Bilateral agreements and fair trade practices: a policy analysis of the Colombia-U.S. free trade agreement (2006).
INTRODUCTION: SIDESTEPPING THE FOREST FOR THE TREES
Colombia is the most politically and economically northern-facing country in South America today. Its ties with the United States go beyond the drug war often associated with its landscape. (1) In fact, Colombia serves as the South American keystone in terms of regional security (2) and stability (3), as well as in terms of bilateral trade with the United States. As the longest-standing democracy in all of Latin America4 and as a major trading partner with the United States, (5) the interests of the two countries are in many ways aligned. (6) With the five-year Plan Colombia program (7) coming to an end and yielding less than desirable results, and the increase of left-leaning politicians in other parts of Latin America, the United States has a strong incentive to strengthen ties with its southern partner. Accordingly, following the unsuccessful negotiation of a regional integration trade agreement between the Americas, negotiations began for the conclusion of a bilateral trade agreement between the two countries. (8)
Following two years of intense talks and attempts to secure a workable agreement, Colombia and the United States signed a bilateral trade agreement on February 27, 2006. (9) This was a momentous occasion for both countries as Colombia, the third-largest Latin American economy, was on the verge of losing its trade preferences under the Andean Trade Preference Act (ATPA), and the United States, which sees Colombia as an important player in its foreign policy, was losing ground in securing a regional trade agreement via the Free Trade Area of the Americas (FTAA). The agreement solidifies many of the trading practices that were in place since 1991 under the ATPA, which was set to expire in December of 2006. (10)
In part, the choice to pursue a bilateral agreement represents a failure on the part of the Bush Administration to secure the FTAA, which had been under negotiation since 1998. (11) Instead, the United States chose to negotiate bilateral agreements with the four Andean countries: Colombia, Bolivia, Ecuador, and Peru. Recent political events in Bolivia (12) and Ecuador (13) indicate the unlikelihood of securing agreements with those countries.
Although the agreement with Colombia has not yet been formalized into law, as it must first be ratified by the U.S. Congress, its supporters offer unquestioning approval of the final terms, and thus, it is likely to be ratified soon. For example, former U.S. Trade Representative Robert Portman said of the deal, "[t]he agreement will help foster economic development in Colombia and contribute to efforts to counter narco-terrorism, which threatens democracy and regional stability." (14) Economists, industry leaders, and politicians on both sides of the agreement have expressed their support for this arrangement. (15)
The agreement is beneficial for U.S. businesses that work with Latin America or that intend to in the future. (16) But is this the best arrangement for Colombia? Will this agreement bring economic growth to the Colombian economy, and will that growth reach the impoverished majority? Would Colombia benefit more from pushing for unification of the Andean Community with Mercosur, uniting two powerful trade blocs and fostering a comprehensive regional trading bloc on par with the European Union and NAFTA?
This paper will explore the use of bilateral trade agreements as a general public policy, seen through the eyes of both the dominant and the subordinate parties to the agreement. It will then explore the Colombian market and its distinctions from a traditional market that may play a role in the establishment and successful operation of a free trade agreement. Subsequently, using an incrementalist policy analysis, the U.S.-Colombia Free Trade Agreement will be explored in context by highlighting the potential benefits and drawbacks of the arrangement to Colombia. Finally, I will draw conclusions and make recommendations in an effort to guide policymakers on the negotiation of other such arrangements in the future, including a proposed merger between the Andean Community and Mercosur.
I. THE USE OF BILATERAL TRADE AGREEMENTS TO PROMOTE FREE TRADE AND ECONOMIC DEVELOPMENT
Trade policy is one of the key components of any effective foreign policy. The establishment of beneficial trade relationships can facilitate domestic growth and industry expansion, while simultaneously promoting the development of an efficient global marketplace. Bilateral free trade agreements offer each country a set of particularized benefits that will, in theory, increase its position as an exporter to the other party, among other things. These benefits generally include reduced tariffs and quotas on key products exported to the other country, which allow exporters to reduce overall costs.
The United States has the largest economy in the world, in terms of gross domestic product (GDP). (17) Accordingly, it has the greatest economic influence and impact on other countries when negotiating trade agreements. The strong voices of the U.S. business community and industries such as agriculture and sugar have a substantial impact on the positions taken by the Office of the U.S. Trade Representative (USTR), (18) the key negotiating body for the United States.
The USTR has marketed free trade as a cure for the severe problems of poverty in many developing countries in which it is negotiating agreements. (19) The logic behind this idea comes from the widely-held belief that economic growth spurs poverty reduction and that free trade agreements bring economic growth. (20) However, several prominent scholars have concluded quite the opposite, and support for this direct relationship has weakened. Free trade may bring growth to certain sectors, but in the majority of cases, the developing country experiences a reduction in economic growth and an expansion of poverty. (21)
The exceedingly slow process of multilateral trade negotiations, namely that of the World Trade Organization (WTO), encourages developed countries such as the United States to meet their demand for better terms of trade through the use of smaller, less complicated bilateral and regional trade agreements. These agreements promise short-term gains in both trade access and political capital.
Powerful negotiators such as the United States have a vested interest in seeing economic growth and poverty reduction in developing countries because this creates more secure investment environments and increases the productivity of the world economy. However, if the policy of negotiating bilateral trade agreements to achieve better terms of trade is not adequately reducing poverty nor sustaining economic growth in developing countries, it may be more appropriate to re-evaluate the policy and attempt to identify more effective mechanisms for achieving these goals. Thus, the next step in determining the effectiveness of bilateral trade agreements as a public policy is to consider their impact on a developing economy. Herein, this analysis will focus on the trade dynamics between Latin America and the United States, focusing on Colombia as the case study. Accordingly, we begin with an examination of the development of trade between Latin America and the United States.
II. TRADE POLICY IN THE WESTERN HEMISPHERE
To fully appreciate the relationship between the United States and Colombia, it is essential to understand the progression of trade development within the Americas. Due to its close proximity, the United States has long held a substantial interest in the economic and political policies of Latin America. Yet this relationship has not always been strong, nor has it always worked to the benefit of the parties. For Latin America, the United States offers a substantial export market, lower shipping costs than those to Europe or Asia, and a population receptive to its goods and services. However, recent shifts in economic development away from hemispheric integration, as well as shifts in political development away from U.S. alignment, have weakened U.S. influence in the region and made the conclusion of trade agreements more difficult. This section attempts to briefly trace' this progression and position Colombia in its relational context with the United States, both historically and in today's global marketplace.
A. The Development of Latin American Trade Liberalization
Latin American trade policies throughout the 1970s relied largely upon import substitution and infant industry protection, which involved significant state assistance for new industries and the promotion of industries that do not necessarily have a comparative advantage in trade. (22) The theory behind import substitution is that by limiting foreign imports of manufactured goods and replacing them with domestically produced goods, exports will begin to exceed imports and economic growth will occur. (23)
The theory of comparative advantage urges countries to emphasize production in sectors in which they have a productivity advantage over other countries. Many countries in Latin America adhered to this theory at the expense of focusing on other, faster-growing commodity exports in which they did not possess these same advantages. (24) Resulting growth in the region during the 1970s tentatively confirmed the wisdom of these policies; however, growth fell to nearly zero in the 1980s while Asian countries, which relied on a theory of export promotion rather than import substitution, grew rapidly. (25) During this period, per capita income in Latin America declined by ten percent. (26)
Some researchers argue that the reason for the Latin American economic stagnation during the 1980s was the failed policy of import substitution, which was applied to different degrees in many countries in the region. (27) Joseph Stiglitz argues that this is not likely the case because, despite different trade policies in each country, economic stagnation occurred across the region. (28) Rather, Stiglitz suggests that it was the openness of the Latin American economy to Foreign Direct Investment (FDI) and reliance on foreign capital goods that led to an increased debt burden and a resulting economic shock. (29) Growth among the Asian Tigers, argues Stiglitz, resulted not simply from trade liberalization, but from the simultaneous government intervention in trade, FDI, and other crucial sectors of their growing economies. (30) The protectionist policies of East Asia along with their export promotion were part of the reason that the region grew so rapidly. (31) This dependence on foreign capital combined with domestic markets that were unprotected from foreign imports resulted in stagnant, if not negative growth in Latin America.
