WASHINGTON, Michigan — Colombia is a dominant player in trade in the Western Hemisphere, possessing the fourth largest economy in Latin America. The U.S., therefore, strives for a healthy relationship with the Latin American nation, but high levels of violence in Colombia complicate commercial ties. Still, the two countries abide by the U.S.-Colombia Trade Promotion Agreement (CTPA), a comprehensive free trade agreement (FTA) that eliminated most tariffs and financial barriers. By reshaping the U.S.-Colombia trade dynamics, this agreement influences poverty in Colombia.
History of the CTPA
The original intention of the CTPA aimed to enhance bilateral trade, with the initial agreement forming in 2006. Debates around Colombia’s financial risks delayed the CTPA until President Obama signed it in 2011. Once enacted on May 15, 2012, the CTPA immediately made around 80% of American exports duty-free upon entering Colombia.
Promoters of this act in the U.S. touted less restricted access to markets in Colombia, which would boost American exports. Removing trade barriers allows the U.S. and Colombia to interchange goods at lower prices, boosting trade and increasing job creation.
Concerns over human rights violations in Colombia sparked opposition, with critics believing that the CTPA displayed U.S. approval of violence in Colombia. These concerns resulted in modifications to the CTPA to ensure that Colombia would address labor rights and violence.
Since the CTPA, the U.S. and Colombia trade more than ever before. The United States is responsible for “34% of Colombia’s total trade,” becoming its “largest trading partner.” In 2019, the U.S. and Colombia traded a total of $28.9 billion worth of goods. Before the enforcement of the CTPA in 2012, the U.S. typically maintained a trade deficit with Colombia but, now, more frequently notes a trade surplus.
The International Trade Commission initially estimated that the deal would increase U.S. exports by more than $1.1 billion, leading to more jobs in both countries. In Colombia, there are more than 90,000 jobs owned by U.S. affiliates, demonstrating the program’s economic benefits.
Estimating the impact of the U.S.-Colombia Trade Promotion Agreement on poverty is difficult because so many factors are at play, so there is no finite statistic associated with the CTPA’s impact on poverty in Colombia.
Nevertheless, in the time frame of the CTPA, poverty rates have improved in Colombia. With a poverty line of $5.50 per day, 35.6% of Colombians lived in poverty in 2011. In 2019, the poverty rate decreased to 29.3%, encompassing around 15 million Colombians, more than a million fewer than in 2011.
On the surface, it might be easy to claim that the CTPA contributed to the reduction of poverty in the nation. However, there is no substantial academic research that supports this conjecture. Similarly, the CTPA’s impact on inequality is ambivalent. Data from the World Bank indicate that Colombia’s level of inequality remains relatively unchanged, potentially highlighting a shortcoming of the agreement.
As the CTPA offered increased prosperity for both nations, many Colombians hoped that they would find new opportunities to encourage economic growth. However, many Colombians struggled in the international market because of the U.S.-Colombian Trade Promotion Agreement.
In August 2013, Colombian farmers, cargo truckers, gold miners, teachers and labor unions began a strike to protest the negative impacts of the CTPA. Many Colombians believed that the resulting influx of goods made competition impossible, leaving Colombian producers at a substantial loss. Protests like this continue due to tensions surrounding Colombia’s free trade agreements with the U.S. and the EU.
Given the backlash the CTPA received in Colombia, it is uncertain whether the agreement substantially benefits the nation, especially regarding GDP growth and poverty relief. This trade policy has hurt numerous Colombians, from farmers to teachers.
Moving forward, many demand improved conditions of the CTPA to promote economic development and alleviate poverty. The status quo primarily benefits the U.S., which expanded its market share from 19% before the CTPA to 50% in 2018. Colombia may seek more tangible benefits, including increased job creation and lower poverty rates. Before any notable changes, there is a substantial need for further research on this policy to evaluate its fairness and pinpoint its weaknesses.
Changing Poverty Locally
As the CTPA currently exists, the trade policy is not making significant changes to poverty. Regardless, many organizations are working to combat poverty throughout Colombia, providing resources to spur economic development and offer alternatives to lives in poverty.
One notable organization is the Zuá Foundation. Founded in 2002, the Zuá Foundation aims to alleviate poverty by working with children in elementary schools until they complete their higher education. Based in Bogotá, the organization’s Higher Education Program finances the higher education of top students who finish secondary school. In exchange, the students commit 20 hours of volunteer tutoring for the Zuá Foundation’s youngest children.
So far, 18 students have gained degrees through the support of the program, with another 15 students in the process of achieving this. In this way, the Zuá Foundation offers young people from vulnerable families a pathway out of poverty.
Poverty is multifaceted and a trade policy like the U.S.-Colombia Trade Promotion Agreement will not erase poverty single-handedly. The mission of the Zuá Foundation displays how impactful local organizations can be at tackling poverty, reminding everyone of the challenging obstacle that global poverty is, requiring work on the international, national and local levels.
– Michael Cardamone