Colombia

U.S. exports gain in first year of U.S.-Colombia trade pact

 

And JIM WYSS

In the year since the U.S.-Colombia Free Trade Agreement has been in effect, Colombian exports to the United States have ticked up only marginally, but U.S. exports to Colombia have climbed by 20 percent.

While the results were disappointing for some in Colombia they were also to be expected: Many Colombian products already entered the U.S. market duty-free, and falling commodity prices have sapped trade.

“A very high share of Colombian exports to the United States are commodities,” said Acting U.S. Secretary of Commerce Rebecca Blank, who was in Colombia on Wednesday, the first anniversary of the trade pact. “And we all know the free trade agreement doesn’t have any effect on prices that are set out by world commodity markets.”

Colombian trade officials said exports overall to the United States grew only 0.05 percent since the FTA was enacted. But Blank said that, excluding oil, exports out of Colombia grew by 7 percent. “That is a sign that trade really is growing here,” she said.

Maria Claudia Lacouture, president of ProExport Colombia, which promotes nontraditional exports and investment in Colombia, said the agency is concentrating its efforts on opening up fresh U.S. markets to new exports such as passion fruit, tilapia and hotel linens, rather than promoting traditional mainstays such as crude oil, coal, coffee, and gold.

“If you look at our non-traditional exports, which don’t include mining products or coffee, there’s been an increase of 18 percent since last year,’’ said Lacouture, who visited Miami this week.

While most Colombian exports used to arrive via just nine U.S. gateways, she said last year 44 U.S. cities received exports from Colombia.

Colombia also is hoping to hook U.S. investors who may prefer to set up manufacturing operations in Colombia and use it as a springboard for duty-free access to the U.S. market as well as U.S. companies interested in bidding on massive development projects. Over the next four years, Colombia has earmarked $26 million for road projects, airport modernization and other improvements.

Blank was leading a delegation of 20 U.S. companies interested in infrastructure development, including Chen Moore & Associates, a Fort Lauderdale engineering firm.

Meanwhile, U.S. traders like Francisco Borrero, who specializes in importing and exporting food products, have been making plans to capitalize on a suddenly wide open Colombian market.

His Medley-based company, Link Trading Group, which represents a number of U.S. food manufacturers, began concentrating on the Colombia market six months ago.

“The FTA has opened up new opportunities — especially for U.S. products heading to Colombia. Lots of U.S. companies are trying to understand the Colombian market now. It’s hot,’’ said Borrero, who is also president of the Colombian American Chamber of Commerce USA in Miami.

Link’s efforts have begun to pay off. It expects to ship its first container load of food products to San Andres, an island off the Colombian coast, in the first week of June, and is working to open markets in Bogota, Cali and Medellín. “We hope to be selling in those markets by late June or early July,’’ he said.

The free trade pact has come at a good time when the Colombian economy has improved and Colombians are eager to try new brands and look at new options, said Borrero, who is also a part owner of Logistic Alliance, a company that imports South American food products that appear in the Hispanic food sections of U.S. supermarkets.

When the free trade pact went into effect last May, 80 percent of U.S. consumer and industrial goods became eligible to enter Colombia duty-free and by the fifth year of the pact, 95 percent of Colombia tariffs on U.S. products will be eliminated. By the 10th year of the agreement, all remaining duties will be phased out. In the first year of the pact, 57 percent of Colombian exports have benefited, according to the Colombian Embassy in Washington.

Last year, U.S. exports to Colombia reached $16.4 billion, a 15 percent increase over 2011. From May 2012 to March, the U.S. Commerce Department says U.S. exports to Colombia were $15.9 billion, up 20 percent compared to a similar period the previous year.

The U.S. is Colombia’s largest trading partner, accounting for 30 percent of its total trade in 2012, and it was the second largest trading partner of the Miami Customs District, which includes airports and seaports from Palm Beach to Key West.