B. Colombia's Role in Hemispheric Trade
In 1991, Brazil, Argentina, Paraguay, and Uruguay joined to form the regional trade association Mercosur. (32) As the third largest trading bloc in the world, (33) with 235 million people and $2.05 trillion in GDP, Mercosur is a powerful force in shaping relations between Latin America and the rest of the world. Despite recent criticism of the regional agreement, (34) Mercosur has been growing in strength in recent years. (35) It has been negotiating a cooperation agreement with the European Community since 1995, with a renewed push for this cooperation made in 2004. (36) In addition, with the granting of full membership to Venezuela in July 2006, Mercosur has been likened to the European Union, but four times larger geographically. (37)
Colombia had maintained an import substitution policy since the late 1950s. Only in 1991 did Colombia begin to reduce its trade barriers and engage in regional trade agreements. (38) These agreements had been developing throughout South America since around 1980, when countries began to abandon trade protectionist policies and open their economies. (39) In 1969, Colombia, Venezuela, Peru, and Bolivia formed the Andean Community, which in 2005 had a population of roughly 118 million people and a GDP of $650 billion. (40) Colombia is also currently an associate member of Mercosur, meaning that it is permitted to partake in free trade agreements with Mercosur, but remains outside of the common market. (41) Achieving Mercosur's goal of complete South American integration into the common market would be highly beneficial for Colombia because the country would gain the stability-enhancing features of a common market. This would allow for unified external tariffs, increased access to the diverse Brazilian and Argentinean economies, and a much stronger voice in future bilateral agreements, which would be negotiated between Mercosur and the third country, rather than Colombia alone. While not a solution that surpasses the benefits of solely multilateral negotiations, unification of Colombia and the remaining Andean Community countries with Mercosur as full members could potentially change the negotiating power of every member state in all likely bilateral agreement negotiations in the future.
C. Attempted Unification of the Americas: The FTAA and Its Demise
The Free Trade Area of the Americas (FTAA) was first negotiated in 1998 at the Second Summit of the Americas in Santiago, Chile. The intent of the agreement initially was to expand the North American Free Trade Agreement (NAFTA) throughout the Western Hemisphere by making a broader free trade zone. (42) This zone would encompass approximately 800 million people. (43) However, the Washington Consensus (44)--a term used to describe the export of free trade policies and liberal reform from the United States--was now broadly opposed throughout Latin America, making the negotiation of a regional trade agreement challenging. (45) According to Dr. Mario Carranza, "[m]ost people in the region feel that two decades of neoliberal economic policies have done little to alleviate poverty in Latin America." (46) The policies purveyed by the Washington Consensus during this period assumed that all barriers to trade were negative for economic development and thus urged the rapid elimination of such barriers. (47) The trade shocks that would result were presumed to be temporary, and long-term aggregate gains were hardly in doubt. However, as economic recession set in during this period, Latin America found itself desperate for loans to sustain the short-term losses that the Consensus brought. This led to further barrier reduction in the region: "many developing nations opened their markets to developed-world goods, not in a reciprocal deal at the GATT, but as a condition of receiving IMF or World Bank funding." (48)
The implementation of an FTAA in Latin America would allow the United States in effect to consolidate "its political and economic relevance in the world system." (49) However, the FTAA negotiators from the United States had to proceed cautiously, working to counteract this negative image of U.S. influence in the region and to show their desire to foster a new way forward. Because of the economic and political power of Mercosur, issues of concern to the group must be addressed in any multilateral trade talk. Two primary issues were raised by Brazil at the FTAA talks: the Singapore issues and U.S. agricultural subsidies. The "Singapore issues," (50) named for their negotiation at the World Trade Organization (WTO) Singapore ministerial meeting in 1998, comprise a group of four areas of concern to developed countries but of little value and potential detrimental effect to developing countries. These issues are investment, competition, transparency, and government procurement. The proposed rules on foreign investment and competition policy could potentially prevent developing countries from importing technology and may give U.S. and European multinational businesses substantially more status in developing countries than a domestic business, (51) The lack of resolution surrounding this set of issues largely led to the breakdown of the 2003 Cancun meeting of the WTO. (52)
The more substantial sticking point for continued trade negotiations involves the demand for the United States to eliminate its agricultural subsidies, which provide roughly $20 billion in direct assistance (53) to a farming sector comprising roughly 1% of the U.S. economy. (54) Brazil demanded that the United States reduce agricultural subsidies as a condition of the FTAA, and the United States refused, stating instead that it would negotiate these subsidies as part of the Doha round of world trade negotiations. (55) The failure of the parties to reach agreement on these two issues led, in large part, to the breakdown of the negotiations. (56)
The WTO Doha ministerial meeting was held in November 2001 and set an aggressive agenda focused on development issues as they relate to trade. (57) This meeting established working groups and an agenda for all member states to address at future ministerial meetings, which are held at least every two years. The United States intended to address subsidies in the context of this agenda rather than in a regional trade negotiation because they sought equivalent subsidy reductions from the European Union, (58) which would only happen in the context of multilateral trade negotiations. However, there was industry support for addressing the subsidies issue, as part of the FTAA negotiations, and economic surveys appeared to show an overall beneficial result to U.S. agriculture upon the elimination of subsidies in the FTAA region. (59)
There was strong support for the FTAA in many parts of Latin America, including those countries that objected to certain provisions regarding subsides and the Singapore issues. For instance, the Brazilian Ambassador to the United States, Rubens A. Barbosa, released a statement calling for the restart of the FTAA negotiations. He said:
The ultimate goal of the process is not free trade for its own sake, but rather achieving the technological, economic, social, developmental, and political gains that we believe an FTAA can help generate. These benefits will not emerge automatically, nor as an inevitable corollary of increased trade liberalization, but instead will require a balanced and equitable process of give and take. (60)
The most recent Summit of the Americas to discuss the conclusion of an FTAA was held in Argentina in November 2005. At that summit, approximately twenty-nine nations supported the conclusion of an FTAA; however, the five opposing nations constitute the bulk of Mercosur and control nearly half of all Latin American trade. (61) The latter group inserted language into the final agreement stating that the "conditions do not exist to attain a hemispheric free-trade accord that is balanced and fair with access to markets ... free of subsidies and distorted commercial practices." (62) As a result, the talks broke down and President Bush departed the summit before it concluded. (63)
The FTAA as proposed in Santiago was dead. Yet the interest of the United States in securing trade agreements in the region was not. Strong support for some type of agreement by several Latin American countries led the United States to pursue bilateral FTAs with willing Latin American countries instead. The United States was never averse to the use of bilateral FTAs in the region. (64) In fact, former U.S. Trade Representative (USTR) Robert Zoellick stated at the Miami ministerial meeting, "the U.S. will not wait [for the won't-do countries]: we will move towards free trade with can-do countries." (65)
The United States was intent on securing a trade agreement with Latin America in some form. While the United States' efforts to secure a multilateral FTAA have failed, the United States may still be able to reassert its power in the hemisphere through the signing of bilateral FTAs. (66)
Colombia's president, Alvaro Uribe, strongly supported President Bush in his push for a regional FTA. (67) However, despite his political popularity, his position is not supported by a majority of the Colombian population. (68) Despite the lack of strong domestic support for a regional or bilateral trade agreement with the United States, President Uribe pursued a bilateral agreement with the United States. A final agreement was signed on February 27, 2006.
