Panama, Colombia Trade Deal Delays Cost U.S. Jobs, Lugar Says

The top Republican on the Senate Foreign Relations Committee said failure to ratify free-trade accords with key allies Panama and Colombia would further cede market share to countries including China, costing U.S. jobs.

In a letter to congressional colleagues, Senator Richard Lugar said the U.S. is losing its place as the “preferred and logical trading partner” for South America. Canada, which signed its own free trade accord with Colombia last year, could soon replace the U.S. as the country’s main supplier of wheat and machinery, the Indiana Republican added. Unilateral trade preferences for Colombia expire this month.

“The FTAs are increasingly considered by Panamanians and Colombians as a crucible in the bilateral relationships,” Lugar said in the letter dated Feb. 8, which followed a trip by a staff member to both countries. “They serve as a symbolic litmus test of U.S. commitments to its friends in a neighborhood where various countries are taking sharply divergent paths.”

Agreements with Colombia and Panama, which would eliminate most tariffs for both nations, have languished since their signing in 2006 and 2007 respectively. Republican lawmakers want President Barack Obama to submit the accords to Congress together with a South Korea free-trade pact that he plans to push first.

Lugar urged Congress to consider the agreements as it debates a renewal of trade preferences for Colombia under the Andean Trade Preferences Act, which expires Feb. 12. About 90 percent of imports from Colombia and Ecuador already enter the U.S. duty-free under the agreement, which aims to foster alternatives to illegal drug production in the region.

No Deadline

In his State of the Union address Jan. 25, Obama called for quick approval of the South Korean accord, without indicating when he would seek passage of the Colombia and Panama pacts. Three days later, Secretary of State Hillary Clinton said Obama wants to send the Colombia accord to Congress this year.

The U.S. imported $11.3 billion of goods from Colombia in 2009 and exported $9.4 billion, according to the report provided by Lugar’s staff to Bloomberg. A deal with Colombia would boost U.S. exports by $1.1 billion, according to the U.S. International Trade Commission.

For the first time, Argentina replaced the U.S. as Colombia’s number one agricultural supplier, Lugar said. Farm exports to Colombia fell to $827 million in 2010 from $1.8 billion in 2008, while Argentina exports to Colombia more than doubled to $1 billion in 2010 from $457 million in 2008, he said.

Canada, China

Once the Canada-Colombia free trade accord goes into effect, as early as this summer, Colombia will buy capital goods from there instead of from U.S. manufacturers, which must pay tariffs ranging from 5 percent to 20 percent, he said. Representatives in Bogota of Archer Daniels Midland Co., the world’s largest grain processor, told Lugar’s staff that the U.S. could lose its entire share of Colombia’s wheat market following implementation of the Canadian accord.

China, which has increased exports to Colombia by 224 percent in the first nine months of 2010, could supplant the U.S. as Colombia’s biggest trading partner within a decade unless the free trade agreement is approved, the report said, citing findings by a Colombian competitiveness council.

China in 2009 overtook the U.S. as Brazil’s largest trading partner, and in 2007 surpassed the U.S. as Chile’s biggest export market. Obama will visit both countries, as well as El Salvador, in his first-ever visit to South America next month.

“In an ailing economy, our ability to create jobs depends largely on expanding domestic and international commerce,” said Carl Meacham, Lugar’s senior aide on Latin America, who traveled to Panama and Colombia to assess the consequences of a U.S. failure to ratify the agreements. “Without the FTAs, the U.S. loses credibility and diminishes its ability to influence countries in Latin America.”

Democrat Opposition

Some Democratic lawmakers have opposed the agreement with Colombia on the grounds that it offers inadequate labor protection, and that violence against union organizers in the South American nation makes it an inappropriate partner.

“Before we can consider any free trade agreement with Colombia, Congress must receive assurances from this administration that it will enforce labor laws,” Senator Sherrod Brown, Democrat of Ohio, said in an e-mailed statement. “Colombia leads the world in labor rights violations, with thousands of murders and death threats directed at union members and leaders.”

Colombia says it has made important strides in reducing violence against workers. The number of trade unionists killed there fell to 13 in 2009 from 99 in 2002, according to the Defense Ministry.

Panama Accord

Panama, whose economy is driven by the Panama Canal, is among the few nations that have a trade deficit with the U.S., with the Central American nation sending $302 million of goods in 2009 to America and receiving $4.3 billion in imports.

The U.S. is losing “large-scale” investment projects in Panama such as the $5.25 billion canal expansion and the $1.5 billion Panama City Metro “to non-American firms,” Lugar said.

Sacyr Vallehermoso SA, a Madrid, Spain-based builder, won a $3.1 billion contract to help expand the Panama Canal in 2009. A group including Brazil’s Odebrecht SA and Fomento de Construcciones & Contratas SA of Spain landed the contract in October to build Panama’s first metro line.

“Ratification of the free-trade agreements would help to reverse these trends and solidify market opportunities for U.S. goods and services,” Lugar said.

To contact the reporter on this story: Helen Murphy in Bogota at hmurphy1@bloomberg.net;

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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