Evidence 3: Essay “Free Trade Agreement (FTA): advantages and

disadvantages

¿What is an FTA?

In simple words, is an agreement between two or more nations with the

objective of the reduction of the barriers of importation and exportation. The
countries that do this agreement, can access to certain benefits, like for
example, no government tariffs, quotas, prohibitions, etc.
Is important to know that this is a free trade between two or more countries
and has opposite ideas with the protectionism of the economy. Basically, we
are telling the country that we are negotiating, that they are tax-free or
almost tax-free of importing products to our country, and more importantly,
we are giving them easy customs processes.
Even if it looks that we are destroying the national economy, it has his
benefits. We are showing them later in this document.
Depending on the case, trade may have different regulations. Certain
products will still have customs and taxes, to protect the country economy.
For example, if our country Colombia has a very good production of coffee,
why we should import coffee then? It’s better to encourage the national
economy of coffee than importing from another countries the things that we
have.
Instead of doing that, we should be importing things that our country doesn’t
has, or doesn’t produce, like for example, LG TV’s. Since we don’t have a
very good electronics industry, then, we can do an FTA with South Corea to
import TV’s to our country and sell them at a good price, and South Corea
can get some of our oil, coffee and other products that they can produce by
themselves.
We can conclude then, that an FTA is a mutual benefit agreement to grow
economically all the countries in the FTA.

Colombia and United States FTA

Historically, there was an FTA that was negotiated between 2006 and 2008.
But, talking about actuality, the FTA between Colombia and United States
was approved the 12 of October of 2011 and has validity since 15 of May of
2012.
Colombia was searching with this agreement to increase the economic
growth, the exportations, have more competitivity of the national industry,
stability in the national market etc.
In addition, they were arguing the possibility of generating more
employment, and this was a very important point in the discussions about
the trade.
United States was searching for the agricultural part of Colombia, especially
the oil since it works so well to their industry. It’s important to denote that the
oil industry has fall since the COVID 19 pandemic, but it will probably get out
of the ruins after all of this.
The oil is a very important for developing a country. Especially in transport,
since almost 70% of the oil is used in road or air transport. Around a quarter
is used for other things like industry or chemical feedstocks, so making the
oil customs free, will mean a great advantage to the United States.
Taking the topic of the Colombia benefits, historically, it doesn’t look very
good to be honest. For example, Colombia has not taken in mind the
following things:
- Lack of protection of other productive sectors
- Mismatch in tax revenue
- Little capacity of the national companies to adapt to international
product standards.
If we see the data since 2009, we can see that the country of Colombia has
the worst growth rates since that year. Exporting to United States has not
improved the economy and the Colombian consumers haven’t increased
their purchasing power.
This is due to the difficult economy conditions that Colombia has. 58% of the
jobs in Colombia have informality, and almost all the informality jobs have a
very bad payment.
In addition, 70% of the Colombian people, only earns between 0 and 1.5
minimum wages, and to be worse, this data is from the year 2019, meaning
that the pandemic probably made this case worse.
Having an FTA with United States is a good thing, since it can give the
country different economic benefits, like for example, giving the opportunity
of local companies to expand their market to a 310 million of people, making
the company’s growth. The problem is that this doesn’t help small business
at all.
The mall businesses in Colombia are having a hard time since the import of
products increase, like for example, the milk importations are very high, and
that makes the national industry have a very hard time selling their products.
To survive, they are forced to sell at a lower price.
Even if Colombia can have advantages and some competitive options, the
weight of the disadvantages is heavier, since the country that we made the
trade is very good developed in comparation to our country.
We can conclude then, that this FTA has advantages, but we can’t forget
that it is affecting the national industry and small and even medium
businesses are having a very hard time due to this FTA.
I think that Colombia should put customs in the things that it already has, like
for example, why should we import milk when we have it? Why should we
import coffee when we have it? I think that Colombia is not taking in mind
that the country is very poor and almost all the businesses are informal. We
should import the things that are in short supply, not the ones that are in our
country already.
The market is being dominated by the international industry and it’s making
the national industry decay. It will be okay if it will be only in the electronics
industry, since it is not our strongest industry, but I don’t think that’s it’s okay
that they dominate our most valuable market, the agriculture.
We need to pay more attention to this FTA in the future and see how in
evolves, hoping for the best.