Colombia's primary trade partner outside of South America is the United States, the recipient of approximately 40% of all Colombian exports. (69) Accordingly, Colombia has significant interests to protect with regard to tariff and quota rates for Colombian exports to the United States. In addition, Colombia does not have a highly diversified economy, resulting in part from its dependence on the United States as its primary trading partner, leaving few alternative markets offering sufficient demand. (70) However, Colombia would have only pursued a trade agreement with the United States if it could be assured of actual economic and political gains. The United States was ready to offer these benefits, "but only after [Latin American countries] were able to shape up their own economies and get them on the road to recovery and steady growth." (71) As a stable, democratic, middle-income country, Colombia is a viable beneficiary.
III. THE BILATERAL ALTERNATIVE TO HEMISPHERIC INTEGRATION
Making substantial decisions in the context of foreign affairs, such as eliminating agricultural subsidies, invading a sovereign nation, or joining the International Criminal Court requires vast amounts of political capital and negotiation. International trade is an area that can be approached either from a grandiose perspective, i.e., multilateral agreements, or from a smaller, more direct approach, i.e., bilateral trade agreements. The latter approach, which might be considered incrementalist, (72) may be more effective in securing short-term benefits and maintaining sufficient political capital for a politician to remain in office. The broad, multilateral approach, which involves negotiating through the WTO, takes substantial political capital in the form of time-consuming and highly-technical trade negotiations and is unlikely to show significant results in the short time that a trade representative or politician occupies her office. The incremental approach offers some hope of economic gain with a lower political capital price tag and is thus the preferred approach, despite its potentially harmful effects on long-term economic growth and stability of the world economy.
Incremental decision-making "is decision-making through small or incremental moves on particular problems rather than through a comprehensive reform program." (73) The authors of this approach incorporate their model of "disjointed incrementalism" as a reflection of both the real and ideal methods of problem-solving in the policymaking process. Their approach to policymaking lowers the grand hopes and expectations of policymakers and encourages them to establish realistic, objective goals that can be accomplished despite a lack of complete information.
The incremental approach does not see long-term gains as feasible during the political shelf life of most politicians. Rather, it identifies marginal gains loosely directed toward the achievement of some greater goal as the most productive approach, despite the possibility that longterm goals might never be achieved. (74) Recognizing that objectives, goals and values change as policies move forward, this approach sets smaller, more achievable short-term goals that allow for the long-term targets to remain flexible. (75)
Despite the drawbacks and criticisms of this theory, (76) it appears to be a reflection of the current U.S. policymaking approach to trade agreements. (77) The United States has not abandoned its use of FTAs (78) in favor of encouraging the growth of a multilateral trading system largely because it is time-consuming and not cost-effective to wait for the effective functioning of a multilateral system. Achieving consensus among 150 member states to implement such a comprehensive trading regime on tariffs, subsidies, and other key trade areas has resulted in a slow moving and often stalled process of multilateral negotiations. Bilateral trade agreements and regional trade agreements function as a shortcut to the achievement of freer trade. In addition, non-trade benefits are eligible for concession when negotiating outside the WTO system, which would otherwise prohibit the negotiation of issues such as labor and environmental standards. (79)
It is not only the speed of achieving consensus on a multilateral trade regime that has caused many countries to seek FTAs outside the WTO regime. At a recent WTO conference, Mari Elka Pangestu, Indonesia's Minister of Trade, said that while developing country trade ministers are well aware of the better terms of trade that they could achieve in a multilateral trading regime, and while they know that FTAs are almost always negative for developing countries, pressure from businesses in their own countries force them to conclude some type of agreement that provides at least limited benefits to their industries. (80) Returning home without some type of trade agreement may reduce industry support for the ruling party.
The result of a desire to move forward, even if only in small steps, and the recognition that, while a better system may exist, more immediate results are better for maintaining political capital, is a process of disjointed incrementalism. In the context of international trade, an area to which Braybrooke and Lindblom may not have predicted the application of their theory, the benefits and drawbacks of an incremental approach applied through FTAs between developed and developing countries may offer short-term political capital to both parties, but may also result in substantially inequitable economic conditions and thus long-term political disaster, at least for the developing country party.
IV. THE U.S.-COLOMBIA FTA: A NECESSARY EVIL FOR COLOMBIA?
The U.S.-Colombia FTA is not uniformly negative for either party, as it provides some economic gains to both markets. This section intends to focus on the primary agricultural and industrial sectors with which the agreement is concerned and to present some of the most significant benefits for both parties that stem from these sectors. Broadly speaking, the agreement provides increased market access for exporters and investors from both parties. However, the extent of access is significantly more limited for Colombian exporters, while the gains for the United States are consistently larger in both quantity and quality of access. This section will discuss these gains and losses in more detail.
A. Primary Gains to the Colombian Economy
The gains to Colombia from the bilateral agreement with the United States should be viewed in the context of the expiring ATPA, which provided similar benefits on a term basis. The ATPA provided Colombia with duty-free access for the vast majority of Colombian goods coming into the United States. (81) The ATPA benefits were set to expire at the end of 2006. Under the newly negotiated bilateral agreement, most of these trade preferences are made permanent. The primary exception to the agreement is the export of Colombian sugar, which will still face tariffs and quota restrictions in the United States. "Any exports [of sugar] beyond the ]Tariff Rate Quotas] TRQ would face prohibitively high tariffs." (82) Thus, while many of the trade preferences previously granted under the ATPA will continue under the new agreement, sugar exports are still limited.
Colombia will open its previously closed market to the import of U.S. remanufactured goods, including machinery, computers, and cellular phones. (83) Colombia will also provide immediate duty-free treatment to U.S. farm exports, including beef, pork, corn, poultry, rice, fruits, vegetables, processed foods, and dairy products. (84) Further, Colombia will provide immediate duty-free treatment to U.S. textiles, presuming that they meet the rules of origin under the agreement, although an escape clause was added to protect Colombian producers in the event that domestic Colombian producers are harmed by excessive imports. (85) This increased flow of U.S. goods into Colombia will likely have the effect of reducing prices to consumers on food, clothing, and technology; (86) however, the increased competition from foreign manufacturers is also likely to have a negative effect on domestic industries in Colombia.
In the services sector, Colombia plans to offer more opportunities for market access to the U.S. service industry by dismantling investment barriers and removing the requirement that a subsidiary corporate branch be established in Colombia before services are provided. (87) These benefits particularly favor the U.S. construction, energy, and professional services industries, but also pave the way for new foreign direct investment opportunities in Colombia. (88) In addition, telecommunication markets in Colombia will be opened by removing the ability of local firms to claim "first right" of access to telecom networks, (89) again increasing competition and likely lowering prices for telecom services to Colombian consumers.
