When most people hear about the United States entering into a trade agreement with another nation, they probably think it involves each side lowering various trade barriers. But that isn't so much the case with the controversial Colombia Free Trade Agreement, awaiting approval by Congress. More than 90 percent of imports from Colombia already come here duty free—a temporary situation the treaty would make permanent—while U.S. exports to that nation are hit with steep tariffs. (Total two-way trade was $18 billion last year.) Yet even though the agreement would apparently level the playing field for U.S. companies by lowering those barriers, its chances of passage seem dicey, as trade has become an explosive issue, especially in this election year. U.S. News recently spoke with U.S. Trade Representative Susan Schwab about the agreement and where American trade policy is heading. Excerpts:
Why is the Colombian agreement such a big deal for the White House? If Colombia were a state, given the size of its economy, it would just be Iowa.
Take a look at Caterpillar. If you talk to Jim Owens, the CEO of Caterpillar, he will tell you that the Peru and Colombia markets combined are bigger for Caterpillar than either the Japanese market or the German market or the U.K. market. And why is that? You've got a lot of extractive industries in that region. But that's real money, and that's U.S. jobs.
If the agreement levels the playing field between the two nations, why is there so much criticism of it?
Good question. Certainly not because of the substance. It was probably best expressed by [House Ways and Means Committee] Chairman [Charles] Rangel, who said, "It's not the substance on the ground—it's the politics in the air." Anyone who has looked at this agreement knows that by any definition it is in the U.S. national interest. It is in our economic and commercial interest. It is in our national security interest. It is in our geopolitical interest. It is a win-win for both the U.S. and Colombia. I mean, there is no rational explanation for any member of Congress to vote "No." This agreement is virtually identical to the Peru agreement, which was approved by an overwhelming bipartisan majority.
Yet there is tremendous opposition, including from House Speaker Nancy Pelosi.
One reason given is labor and environmental standards. Guess what? Enforceable labor and environmental standards are in there. There are also issues associated with violence in Colombia. But you need to look at what the government has done. President [Alvaro] Uribe has been a transformational leader, and there has been such a dramatic improvement in the situation. Kidnappings are down over 80 percent, acts of terror are down over 75 percent, the murder rate is down 40 percent, and the murder rate associated with trade unionists, down almost 80 percent since 2001, 2002. So by voting to delay or voting down the Colombia FTA, are we going to save one life or save one endangered species or create a single, solitary job in the United States or Colombia? Every single reason you can come up with points in the direction of getting this thing into place as soon as possible.
What if the treaty doesn't pass?
Leaders in the hemisphere and Latin America have said that the single most destabilizing factor in Latin America today may be the U.S. Congress's failure to ratify the Colombia Free Trade Agreement. That is more destabilizing today than anything that Colombia's neighbor Venezuela is doing or threatening to do— and that is saying a lot.
And beyond Latin America?
Then you have the whole issue of U.S. global leadership and the exercise of "soft power." One of the principal instruments of soft power that any president has is our trade and commercial relationships, and if you reject the use of trade in that context, you are giving up a tremendously valuable instrument that also has major economic and commercial benefits for us. If the Congress is not capable of ratifying a trade agreement that is so clearly in our interest, it raises real questions about our global economic leadership going forward.
If open trade is so good for America, why is it so unpopular these days?
Trade is really easy to demagogue. Trade has always been a heavy lift. And those of us who recognize the positive benefits of free and fair trade have not done as good a job as we should have in telling the story.
Hillary Clinton and Barack Obama have talked about possibly renegotiating NAFTA. Would that be a feasible plan in your view?
I think it would be job destroying and not job creating. And [Canada and Mexico] have things they want, too, or things they might want to take back. We would be shooting ourselves in the foot economically. The key statistic is this: What are our top two export markets? Canada and Mexico. Hello? We want to jeopardize that? I don't think so.