So far, most of the impact from the free trade agreement has been on the U.S. side because most Colombian products already entered the United States duty-free under the Andean Promotion and Drug Eradication Act, which was designed to encourage economic alternatives to cocaine production. However, 1,000 Colombian products, including sugar, textiles, tuna, dairy products and confectionary goods, that didn’t benefit are now covered by the FTA.

The act also had to be renewed periodically and occasionally lapsed.

That’s what happened to U.S. flower importers just before Valentine’s Day 2011 when the trade preference act expired. The impact rippled through South Florida because Miami is the top U.S. gateway for entry of fresh-cut flowers. About two-thirds of the blooms consumed in the U.S. arrive here and Colombia is one of the main suppliers.

“The last four years have been very stressful with the trade preference being renewed at the last minute and in February 2011, actually expiring. Even when it was renewed, importers didn’t know until the last moment so they still had to make contingency plans,’’ said Christine Boldt, executive vice president of the Association of Floral Importers of Florida.

“Now we have permanent status” for duty-free treatment, she said. And under the free trade pact, a merchandise processing fee no longer has to be paid.

Fresh-cut flowers imports, which totaled $604.3 million in 2012 — a 12.5 percent increase, were the second most important Colombian product shipped to the Miami district behind gold imports, which — buoyed by strong prices — surged to $2.9 billion last year.

Hernando José Gómez, head of the FTA implementation office in Bogotá, said the fact that Colombia didn’t see exports to the United States surge in the last year doesn’t mean the program is flawed.

“It has been a very positive year,” he said. “We have more than 700 new exporting companies and we’ve exported 187 products that we had never sold to the United States before, but it’s been a difficult economic environment.”

Among the products sold to the United States for the first time were ammonia, electrical transformers, live yeasts, cocoa butter, and merchandise-wrapping machines, he said.

Other non-traditional exports saw impressive growth, he said. Towels, tablecloths and curtains, were up 54 percent, sweets were up 50 percent, aluminum doors and windows were up 53 percent, and filets of fresh-water tilapia were up 479 percent.

Mauricio Silva is the sales manager of Piscícola New York, Colombia’s largest tilapia exporter, which sold $30 million worth of fish last year, primarily to a wholesaler in Vermont.

The sector’s growth is being driven by new players entering the market, he said. But in a sense, the FTA has been a double-edged sword for existing companies. Even before the FTA, Colombia was seen as a haven for foreign investors, and the agreement only reinforced that image.

As dollars have flowed into the mining and petroleum sectors, it has strengthened the local currency 23 percent over the last five years, making it difficult for tilapia exporters, for example, to compete against places like Honduras, Costa Rica or Ecuador.

With the dollar working against those who want to export, Silva said he may start to focus more on the domestic market.

Meanwhile, questions remain about Colombia’s record in protecting trade union members. To win Congressional approval of the FTA, the Obama administration and Colombia developed an action plan to address concerns about violence. The U.S. Trade Representative’s Office said “important advances’’ have been achieved in the past year, but advocacy groups say Colombia still remains one of deadliest places on earth for union members.

Death threats against unionists continue “unabated,’’ according to Public Citizen, and at least 20 labor union members were assassinated in 2012. The International Trade Union Confederation said there were 35 deaths.

If the FTA hasn’t produced the short-term bonanza that some were expecting, it also didn’t flood Colombia with subsidized U.S. agricultural goods like some had feared.

Instead, U.S. farmers have basically recaptured some of the soy and wheat market that they had lost to South America’s Mercusur bloc of nations and to Canada, whose free trade agreement with Colombia went into effect in August 2011, Gómez said.

But U.S. exports of soybeans, pork and rice, which used to face an 80 percent duty, have been big winners and overall U.S. agricultural exports were up 68 percent from last May to this March.

“This is like a bridge that you inaugurate. Just because we cut the ribbon one year ago doesn’t mean we’re going to immediately see a tsunami of traffic back and forth,” Colombia’s Vice Minister of Commerce Gabriel Duque told The Miami Herald. “But it opens up the possibility of having long-term relations.”

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