U.S. investors in Colombia will have an opportunity to operate in a more stable legal framework under the agreement. All types of investments are protected under the agreement, including enterprise, debt, concessions, and intellectual property. (90) For the most part, U.S. investors will be treated as if they were Colombian investors, with the ability to establish, acquire, and operate investments throughout the country. (91) They will also be provided with due process protections and remedies in the event of legal claims such as expropriation by the state. (92) These provisions may instill a greater sense of security for foreign investors and thus promote investment in Colombia. (93)
For intellectual property protections, U.S. companies will be treated equally with Colombian companies. Colombia agreed to develop an online trademark registration system to extend the terms of copyright protections, to limit the grounds for revoking a patent, and to create a system for preventing the marketing of pharmaceutical products that infringe patents. (94) The Colombian government is also required to use only legitimate computer software and to criminalize end-user piracy (such as illegal music downloading). (95)
Additionally, the agreement requires that Colombia post laws and regulations on the Internet, providing procedural certainty and transparency to foreign investors. The agreement also calls for laws that prohibit anti-competitive business conduct, enforce domestic labor and environmental laws, and establish dispute settlement panels that promote compliance through "consultation and trade-enhancing remedies." (96) Finally, the agreement includes "innovative provisions that allow the creation of working groups to evaluate the impacts of the agreement on small and medium-sized businesses." (97)
B. Primary Losses to the Colombian Economy
One of the primary Latin American objections to the FTAA was the refusal of the United States to negotiate its position on agricultural subsidies. The importance of this issue to the region cannot be overstated; however, the importance of this issue to each individual country in Latin America resonates unequally. (98) For Colombia, progress on reducing foreign agricultural barriers is highly important. The U.S.-Colombia FTA did not address U.S. agricultural subsidies, nor does the United States seem likely to address them in other bilateral FTAs. (99)
The agreement is highly favorable to certain U.S. agricultural industries, especially the beef, cotton, and wheat industries. These agricultural sectors will largely receive immediate duty-free access to the Colombian market. (100) According to negotiators, agricultural issues were the reason for the delayed conclusion of an agreement. (101) Strong opposition from most sectors of the Colombian agriculture industry was unsuccessful in slowing or preventing the progress of the agreement. (102)
Rice, poultry, (103) and sugar (104) are three of the most sensitive agricultural products to the Colombian economy. Colombian negotiators sought to receive expanded duty-free access to the U.S. market for sugar in the range of 500,000 to one million additional tons per year. U.S. negotiators sought to protect the interests of the U.S. domestic sugar industry, which argued that Colombian access to the U.S. sugar market would triple in the first year, negatively impacting the U.S. sugar industry, (105) The resulting agreement provided additional access to only 50,000 tons of Colombian sugar (for a total of 75,000 tons per year). (106) The quota on sugar will increase by 750 tons per year; however, the over-quota tariff is the only tariff in the FTA that will never be phased out. (107)
The United States was interested in expanding access for domestic producers to the Colombian rice market, which had previously been highly restrictive. The result was an increased quota of 79,000 tons and tariff elimination phased in over nineteen years. (108) This was a significant improvement over past treatment and was hailed by the U.S. rice industry as a success over Colombian opposition. (109)
Colombia agreed to open its market to U.S. exports of chicken leg quarters, despite strong opposition by Colombian poultry farmers. (110) The market will permit an initial quota of 26,000 tons to be imported, with a duty of about 70% on imports above that level. (111) A representative from a Colombian poultry trade association argued that this provision could wipe out the Colombian poultry industry "in a couple of years." (112)
Fair trade advocates have identified agriculture as one of the most significant drawbacks to this agreement for Colombia, finding that the risk of U.S. dumping (flooding the target market with goods sold at below market value, in many cases driving local producers out of business) and the removal of safeguards that offer food security could be highly detrimental to the Colombian market.113 According to the author of a recent Oxfam report on the agreement, "[t]rade could be the engine to pull millions out of poverty, but instead the winners of this agreement are American and international companies." (114)
2. Dispute Settlement
A mechanism for exporters to remedy certain trade disputes between countries is an invaluable facet of an effective trade agreement. (115) The U.S.-Colombia FTA includes investment dispute provisions that provide for binding international arbitration should a dispute arise. (116) With regard to conflicts between the states over the agreement itself, a dispute settlement mechanism exists that allows for monetary remedies to force compliance with respect to the core obligations of the agreement. (117)
Article XXIV of the GATT agreement discourages member states from entering into bilateral FTAs. One of the rationales for this article is that weak states will receive legal protection from more economically and politically powerful states if they manage their trade solely through the multilateral mechanism. (118) Article XXIV urges the use of a multilateral approach at the Dispute Settlement Body of the WTO, which allows weaker countries to effect more equitable and enforceable settlements. (119) Without protections against power imbalances, weaker parties to a bilateral trade agreement may find it more difficult to employ dispute settlement mechanisms for fear of economic or political retaliation, which the WTO may be unable to prevent if not conducted in the multilateral trade environment.
In the case of the U.S.-Colombia FTA, the dispute settlement mechanism has not yet been implemented; however, as it will operate outside the multilateral environment, Colombia faces a greater likelihood of political and economic pressure to challenge only the most egregious agreement violations. Had the agreement been negotiated in the multilateral context, that is, at the WTO, Colombia would be less likely to face potential retaliation or loss of benefits were it to challenge U.S. trade practices. (120)
3. Weak Overall Economic Gains
Peter Hakim, president of the Inter-American Dialogue, a Washington-based policy organization addressing hemispheric issues, argues that the benefits of free trade for Latin America depend on three factors, each of which varies based on the country: 1) the amount of exports shipped to the United States; 2) the level of import barriers in the United States faced by the particular country, and; 3) the contribution of exports to the country's economy. (121)
In 2005, Colombian exports totaled $21.1 billion, or 17.1% of annual GDP; exports to the United States accounted for 43% of total exports, and imports from the United States accounted for 29% of total imports. (122) As a result of an FTA with the United States, Colombia's exports to the United States are expected to increase by roughly 4%, or $600 million. (123) The resulting increase, while significant, is far less than the economic gains realized by more export-oriented economies like the "Asian tigers, "(124) which, as of 1993, exported close to 40% of their total GDP. (125)
4. Effects on the Informal Economy
Losses to an economy from a bilateral trade agreement may reach beyond the formal economy of consumers and licensed producers. The informal economy, which consists of those manufacturers and sellers that operate outside the bounds of the legal marketplace, either via home production, street vending, or informal markets, comprise a substantial portion, if not a majority, of the economic contingent of production in developing countries. Informal businesses exist in the United States, but on a comparatively small scale. (126) In many developing countries, these informal economies constitute 60% or more of the total economy. (127) The World Bank estimates that Colombia's informal economy is 39.1% of its total GDP. (128)
This Section will address two potential concerns over the impact of a bilateral trade agreement on this critically important sector: 1) the likely increase in informal employment resulting from formal job losses, and; 2) the limited ability of informal businesses to participate in the global markets created by a bilateral trade agreement.
After the conclusion of the NAFTA agreement between the United States, Mexico, and Canada, Mexico encountered substantial economic problems. These included a reduction in manufacturing sector employment, a 10% average drop in industrial worker wages, and a growth spurt in the informal economy. (129) During the 1990s, a similar expansion of income inequality was seen in Colombia, largely due to an imbalance across economic sectors and an increase in wage premiums. (130) This growth in informality means a larger portion of the population is without access to government benefits, such as social security or unemployment insurance, placing more people at risk of falling into poverty.
With respect to the ability to participate in new market opportunities created by the trade agreement, informal businesses are at a significant disadvantage. Moving from the informal to the formal sector by registering a business and acquiring necessary licenses to operate is much faster and less expensive in the United States than in Colombia. To begin a formal business, the World Bank estimates that it would take about five days, with an average of five steps and would cost 0.5% of annual GDP per capita in the United States, (131) as compared to twelve steps, taking roughly forty-three days and costing 25.3% of annual GDP per capita in Colombia. In addition, acquiring the licenses to operate and complying with permit requirements for a U.S. manufacturer would take about seventy days and cost 16.9% of GDP per capita. The same business in Colombia would require 150 days and cost 697.3% of GDP per capita to comply. (132) Finally, the time it takes to export goods once the business has been legally registered and licensed is nine days in the United States and thirty-four in Colombia. (133) Thus, while a U.S. seller may survive the wait and could potentially benefit from the agreement, a typical informal Colombian business operator that wanted to export their goods would likely face significant challenges in getting their goods to foreign markets and thus would be less likely to benefit from the agreement.
The distinction between the benefits accruing to an informal economic businessperson who moves into the formal economy in the United States and that same businessperson in Colombia are stark. Yet more importantly, the scope of this impact is much greater in Colombia, where more than one third of their economy operates informally (134) and is unable to benefit easily and affordably from the trade agreement. Accordingly, potential losses to the Colombian economy from the lessened ability of a major portion of its population to participate in the trade agreement must be assessed.
