Oh Eternal Joy!
Published in El Pais
(Colombia) on 15 October 2011
by Mauricio Cabrera Galvis (link to original)
That is what the approval of United States-Colombia Trade Promotion Agreement by the U.S. Congress has generated after a shameful wait of more than five years. President Santos judged it to be a historic event with enormous economic benefits: a permanent 1 percent increase in the rate of economic growth, the generation of 250,000 new jobs and a minimum 6 percent growth in exports.
The jubilation of the minister of foreign trade was greater. For this civil servant, the CTPA will allow exports to triple and will create no fewer than 300,000 new jobs.
More cautious were the gringos: Although President Obama said that the CTPA will serve “to spur economic growth, increase exports and create jobs in the United States, while promoting our core values,” his government’s expectations were far more modest, at least regarding employment.
According to official estimates by the Office of the United States Trade Representative (USTR), the CTPA should increase exports to Colombia by $1.1 billion annually, while imports from Colombia will only increase by $487 million per year. This figure coincides with the one in a 2007 study by the Bank of the Republic [of Colombia], which estimated a $600 million increase in exports to the U.S., before the revaluation of the peso debilitated the competitiveness of Colombian producers.
As such, we should not be under any illusions that the CTPA will improve the situation of our foreign trade or that it will reduce the balance of payments deficit. All studies, including those by the [Colombian] National Planning Department, show that the agreement will increase Colombian imports more than it will exports to the U.S. Furthermore, the same study by the Bank of the Republic concludes that the CTPA will lead to an increase in the services trade deficit, with export of services rising by $322 million and imports by $1.14 billion.
Where there is no coincidence is in the impact on employment. For the USTR, an increase of $1.1 billion in its exports should create 7,000 (Yes! Only 7,000) new jobs in the United States. Here, according to the Ministry of Commerce, Industry and Tourism, more than 300,000 jobs are going to be created — although it is still not clear what the magic recipe will be to achieve this.
In fact, opinions are already being expressed claiming that the CTPA could end up destroying jobs, not because of the commercial imbalance, but because of the demands made by the gringo Congress that labor matters serve as a condition to pass the agreement. Measures such as the elimination of associative work cooperatives or the protection of trade unions and collective negotiation are seen by employers as causing a loss of competitiveness. For example, according to [Colombia’s] National Association of Financial Institution’s “Economic Commentary” on October 12, “the pursuit of the CTPA with the United States has pushed up the cost of labor in Colombia. As a result, the country’s industry is threatened with a rapid loss of competitiveness. This begs the question, what is the CTPA really for? It is as though Colombia went in search of wool through the United States’ CTPA, and we ended up getting ‘fleeced,’ in terms of workforce competitiveness."
Free trade creates employment in some sectors and destroys it in others; for the result not to be zero sum but positive, total freedom would be required in the labor market. But the CTPA is incomplete. It seeks to guarantee the free trade of goods and free flow of capital, but says nothing about freeing up the flow of migrant workers at a time when the United States is toughening up its laws against immigrants. In the end, the official expectations are nothing but false illusions.
The jubilation of the minister of foreign trade was greater. For this civil servant, the CTPA will allow exports to triple and will create no fewer than 300,000 new jobs.
More cautious were the gringos: Although President Obama said that the CTPA will serve “to spur economic growth, increase exports and create jobs in the United States, while promoting our core values,” his government’s expectations were far more modest, at least regarding employment.
According to official estimates by the Office of the United States Trade Representative (USTR), the CTPA should increase exports to Colombia by $1.1 billion annually, while imports from Colombia will only increase by $487 million per year. This figure coincides with the one in a 2007 study by the Bank of the Republic [of Colombia], which estimated a $600 million increase in exports to the U.S., before the revaluation of the peso debilitated the competitiveness of Colombian producers.
As such, we should not be under any illusions that the CTPA will improve the situation of our foreign trade or that it will reduce the balance of payments deficit. All studies, including those by the [Colombian] National Planning Department, show that the agreement will increase Colombian imports more than it will exports to the U.S. Furthermore, the same study by the Bank of the Republic concludes that the CTPA will lead to an increase in the services trade deficit, with export of services rising by $322 million and imports by $1.14 billion.
Where there is no coincidence is in the impact on employment. For the USTR, an increase of $1.1 billion in its exports should create 7,000 (Yes! Only 7,000) new jobs in the United States. Here, according to the Ministry of Commerce, Industry and Tourism, more than 300,000 jobs are going to be created — although it is still not clear what the magic recipe will be to achieve this.
In fact, opinions are already being expressed claiming that the CTPA could end up destroying jobs, not because of the commercial imbalance, but because of the demands made by the gringo Congress that labor matters serve as a condition to pass the agreement. Measures such as the elimination of associative work cooperatives or the protection of trade unions and collective negotiation are seen by employers as causing a loss of competitiveness. For example, according to [Colombia’s] National Association of Financial Institution’s “Economic Commentary” on October 12, “the pursuit of the CTPA with the United States has pushed up the cost of labor in Colombia. As a result, the country’s industry is threatened with a rapid loss of competitiveness. This begs the question, what is the CTPA really for? It is as though Colombia went in search of wool through the United States’ CTPA, and we ended up getting ‘fleeced,’ in terms of workforce competitiveness."
Free trade creates employment in some sectors and destroys it in others; for the result not to be zero sum but positive, total freedom would be required in the labor market. But the CTPA is incomplete. It seeks to guarantee the free trade of goods and free flow of capital, but says nothing about freeing up the flow of migrant workers at a time when the United States is toughening up its laws against immigrants. In the end, the official expectations are nothing but false illusions.