Business

Free-trade pact with Colombia no sure thing

A landmark free-trade pact between Canada and Colombia could give the South American nation increased prominence, but the proposed deal is not without its detractors.

With a little over $1 billion in two-way trade last year, most Canadians wouldn't put Colombia at the the top of their list of international concerns. 

However, a bill making its way through Parliament could change that as Canada nears a landmark free-trade pact with the South American nation.

In November 2008, the governments of Canada and Colombia signed a deal that would virtually eliminate tariffs between the two countries. Tariffs on goods that the two countries don't compete on — coffee from Colombia, and wheat and oats from Canada, for example — would be brought to zero immediately, while others (on machinery and certain commodities) would come down slowly over five years.

Colombia's parliament quickly gave the proposal final approval last year, but Canadian lawmakers dragged their feet while the economic crisis unwound through 2009.

'You don't win the war on drugs and terrorism with soldiers and police alone'— Colombian Trade Minister Luis Plata

On April 19, the bill finally passed first reading in the House of Commons by a 183-78 margin. It has since gone to a subcommittee for amendments. It will need at least a second reading and then receive royal assent to become law.

The bill received bilateral support from Liberals and Conservatives to get past its first hurdle, but there's enough opposition from lawmakers and trade experts that the pact is far from a sure thing.

"We're hopeful that the outcome will be positive," Colombian Tourism and Trade Minister Luis Plata said on a recent trip to Canada.

A Colombian police officer draws over the lines of a symbol on the top of a seized package of cocaine on April 16, 2010. The drug trade has long hung over foreign investment in the country. ((Fernando Vergara/Associated Press))

Trade between the two countries doesn't amount to much now (Canada shipped just under $600 million to Colombia in 2009, mainly vegetable products and heavy machinery) and in return, Colombia sent about $730 million worth of vegetable products and minerals to Canada.

Those figures were a drop in the bucket of Canada's $1.3 trillion economy last year, but they could be poised to grow. For both sides, the deal could be significant not only for what it means in dollar terms now, but what doors it might open down the road.

"Free trade with us alone is unlikely to have a large impact," University of Toronto economist Albert Berry said. "What Colombia is thinking is that if they link up with us it will have some influence with the Americans."

A similar trade agreement signed with the United States in 2006 is tied up in red tape over protectionist concerns and shows no signs of being ratified any time soon. "They want FTAs with lots of different people and we're an attractive trading partner because we're relatively big and our stance on human rights would be noted," Berry said.

An employee of the Canadian Alange Energy Petroleum Co. inspects the quality of oil in Campo Cubiro, Colombia on April 26, 2010. Many Canadian mining and energy firms have invested in the emerging country. ((Jose Miguel Gomez/Reuters))

Indeed, much of the opposition to the pact stems from concerns over human rights. The Canadian Labour Congress has been a vocal opponent of the deal, arguing Canada shouldn't link up with Colombia until the latter shows it is serious about dealing with its human-rights violations.

"We remain opposed to a free-trade deal with Colombia because we believe that the provisions will cause human rights violations to increase," the CLC said.

Human-rights abuses were the main target of lawmakers opposed to the deal in the House.

"Colombia is not a country we should boast about being friends with," Bloc Québécois MP Diane Bourgeois told the House before the bill passed its first reading. "On the contrary, we must force that country to adopt legislation and practices that comply with UN requirements."

Some of the statistics on Colombia's labour unrest are striking. "More labour leaders are killed every year in Colombia than the rest of the world combined," CUPE president Paul Moist said, calling the pact as it was originally signed a "terrible, heartless decision" by the Canadian government.

European labour advocates have voiced similar concerns over a recently signed trade pact between Colombia and the E.U.

Colombian President Alvaro Uribe has worked hard to crack down on rampant drug and human-rights abuses, his trade minister says. ((Christian Escobar Mora/Associated Press))

Official data shows 28 unionists were killed in Colombia in 2009. "But when our administration started, 196 union members were murdered that year," Plata says. "Twenty-eight is still too high, but tremendous progress has been made," he argues.

Berry doesn't dispute that progress is being made, but questions how much of that can be directly attributed to a government crackdown. "Even if it's going down, there's the question as to whether it will continue to do so," he said.

It will, Plata insists.

The Colombian government recorded 253 sentences for crimes against trade unionists in the last seven years, Plata says, compared with only two issued between 1991 and 2001.

"We've made that effort not because of a free trade agreement but because it's the right thing to do," Plata said. "Our duty is to protect all Colombians."

Ultimately, Plata and others argue free trade is an effective way of improving human rights, but opinion is far from united on the issue. As Liberal MP Paul Szabo wondered when the bill was first debated in parliament, "The question becomes … whether or not trade will, in fact, have a beneficial impact on the human rights situation in a country like Colombia."

That most of Colombia's exports are from mining doesn't bode well, Berry says. "It's a nasty industry that tends to not create as many jobs as people claim" he said. Colombia linking up with Canadian mining firms over other mining giants from less scrupulous countries could help, but it's far from certain. "I'm hopeful, but not holding my breath," Berry said.

Drug worries

Detractors also cite drug fears. Long seen as a hub for international narcotics, critics say a free-trade deal with Colombia wouldn't be worth the corresponding risk of increased drug-trafficking.

Plata dismisses those concerns, arguing that the government of President Alvaro Uribe has worked hard to disband the powerful drug cartels that used to control the country.

In 2002, Colombia had the highest murder and kidnapping rates in the world, for example, but they have come down by 85 per cent and 50 per cent, respectively, since Uribe came to power in 2002, Plata notes.

Much of that is because the Uribe government has moved to crush FARC rebels. But he was able to do that by using militia groups that have effectively become mercenary armies that aren't always controllable. "They're in bed with thuggish paramilitaries now, so how can you claim to be cleaning the country up when the cleaners are dirtiest of all?" Berry asked.

"We still have challenges, and we're addressing that," Plata said. "But you don't win the war on drugs and terrorism with soldiers and police alone. You win the war by giving people jobs and opportunities, and that's exactly what trade deals are for."

Various Colombian dignitaries board a helicopter to meet hostages whom FARC rebels agreed to release in February. The Uribe government has been cracking down on the rebel group. ((William Fernando Martinez/Associated Press))

Colombia has suffered somewhat due to an acrimonious trading relationship with its neighbour Venezuela, but with more than $3.5 billion worth of foreign investment expected to pour into Colombia's oil sector this year alone, Venezuela's loss could be Colombia and Canada's gain.

With a population of 45 million people, Colombia is one of the few countries in the world whose economy expanded during the recessionary year of 2009. And its economy is on track to expand by 2.5 per cent to three per cent this year.

New markets

Just as Colombia likely wants to link up with Canada as a springboard to other developed economies, Canada could use Colombia as a beachead for the new markets in the Southern Hemisphere, Berry says.

"For us it's a chance to get in ahead of the Americans, and there's always the untapped potential of increasing trade with Latin America in general," he said.

As it stands, the trade that does go back and forth between is often riddled with uncertainties. TSX-listed mining company Greystar Resources Ltd. might be a cautionary tale in that regard. Greystar resources plunged the most in a decade on one day in late April after the Colombian government ordered an review of the company's gold and silver deposit.

Greystar shares had gained more than 90 per cent in the past year before cratering. The company said in a statement it is appealing the decision, but it underlines the problems many Canadian firms have had in dealing with Colombian bureaucracy.

Ultimately, Plata says, a free-trade pact could help both sides by setting the benchmark for discussions.

"Some people will never support free trade agreements for ideological reasons," he said, "but I think they're good guidelines for both countries to work from as trade progresses."

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