Inequitable trade results when economic benefits from trade accrue to one segment of society and either have no effect or a negative effect on other segments of society. When a segment of society is excluded from the export economy due to an inability to operate their business legally, any export-driven benefits acquired through an FTA will accrue disproportionately. The reason for this disproportionate distribution is that when a large informal sector persists, that sector is unlikely to contain direct participants in the export economy. Thus, as anticipated economic benefits begin to accrue domestically, they will accrue primarily with the direct participants-the formal economic actors. This has been the trend in other trade agreements in the Americas. (135) Accordingly, the income gap among the Colombian population may widen because of this FTA as a result of increased export benefits for Colombia's legal exporters combined with the negative impact of increased competition from U.S. imports on extralegal businesses throughout Colombia. This very concern was raised in a recent United Nations report, which found that as trade liberalization has expanded around the world, so has the incidence of employment in the informal sector. (136)
CONCLUSIONS AND RECOMMENDATIONS
A. Are FTAs Negative for Economic Development?
The effect of an FTA on Colombian economic growth is uncertain. According to an economic study conducted by Hernando Zuleta and Oscar Gracia, "the effect of FTA [on the Colombian economy] alone is likely to be relatively small." (137) By and large, developing countries are importers of goods; accordingly, an FTA that lowers import barriers will generally provide greater benefits to the country that exports more as their goods will be granted easier entry. (138) The impact of a bilateral trade agreement on Colombia may be less significant than FTAs in other parts of the world where a stronger export economy is already in place. (139)
As a growing middle-income economy, Colombia is approaching the road to economic independence and should tread carefully to avoid succumbing to a deeper dependency relationship with the United States. Trade offers many developing countries opportunities to pursue economic growth strategies. However, it is not in the opening of markets that these opportunities lie. Rather, trade offers an opportunity to examine domestic policies on imports and exports, manufacturing, technological growth, as well as to evaluate rule of law protections for domestic producers and foreign investors, regulatory flexibility for licensing and innovation, and investment in domestic education and health programs. (140)
The short-term gain policy approach to trade agreements applied by the United States may serve short-term interests and appease certain business communities in both the United States and the partner country. However, this incremental approach suffers from a lack of foresight and ignores a deeper discussion about development and equitable trade, without which the global trading system will be less predictable, accountable, and successful. In the case under examination here, Colombia may experience the shortfalls of this approach, enduring short-term benefits in the form of lower consumer prices on certain goods while succumbing to long-term job losses and industry failures as a result of increased and more efficient competition. In terms of Colombia's economic development, a framework for sustainable growth and poverty reduction requires looking beyond the limited short-term gains of a bilateral trade agreement.
Using this incremental approach to secure an FTA with Colombia may blind policymakers to the most salient trade issues in the region-namely, equitable economic growth policy, development assistance, and growth of social capital. The imbalanced trade resulting from this and similar FTAs further solidifies the inferior position of developing countries in the global marketplace.
B. The Alternative Approach
Colombia and other South American countries have an alternative to forming either an FTAA or entering potentially detrimental bilateral agreements with the United States. One of these options is to focus on South-South trade by increasing ties with countries such as China and India. This is already a growing option with regard to China, as seen by the recent exchanges between Hu Jintao, President of China, and several Latin American countries, (141) Another perhaps more powerful alternative would involve a unification of Mercosur with the Andean Community, which would create a significant force in the Western hemisphere and in the world, and might serve as an adequate substitute for the conclusion of an FTAA. (142) A regional approach to liberalized Latin American trade has the advantage of unifying related markets, each of which shares the goals of poverty reduction and equitable economic growth. Recent events in the region, such as Venezuela's withdrawal from the Andean Community, may make such regional unification difficult from a political standpoint, but it is in the best economic interests of each country to pursue a single approach to foreign trade for the region, as evidenced by the strong trading positions taken on by the European Union and ASEAN.
One frequent objection to complete South American integration is that while some countries (Colombia, Peru) seek stronger ties with their Northern neighbors, other countries (Venezuela, Brazil, Bolivia) are more interested in loosening these ties. Peter Hakim recently argued in Foreign Affairs that the United States is losing its influence in the region, largely because of the economic failures that have been blamed on the implementation of U.S.-backed neoliberal policies. (143) Yet this shift away from U.S. partnerships should not divide the otherwise culturally and economically intertwined countries of South America from each other. Regional integration and unified external policy can strengthen the position of Latin America in the global marketplace, allowing it to acquire better concessions in future trade agreements and to negotiate more forcefully in the multilateral context. In addition, with the recent change of power in the U.S. Congress, trade deals between the United States and Colombia and Peru may be stalled, perhaps indefinitely, as Democrats reevaluate their desire to offer new concessions to trading partners. (144) This could not only mean a reduction in already low U.S. regional participation, but also an opportunity for the previously Northern-facing countries to reevaluate the potential gains from integration with their neighbors.
What this Article has attempted to show is that bilateral free trade agreements are risky for the less powerful party both because they detract from more equitable multilateral negotiations at the WTO, and because they often extract more economically detrimental concessions from the weaker party in the negotiations at the expense of long-term economic development goals. Yet these agreements are a growing reality today and may be indicative of gaps in the multilateral negotiating process. (145) Accordingly, developing countries must be urged to proceed with caution, rather than desperation. Small gains in the short-term can serve the interests of some developing country constituents, but at what cost to long-term economic development? Utilizing the power of a regional organization, such as Mercosur, is one alternative to going it alone. Yet it is imperative that policymakers in developing countries recognize their negotiating position, identify their long-term strategy for economic development, and proceed with the mission of providing a sustainable future for their children rather than simply pursuing short-term political gains.
Kevin J. Fandl ([dagger])
([dagger]) Admitted to practice law in New York, Massachusetts, and Washington, D.C.; B.A. Lock Haven University of Pennsylvania; M.A., American University School of International Service, J.D.; American University Washington College of Law; Ph.D. candidate, George Mason University. Fulbright Fellow (Colombia). I would like to thank my wife, Monica Bibiana Lugo, for her unwavering dedication and support of my quest toward a world that recognizes that justice only begins where poverty ends. This article is dedicated to her and to the most wonderful gift imaginable, our daughter, Isabella Sophia. I would also like to express mv deep gratitude to the editors at the Yale Human Rights & Development Law Journal, who worked tirelessly and professionally to make this article respectable.
(1.) See, e.g., Michael Beaulieu, US-Colombia Relations at a Crossroads, VIEWPOINTS AMERICAS, Sept. 6, 2006, at 1, http://www.counciloftheamericas.org/coa/publications/ViewPoint Americas/2006/USColombiaRelations-Beaulieu.pdf.
(2.) See e.g., U.S. Department of State, Colombia, United States Allies in Fighting Terrorism, Mar. 23, 2006, http://usinfo.state.gov/is/Archive/2006/Mar/27-412929.html.
(3.) See, e.g., DANIEL W. CHRISTMAN & JOHN G. HEIMANN, ANDES 2020: A NEW STRATEGY FOR CHALLENGES OF COLOMBIA AND THE REGION 8-9 (2004).
(4.) See, e.g., Russell Crandall, The End of Civil Conflict in Colombia: The Military, Paramilitaries, and a New Role for the United States, 19 SAIS REV. 223, 223 (1999).
(5.) See, e.g., Press Release, U.S. Trade Representative, United States and Colombia Conclude Free Trade Agreement, (Feb. 27, 2006), http://www.ustr.gov/Document_Library/Press_Releases/2006/February/ United_States_Colombia_Conclude_Free_Trade_Agreement.html (highlighting the $14.3 billion in trade between the two countries).
(6.) See, e.g., Simon Romero, Bush Heads to Colombia as Scandal Taints Key Alliance, N.Y. TIMES, Mar. 11, 2006, at A4 (describing Colombia as the closest U.S. ally in South America).
(7.) See, e.g., U.S. Institute of Peace, Plan Colombia: Plan for Peace, Prosperity, and the Strengthening of the State, (2000), http://www.usip.org/library/pa/colombia/adddoc/plan_ colombia_101999.html.
(8.) See Robert B. Zoellick, America Will Not Wait for the Won't-Do Countries, FIN. TIMES, Sept. 22, 2003, at 23.
(9.) See, e.g., U.S. Trade Representative, Conclude Free Trade Agreement, supra note 5.
(10.) Press Release, U.S. Embassy Bogota, Colombia, USTR Expresses Strong Support for Extending ATPA Preferences (Nov. 14, 2006), http://bogota.usembassy.gov/wwwsustratpae. shtml.
