilk can be a lot more trouble than they’re worth. The Colombia contretemps is the latest sign that the Bush administration’s policy of avidly pursuing such agreements with individual countries is prone to serious backfiring.

Don’t get me wrong. I’m not espousing the arguments of the American labor unions and their soulmates in Congress who regard the U.S.-Colombia FTA as a threat to U.S. living standards. But I am equally unmoved by the claims of knee-jerk free traders that the deal is a model of how trade policy ought to be conducted.

My point is that there are good ways and bad ways to promote trade liberalization, and bilateral FTA’s are in the latter category. By far the best way is on a multilateral basis—that is, in the World Trade Organization. For all its flaws, the WTO plays a crucial role in fostering global economic stability, because countries take their trade disputes to WTO tribunals for adjudication rather than engaging in tit-for-tat retaliation. That keeps trade wars from erupting, and so do WTO members’ pledges to keep their tariffs within legally-bound limits.

Bilateral deals, much beloved by politicians and trade negotiators because they offer the opportunity for splashy photo-ops, have spread in such profusion in recent years that they are threatening to erode the authority of the multilateral system. Their advocates argue that while the multilateral approach is preferable, it’s too cumbersome and unproductive, as witnessed by the slow pace of the WTO’s Doha Round of negotiations. Well, first of all, the Doha talks have made some significant progress in recent months, and there’s at least a chance that an important breakthrough will come in the next few weeks. Even if it doesn’t, trade policymakers ought to be spending their time and energy shoring up the credibility of the WTO, rather than undermining it by adding to the spaghetti bowl of bilateral and regional arrangements.

As usual, we’re hearing the litany of justifications for Colombia that the knee-jerkers have trotted out in the past, about how this country of 44 million people is a big potential market for U.S. exports. This is the sort of overselling that just ends up giving open trade a bad name. Yes, an FTA with Colombia would give U.S. firms duty-free treatment on their exports there, and that would help companies like Caterpillar sell some more machinery. But let’s put the payoff in perspective.

Even if U.S. exports to Colombia, which totaled $8.6 billion last year, doubled overnight, that would add less than seven-hundredths of one percent to U.S. gross domestic product. Looking at the broader picture, the exports of all the countries with whom the Bush administration has completed FTA’s add up to less than 7 percent of total exports; throw in the pending deals with Colombia, South Korea and Panama, and the figure is still only about 11 percent of total exports. And that’s just a sliver of the total economy; exports accounted for less than 8 percent of U.S. GDP last year.

The current dustup over Colombia is vitiating yet another of FTA boosters’ favorite claims, that the deals generate foreign policy benefits. I’ll admit that some recent FTA’s have added a little sheen to U.S. relations with certain countries—Morocco and Bahrain come to mind. But are those gains worth the anti-American sentiment that gets stirred up when negotiations go sour, or when Congress balks because of differences with the administration over issues such as labor standards? Accusations of U.S. bullying are often raised by opponents in the countries with whom Washington negotiates, and those accusations are far from spurious. Talks concerning a proposed U.S.-Thailand FTA, for example, have foundered in part because the Thais felt America was pushing them around over protection for drug patents; the spat was barely noticed here but it made headlines in Bangkok.

The Bush administration is undoubtedly right in saying that Venezuelan President Hugo Chavez would take enormous pleasure in seeing the U.S.-Colombia FTA go down in flames, and in the end the specter of such a foreign policy disaster may help get the deal approved. Whatever the outcome, it ought to prompt some deep questioning about why agreements such as these are negotiated in the first place. It may be too late to undo all the Bush deals, but hopefully the next president will recognize the folly of the current policy, stop pursuing FTA’s and use America’s clout to halt the trend toward a more splintered world of trade.