Free Trade Agreements: What’s not to like?


Shaken out of its protectionist stupor by the dismal economic situation in the US, the Obama Administration has announced it is moving toward ratification of successfully negotiated free trade agreements (FTAs) with Colombia, South Korea, and Panama. Whether or not Obama will defy the Democrat base and follow through on this isn’t clear, but it is worth reiterating what a no-brainer these trade agreements are and what a shame it is that they have been languishing in Congress.

By the time the treaties, negotiated by the Bush administration, were complete and ready for ratification, the Democrats had seized congress and were unwilling to put the treaties to a vote. Obama equivocated on the issue during the campaign, expressing ambiguous support for free trade generally but voicing opposition to the FTA with Colombia over concerns about violence against trade unions perpetrated by drug lords and corrupt politicians. Since the election, Obama has appeased protectionist sentiment on trade by refusing to even attempt to work through congressional objections until now.

The aforementioned Colombian FTA deserves particular attention. Though the agreement with South Korea is the most lucrative in dollar terms, the agreement with Colombia is the most important politically and has been the most controversial. In 2000, Colombia had the highest murder rate in the world, rebels controlled almost half of the country, and instability made for a grim economy.

President Alvaro Uribe then embarked on a massive campaign to fight drug traffickers and stabilize the country. In the past 10 years the murder rate has plummeted, rebel groups are on the verge of collapse and the country is booming. We at ASI do not agree with the American-led War on Drugs, but Colombia’s recovery from chaos is unquestionably a welcome development, particularly given that the country now shines as a beacon of capitalism in South America. This is in stark contrast to its neighbor, Venezuela, whose devastation under leader-cum-dictator Hugo Chavez serves to remind the world how terrible socialism is.

The negotiation of the FTA with Colombia was part of the Bush administration’s evidently successful effort to aid a strong American ally. The growth that the treaty will bring the country will continue to turn Colombians away from the drug trade and toward legitimate market activity. Given this, the concern over the safety of trade unionists is plainly illegitimate; violence against unions has fallen substantially and will continue to fall as Colombia’s economy globalizes and drug production migrates to poorer countries like Bolivia and Peru. Rejecting an FTA will inhibit development and thus increase violence and assassinations. The objection does not hold up; it is plainly a guise for general resistance to FTAs by those who hold anti-trade views in spite of the benefits that accrue to the countries involved.

The wonderful thing about trade is that, unlike virtually everything else the US government does overseas, the political benefits will be accompanied by benefits to the American economy. Not only do these three agreements help shore up three democratic US allies, they also have a positive effect on the Obama administration’s highest priority: the economy. US trade figures recently released reveal soaring trade deficits, which are subtracted from GDP so as to make economic growth look weaker than it actually is (on that see here). Obama wants to ease political pressure by making trade figures look better, and it just so happens that the three trade agreements will facilitate more balanced trade. Yes, passing the agreements will upset a part of his base, but it will provide a boost to the economy - access to the South Korean market is no small prize. This should outweigh any political hit he is worried about taking from his union backers. But he has to stop dithering.

Meanwhile, an FTA between Canada and Colombia looks like it will give Canadian businesses a jump start on gaining a share of the Colombian market. We Americans like to snigger at Canada, but if liberal trade policies are indeed giving Canadian businesses a competitive edge…well, it seems the joke is on Uncle Sam.