(11.) See Mario E. Carranza, MERCOSUR, The Free Trade Area of the Americas, and the Future of U.S. Hegemony in Latin America, 27 FORDHAM INT'L L.J. 1029, 1030 (2004).
(12.) Bush Signs ATPDEA Extension into Law, LATINNEWS DAILY, Dec. 21, 2006 (discussing the unwillingness of Bolivia's new president, Evo Morales, to negotiate a trade agreement with the United States).
(13.) New Ecuador Leader Nixes U.S. Trade Pact, AFX INTERNATIONAL FOCUS, Dec. 10, 2006 (indicating that Rafael Correa, the incoming Ecuadorian president, will not sign a trade agreement with the United States).
(14.) U.S., Colombia Reach Free Trade Deal, ASSOCIATED PRESS, Feb. 27, 2006.
(15.) See, e.g., Kathryn McConnell, United States Signs Free-Trade Agreement with Colombia, USINFO, Nov. 22, 2006, http://usinfo.state.gov/xarchives/display.html?p=washfileenglish&y=2006 &m=November&x=20061122121011AKllennoCcM0.6516535.
(16.) Carranza, supra note 11, at 1032 (suggesting that the FTAA will give the U.S. government and big business interests a unique opportunity, to pry open the MERCOSUR market).
(17.) But see David M. Lampton, The Faces of Chinese Power, FOR. AFF. Jan.-Feb. 2007, at 115, 115-16 (arguing that the United States has historically underestimated the growing economic and political power of China).
(18.) See, e.g., Stephanie Saul, Drug Lobby Got a Victory in Trade Pact Vote, N.Y. TIMES, July 2, 2005, at C1 (discussing the successful lobbying efforts of U.S. drug companies during the negotiations for the Central American Free Trade Agreement); see also Chantal Thomas, Challenges For Democracy and Trade: The Case of the United States, 41 HARV. J. ON LEGIS. 1, 12 (2004) (describing the strong influence of industries in lobbying for benefits under U.S. trade policy).
(19.) See United States Trade Representative, Trade Facts at 5 (2003) http://www.ustr.gov/assets/Document_Library/Fact_Sheets/2003/ asset_upload_file962_3466.pdf (contending that free trade is "among the most powerful tools available to poverty").
(20.) M. Ayhan Kose, et al., How Has NAFTA Affected the Mexican Economy? Review and Evidence, 24-25 (IMF Working Paper No. 04/59, 2004); see also Dani Rodrik, Growth Versus Poverty Reduction: A Hollow Debate, 37 FIN. & DEV. 8, 8-9 (2000).
(21.) See, e.g., Kose, et al., supra note 20, at 25; U.N. Conf. on Trade & Dev., The Least Developed Countries Report 2004:Linking International Trade with Poverty Reduction, at 67, U.N. Doc. UNCTAD/LCD/2004, U.N. Sales No. E.04.II.D.27 (2004), available at http://www:unctad.org/en/docs/ldc2004_en.pdf (arguing that the assumption of an automatic reduction in poverty through trade will often result in counterproductive strategies).
(22.) See, e.g., JOSEPH E. STIGLITZ & ANDREW CHARLTON, FAIR TRADE FOR ALL: HOW CAN TRADE PROMOTE DEVELOPMENT 17-21 (2005).
(23.) See, e.g., Werner Baer, Import Substitution and Industrialization in Latin America: Experiences and Interpretations, 7 LATIN AM. RES. REV. 1, 95-96 (1972).
(24.) See STIGLITZ, supra note 22, at 19.
(25.) Id. at 19-20.
(26.) Peter Hakim, Western Hemisphere Free Trade: Why Latin America Should Be Interested?, 526 ANNALS AM. ACAD. POL. & SOC. SC1.121, 123 (1993).
(27.) See, e.g., Guillermo Rozenwurcel, Why Have All the Development Strategies Failed in Latin America?, 5 (UN U., World Inst. for Dev. Econ. Res., Research Paper No. 2006/12, 2006), http://www.widner.unu.edu/publications/rps/rps2006/rp2006-12.pdf (contending that import substitution resulted in closed economies that prevented sufficient foreign investment).
(28.) STIGLITZ, supra note 22, at 21-22.
(30.) Id. at 89.
(32.) See Treaty of Asunci6n, Dec. 31, 1994, 30 LL.M. 1041.
(33.) See Diego Agudelo et al., Regional and Global Integration in South America: A Spanish Fiesta Within Trade Communities, 7 Indiana Univ. Center for International Business Education & Research (July 2005), http://www.kelley.indiana.edu/CIBER/research.cfm.
(34.) See, e.g., Downhill from Here: Mercosur's Summit, ECONOMIST July 29, 2006, at 36 (discussing the tensions created by the inclusion of Venezuela in the group).
(35.) See, e.g., European Trade: Take Your Partners, ECONOMIST Oct. 7, 2006, at 38 (suggesting that the European Union is courting growing markets, including Mercosur).
(36.) See, e.g., European Commission External Relations, The E.U.'s Relations with Mercosur, http://ec.europa.eu/comm/external_relations/mercosur/intro/index.htm (last visited Feb. 19, 2007). However, note that these talks are currently stalled due to discussions over agricultural quotas, among other crucial trade issues. See, e.g., EUMercosur Trade Talks Stalled, BBC NEWS, July 21, 2004, http://news.bbc.co.uk/1/hi/world/americas/3914787.stm.
(37.) Profile: Mercosur-Common Market of the South, BBC NEWS, Dec. 15, 2006, http://news.bbc.co.uk/2/hi/americas/5195834.stm [hereinafter Mercosur-Common Market of the South].
(38.) Agudelo et al., supra note 33, at 7.
(39.) Id. at 2, 4.
(40.) Id. at 7. Note that Venezuela has recently announced its intention to withdraw from the association. See, e.g., Venezuela's Withdrawal from CAN Prompts Worries, LATINNEWS DAILY, April 21, 2006, at 1. But see Chavez Says Venezuela Willing to Reconsider Exit From CAN, BBC MONITORING INTERNATIONAL REPORTS, April 24, 2006 (calling into question Venezuela's commitment to withdraw from the Andean Community,).
(41.) Mercosur--Common Market of the South, supra note 37.
(42.) See Carranza, supra note 11, at 1030.
(43.) See Agudelo et al., supra note 33, at 9.
(44.) This term, originally coined by John Williamson, is also called neoliberalism and often refers to the process of globalization. See Washington Consensus, Center for International Development at Harvard University, http://www.cid.harvard.edu/cidtrade/ issues/washington.html (last updated Apr. 2003).
(45.) See Carranza, supra note 11, at 1047-48 (discussing the backlash resulting from the implementation of the Washington Consensus throughout the 1990s).
(46.) Id. at 1049.
(47.) See Dani Rodrik, Rethinking Growth Policies in the Developing World, 1-2 (Oct. 8, 2004), available at http://ksghome.harvard.edu/-drodrik/ Luca_d_Agliano_Lecture Oct 2004.pdf (unpublished paper).
(48.) See JOHN H. BARTON ET AL., THE EVOLUTION OF THE TRADE REGIME: POLITICS, LAW, AND ECONOMICS OF THE GATT AND THE WTO 164 (2006).
(49.) See Agudelo et al., supra note 33, at 10.
(50.) See, e.g., The Singapore Issues: Investment, Competition Policy, Transparency in Government Procurement and Trade Facilitation, 1 DOHA ROUND BRIEFING SERIES 6 (Feb. 2003).
(51.) See Carranza, supra note 11, at 1051-52.
(52.) See World Trade Talks Collapse, BBC NEWS, Sept. 15, 2003, http://news.bbc.co.uk/2/hi/ business/3108460.stm.
(53.) See, e.g., Chris Edwards & Tad DeHaven, The Stubborn Seeds of U.S. Farm Subsidies, CATO INST., Aug. 2001, available at http://www.cato.org/research/articles/ce082301.htmi.
