TRADE BARRIERS

Instructions - Read the article below. Underline the words you do not understand and look them up in a
dictionary. Then answer the questions at the end.

THE COSTS OF COLOMBIA’S CLOSED ECONOMY

1 C OLOMBIANS PAY more for wine

than most Latin Americans. The
price shoots up as soon as a case
reaches shore. Each time a shipment
arrives, importers must submit at least
eight forms to as many agencies.
Officials can take up to 15 days to
clear it. In the meantime, importers
store their bottles in climate-
controlled warehouses. When a
permit finally comes, bad roads and
high trucking charges mean that
merchants pay among the highest freight bills in the world to ship the wine to Bogotá, the capital, where most
customers are. By the time it reaches a dinner table a bottle of wine costs eight times more than in its country
of origin. Its costly journey is the rule, not the exception, for products imported by Colombia.

2 It used to be easier. The government liberalised the economy in the early 1990s after decades of
protectionism. At that time Colombia depended on exports of coffee, the price of which was plummeting. In
an effort to diversify the economy and make it more productive, the government reduced tariffs and
eliminated lists of items whose import was prohibited.

3 That openness lasted just a few years. Owners of factories and sugar mills, dairy farmers, rice growers and
regional governments, which own distillers of aguardiente, a local tipple, were hurt by competition. They
lobbied to restore protection. The government could not reimpose tariffs, in part because of its commitments
as a member of the World Trade Organisation. So it put up lots of non-tariff barriers.

4 Colombia is now as closed as it was in the 1990s, according to a new book*.

Total trade has increased fivefold, but the ratio of trade to GDP has not risen
much (see chart). Non-tariff measures affect nearly four-fifths of imports, up
from 27% in 1992, says the UN Conference on Trade and Development. The
government has created new trade-related agencies, and has given existing
bodies more power to meddle.

5 The coddling of domestic producers is one reason why productivity has

barely grown since the 1990s. In 2012 farms produced less by value in real
terms than they did in 1990. Peru and Chile, which have less variety in their
growing conditions but more open economies, have doubled their output over the same period. Pricey imports
raise exporters’ costs, making them less competitive.

6 Ports are suffering. Ships arrive in Buenaventura, the biggest port on the Pacific coast, loaded with containers,
but they leave with nothing. Cartagena, on the Caribbean coast, makes its living as a transshipment port,
shuffling goods from one ship to another. But that is less profitable than handling exports and imports.
Colombia’s “main export is air”, says Anibal Ochoa, the port’s commercial director.

Daniel Bosch Ibáñez for Nista School of Languages Page 1 of 2

TRADE BARRIERS

7 Until now, governments have ignored the costs of Colombia’s closed shop. That is partly because their priority
was to defeat the FARC, a guerrilla group that waged a 50-year war against the state. From the early 2000s
Colombia earned a decent living from oil and gas, which replaced coffee as the main export. They account for
nearly 60% of goods exports.

8 Now pressure is building to liberalise. A peace agreement in 2016 ended the war. Oil prices fell in 2014 and
have yet to recover fully. Reserves are running low. Trade could become the economy’s new engine, says Jorge
García, one of the book’s editors.

9 So far, though, the push to open up has had little support from the top. The government has made some
permits easier to apply for, but did not reduce their number or cost. For now, it seems, only rich Colombians
will be able to afford wine. Others will drown their sorrows in aguardiente.

*“Comercio Exterior en Colombia: Política, Instituciones, Costos y Resultados”, edited by Jorge García García, Enrique Montes Uribe,
Iader Giraldo Salazar. Banco de la República.

th
Article adapted from The Economist published on Feb 6 2020 (https://www.economist.com/the-americas/2020/02/06/the-costs-of-
colombias-closed-economy).

1. Trade tariffs are taxes imposed on imported goods. For Slovenian customers, what are the advantages and
disadvantages of trade tariffs? And for the Slovenian producers of those goods?
2. The European Union and Australia have a trade agreement to avoid tariffs on wines. Do you agree with such
agreements?
3. The European Union and China do not have a trade agreement. Would it be beneficial to have one? What goods
would you include/exclude?
4. “Red-tape” or bureaucratic proceedings can be as costly as import tariffs. Can you think of such regulations in
Slovenia designed to prevent competition from imported goods or services?

Daniel Bosch Ibáñez for Nista School of Languages Page 2 of 2