(54.) See, e.g., ECONOMIST INTELLIGENCE UNIT COUNTRY REPORT: UNITED STATES 5 (2005).
(55.) See, e.g., Carranza, supra note 11, at 1051.
(56.) See id. at 1052-53.
(57.) The Doha round was the fourth official high-level ministerial meeting since the 1995 establishment of the World Trade Organization. The most recent ministerial meeting was held in Hong Kong in 2005. Meetings are mandated to be held every two years. Marrakesh Agreement Establishing the World Trade Organization, art. IV, Apr. 15, 1994, 1867 U.N.T.S. 154, 33 I.L.M. 1144.
(58.) See, e.g., The WTO Doha Development Round, Aug. 1, 2006, http://www.euractiv.com/en/trade/wto-doha-development-round/ article-157082.
(59.) See, e.g., Remy Jurenas, Agriculture in the Free Trade Area of the Americas, Congressional Research Service, Agricultural Policy Briefing Book, http://vcww.cnie.org/nle/crsreports/ briefingbooks/Agriculture/Agriculture%20in%20the%20Free%20Trade%20Area % 20of % 20the %20Americas.htm (last updated June 15, 2004).
(60.) Press release, Rubens A. Barbosa, Brazilian Ambassador to the United States, Brazil and the United States: Overcoming Obstacles to an FTAA, available at http://www.brasilemb.org/embassy/embaixador_ftaa.shtml (last visited Feb. 19, 2007).
(61.) See, e.g., Garry Leech, Despite FTAA Defeat at Americas Summit, Free Trade To Be Imposed on Colombia, COLOMBIA J. ONLINE, Nov. 7 2005, available at http://www.colombiajournal.org/ colombia221.htm.
(62.) See Summit of the Americas Fails To Resurrect FTAA, BRIDGES WK.LY. TRADE NEWS DIG., Nov. 9, 2005, at 5.
(63.) See Leech, supra note 61.
(64.) See, e.g., Carranza, supra note 11, at 1054 (noting that at the Miami ministerial meeting, the United States stated its intent to pursue bilateral agreements with Bolivia, Colombia, the Dominican Republic, Ecuador, Panama, and Peru, along with the FTAA itself).
(65.) Zoellick, supra note 8, at 23.
(66.) See, e.g., Carranza, supra note 11, at 1036 ("Bilateral free trade agreements ... such as the one signed with Chile on June 6, 2003, would allow the United States to obtain concessions from individual countries without going through the cumbersome FTAA process."). The United States may also gain politically from entering into a bilateral FTA with Columbia. See Secretary of State Condoleeza Rice, Remarks with Colombian Foreign Minister Barco (Apr. 27, 2005) ("[W]e spoke about the free trade agreement [with Colombia] and how important this is in its connection to combating drugs for Colombia.").
(67.) See, e.g., Jane Bussey, Trade Negotiations Are Everywhere, But Can They Reach Fruition?, FOR. POL., Jan. 1, 2005.
(68.) See, e.g., Leech, supra note 61 (finding that forty-three percent of Colombians are opposed to a bilateral trade agreement with the United States while thirty-eight percent support such an agreement).
(69.) See ECONOMIST INTELLIGENCE UNIT COUNTRY REPORT: COLOMBIA 10 (2007); see also Agudelo et al., supra note 33, at 12; Orlando Gracia & Hernando Zuleta, The Free Trade Agreement Between Columbia and USA: What Can Happen to Colombia? 8 (Kiel Institute for World Economy Working Paper, 2004), available at http://www.ifw-kiel.de/VRCent/DEGIT/paper/degit-10/c010-023.pdf.
(70.) Agudelo et al., supra note 33, at 14.
(71.) Hakim, Western Hemisphere, supra note 26, at 124.
(72.) See DAVID BRAYBROOKE & CHARLES E. LINDBLOM, A STRATEGY OF DECISION: POLICY EVALUATION AS A SOCIAL PROCESS 71-77 (1963). The approach of incremental change was presented in 1963 by David Braybrooke and Charles E. Lindblom.
(73.) Id. at 71.
(74.) See id. at 102-03.
(75.) Id. at 71-73.
(76.) See, e.g., Bernard Hennessy, A Strategy of Decision: Policy Evaluation as a Social Process, 17 W. POL. Q. 545 (1964) (book review) (arguing that this theory fails to add anything to the field of political science and is perhaps more of a philosophical examination of a well-known process).
(77.) A comprehensive and informed approach to trade agreements would be to abide by General Agreement on Tariffs and Trade 1994 (GATT) Article XXIV, which restricts the entry by member states into bilateral FTAs by requiring notification and sanctioning of any free trade agreement outside the purview of the WTO. By discouraging FTAs in favor of moving toward a multilateral trading system that is monitored and enforced by a neutral world body, the WTO seeks to equitably balance the treatment of all member states and to protect developing countries from being taken advantage of through inequitable FTAs. As of 2005, the WTO received notification of nearly 300 regional trade agreements (RTAs). Of these, only one has been sanctioned under Article XXIV and remains active. See CONSULTATIVE BOARD, WORLD TRADE ORGANIZATION,, THE FUTURE OF THE WTO: ADDRESSING INSTITUTIONAL CHALLENGES IN THE NEW MILLENNIUM 21-22 (2004), available at http://www.wto.org/english/ thewto_e/10anniv_e/future_wto_e.pdf. This trend indicates an unwillingness to pursue a comprehensive and informed approach, consistent with Braybrooke and Lindblom's assessment.
(78.) See The Australia-US FTA-A Step Towards Multilateral Free Trade? Analysis, AGRA EUROPE WEEKLY, Dec. 3, 2004, at A1.
(79.) See CONSULTATIVE BOARD, WORLD TRADE ORGANIZATION, supra note 77, at 23.
(80.) See Dr. Mari Elka Pangestu, Minister of Trade, Republic of Indonesia, WTO and the Developing Countries: an Indonesian Perspective, Keynote Presented at WTO at 10: Dispute Settlement, Governance and Developing Countries, Columbia University, New York (Apr. 56, 2006), available at http://www.sipa.columbia.edu/wto/pdfs/pangestu.pdf.
(81.) Fact Sheet, Office of the United States Trade Representative, Free Trade with Colombia: Summary of the Agreement (Feb. 27, 2006), available at http://www.ustr.gov/ assets/Document Library/Fact_Sheets/2006/asset_upload_file485_9023.pdf [hereinafter Fact Sheet, USTR].
(82.) See, e.g., Press Release, U.S. Dep't of State, U.S. Announces Completion of Free-Trade Agreement with Colombia (Feb. 27, 2006), available at http://usinfo.state.gov/ei/Archive/ 2006/Feb/27-265723.html.
(83.) Fact Sheet, USTR, supra note 81, at 1.
(85.) Id. at 2.
(86.) See, e.g., Krysta Boryskavich & Aaron Bowler, Trade and Culture: Hollywood North: Tax Incentives and the Fihn Industry in Canada, 2 ASPER REV. INT'L BUS. & TRADE L. 25, 28 n.6 (2002) (noting the Canadian Department of Finance expected NAFTA to improve Canadian citizen welfare by reducing consumer and factor prices).
(87.) Fact Sheet, USTR, supra note 81, at 2.
(90.) Id. at 3.
(93.) See John T. Schmidt, Arbitration Under the Auspices of the International Centre for Settlement of Investment Disputes (ICSID): Implications of the Decision on Jurisdiction in Alcoa Minerals of Jamaica, Inc. v. Government of Jamaica, 17 HARV. INT'L L. J. 90, 103-04 (1976), cited in Charles H. Brower, II, Investor-State Disputes Under NAFTA: A Tale of Fear and Equilibrium, 29 PEPP. L. REV. 43, 52 (2001) (discussing the need to include provisions that give investors a forum to raise disputes within trade agreements).
(94.) Fact Sheet, USTR, supra note 81, at 4.
(95.) Id. at 5.
(96.) Id. at 7.
(98.) For example, the Colombian agricultural sector is 12.3% of its economy, whereas in Brazil agriculture accounts for 8% of its total economy, and in Venezuela it accounts for 4% of the total economy. See ECONOMIST INTELLIGENCE UNIT COUNTRY COMMERCE REPORT: BRAZIL 6 (2006); ECONOMIST INTELLIGENCE UNIT COUNTRY COMMERCE REPORT: COLOMBIA 6 (2007); ECONOMIST INTELLIGENCE UNIT COUNTRY COMMERCE REPORT: VENEZUELA 6 (2006).
(99.) See, e.g., Jenalia Moreno, FTAA Trade Meeting: U.S. Adds 6 Players to Lean on Brazil: S. American Giant Puts Up Resistance, Hous. CHRON., Nov. 19, 2003, at 1B, 10B (suggesting that the U.S. refusal to address subsidies in the FTAA context signals an unwillingness to negotiate in the bilateral context as well).
(100.) See Fact Sheet, USTR, supra note 81, at 1.
(101.) US, Colombia Sign Bilateral FTA, BRIDGES WKLY. TRADE NEWS DIG., Mar. 1, 2006, at 6.
(102.) Id. (noting, however, that the Colombian flower industry is expected to benefit from this FTA).
(103.) See US, Colombia Sign Bilateral FTA, supra note 101, at 6.
(104.) Completed Colombia FTA Would Triple Sugar Access in the First Year, INSIDE U.S. TRADE, March 3, 2006, at 1, 16, available at http://www.americas.org/item_25554.
(109.) Forrest Laws, Colombia Trade Agreement Could Help Sell More U.S. Rice, DELTA FARM PRESS, Mar. 17, 2006, http://deltafarmpress.com/mag/farming_colombia_trade_agreement/ index.html (discussing the comments of the USA Rice Federation toward the newly concluded agreement).
(110.) Colombia Seals Trade Deal with US, BBC NEWS, Feb. 27, 2006, http://news.bbc.co.uk/2/hi/business/4756276.stm.
(113.) Oxfam, Oxfam Warns US-Andean Trade Deals Will Harm Developing Countries, (June 14, 2006), http://www.oxfam.org/en/news/pressreleases2006/pr060614_song_sirens.
(115.) See, e.g., Hakim, Western Hemisphere, supra note 26, at 132 (suggesting that a dispute settlement system would be an important benefit to a Latin American country entering a trade agreement with the United States).
(116.) See Fact Sheet, USTR, supra note 81, at 3.
(117.) See id. at 7 (noting availability of such mechanisms in the U.S.-Chilean agreement).
(118.) See, e.g., CONSULTATIVE BOARD, WORLD TRADE ORGANIZATION, supra note 77, [paragraph] 53 ("For as long as [powerful states] choose to exert that market power in a multilateral context, under rules agreed by everyone, the poor and the weak need not fear a return to the law of the jungle.").
(119.) See Pascal Lamy, Director-General, Multilateral and Bilateral Trade Agreements: Friends or Foes?, 2006 Gabriel Silver Memorial Lecture at Columbia University 9 (Oct. 31, 2006), available at http://www.sipa.columbia.edu/news_events/special_events/silver_ lecture/Lamy_SIPASilverLecture.pdf (arguing that bilateral agreement dispute settlement provisions "cannot replace" those in the multilateral context, largely because they cannot resolve power imbalances as the WTO is able to do).
(120.) See id.
(121.) Hakim, Western Hemisphere, supra note 26, at 126-28.
(122.) U.S. Dept. of State, Bureau of Western Hemisphere Affairs, Background Note: Colombia (Oct. 2006), http://www.state.gov/r/pa/ei/bgn/35754.htm.
(123.) See, e.g., U.S.-Colombia Trade Promotion Agreement: Enhanced Market Access to Colombia, Export.gov, http://www.export.gov/fta/colombia/mrktaccss.asp?dName= Colombia (last visited Mar. 14, 2007) (outlining the benefits of U.S. exporters to Colombia); see Beneficios de la Negociaci6n de un Acuerdo de Libre Comercio con los Estados Unidos, TLC.gov, http: / / www.tlc.gov.co / eContent / library/ documents/ DocNewsNo3804Document No1159.pdf (last visited Mar. 14, 2007) (outlining the benefits of Colombian exports to the United States and Colombian domestic industries).
(124.) The "Asian tigers", a group of seven countries consisting of India, Hong Kong, Malaysia, Indonesia, Thailand, Korea, and Japan, stood out as models of rapid economic development prior to their 1997 regional financial crises. See, e.g., The downward spiral of the Asian tigers, BBC NEWS, Mar. 31, 1998, http://news.bbc.co.uk/2/hi/specialreport/1998/ asian_economic_crises/72222.stm.
(125.) Hakim, Western Hemisphere, supra note 26, at 128.
(126.) The World Bank estimates the U.S. informal economic sector to be 8.8%. WORLD BANK, DOING BUSINESS IN 2004, 175 (2003).
(127.) See Friedrich Schneider, Size and Measurement of the Informal Economy in 110 Countries Around the World 10 (World Bank Working Paper, 2002) available at http://rru.worldbank.org/ Documents/PapersLinks/informal_economy.pdf (estimating that Bolivia encompasses the largest informal economy at 68% of total GDP).
(128.) WORLD BANK, supra note 126, at 142.
(129.) GUY POITRAS, INVENTING NORTH AMERICA: CANADA, MEXICO, AND THE UNITED STATES 125 (2001).
(130.) Gracia & Zuleta, supra note 69, at 6.
(134.) WORLD BANK, supra note 126, at 142.
(135.) See, e.g., Gerardo Esquivel & Jose Antonio Rodriguez-Lopez, Technology, Trade, and Wage Inequality in Mexico Before and After NAFTA, 72 J. DEV. ECON. 543, 548-51 (2003) (discussing the effects of NAFTA on wage inequality in Mexico and finding that the wage gap between skilled and non-skilled workers increased both before and after the implementation of NAFTA, largely due to technological change).
(136.) See U.N. Dep't of Econ. & Soc. Affairs, The Inequality Predicament: Report on the World Social Situation 2005, 36-38, U.N. Doc. A / 60 / 117 / Rev.1/ ST / ESA / 299 (2005).
(137.) Gracia & Zuleta, supra note 69.
(138.) Victor Mosoti, Bilateral Investment Treaties and the Possibility of a Multilateral Framework on Investment at the WTO: Are Poor Economies Caught in Between?, 26 Nw. J. INT'L & BUS. 95, 9699 (2005).
(139.) See Agduelo, supra note 33, at 21 (inferring that globalization and trade agreements in general have less impact in Latin America than they do in other parts of the world).
(140.) See, e.g., Hakim, Western Hemisphere, supra note 26, at 121 (suggesting that the economic and political restructuring resulting from free trade agreements is where the real economic benefits are derived).
(141.) See Peter Hakim, Is Washington Losing Latin America?, FOREIGN AFF., Jan.Feb. 2006, at 39, 45 (finding that "some members of Congress view China as the most serious challenge to U.S. interests in the region since the collapse of the Soviet Union" and observing that "the huge financial resources China is promising to bring to Latin America, its growing military-to-military relations in the region, and its clear political ambitions" may be "potential threats to the long-standing pillar of U.S. policy in the hemisphere, the Monroe Doctrine").
(142.) See Carranza, supra note 11, at 1052.
(143.) See Hakim, Is Washington Losing, supra note 141.
(144.) See Snubs and Opportunities, THE ECONOMIST, Nov. 25, 2006, at 37, 37-38.
(145.) See e.g., CONSULTATIVE BOARD, WORLD TRADE ORGANIZATION, supra note 118, at 1926 (noting that proponents of preferential trade agreements argue that they offer benefits over the multilateral system including broader and deeper trade reforms, political motivations, and non-reciprocal benefits, among others).
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|Author:||Fandl, Kevin J.|
|Publication:||Yale Human Rights and Development Law Journal|
|Date:||Jan 1, 2007|
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