ALAI, América Latina en Movimiento
We should do what USA did, not what USA preaches
FTA: Where are we going?
Colombians went to a war in mid nineteenth century, Golgothas against Draconians, fighting for free trade. Artisans opposed free trade, merchants supported it. The latter, Golgothas, won.
Throughout Latin America the Colombian script was repeated, and also the merchants won. Moreover, USA fought a civil war between 1862-65, that didn’t concern freedom of slaves, as much as free trade. The industrial and protectionist North won, while the South, landowning, slaveholding and producer of raw materials, cotton, sugar, etc., lost its privileges.
The comparison derived from these two stories is interesting, especially for the consequences that each of those confrontations had for their respective countries. As Americans developed the most powerful manufacturing economy in the world, "doing what the British had done," which means protecting it; Latin Americans, "by doing what the English preached" dragged a history of failure and violence, with national economies oscillating between mediocrity and poverty.
Today, after 150 years, in Colombia, the ruling elite is betting on free trade, disguised in different clothing, as an engine of growth and employment. First came the so called opening, with unilateral tariff reductions, privatization of public assets, currency and financial liberalization, and so on. A decalogue of measures better known as the Washington Consensus, since the ending of Virgilio Barco’s government to the present. Then, secondly, the so-called free trade agreements (FTAs), which are agreements between parties, and are more investment agreements than trade deals. The most important one is the FTA with US which became active since May 15.
But what are we to sell or to buy from the U.S.? Both today as in the nineteenth century, the natural resources comparative advantage is the way to creative impotence, our destiny marked by vested interests from a colonial past. The former director of National Planning Santiago Montenegro put it: "There is growing awareness of the potential to grow outwards and exploit the comparative advantages of Colombia (...) based on natural resources" (2006, 'Sociedad abierta, geografía y desarrollo'). In this regard, the 2006 draft Law 178, which regulates the FTA with the U.S., is rather specific in the kind of products to be exported: "Fruits, vegetables, meat products, milk, cocoa, tobacco, rubber, products of aquaculture, timber products, those from the publishing industry, and many more. " Which ones? If they were important they would be listed in first place.
What will we buy? The main argument in favor of NAFTA is that consumers are the big winners because cheaper food could be imported. For Armando Montenegro, consumption of corn bread is punished by a 40% tariff on white corn, "It is, therefore, an unjust mechanism for transferring money from the millions of “arepas” consumers, mostly low-income ones, to corn producers.” ('El Espectador', October 16-2011).
Similarly, Juan Carlos Echeverry, Minister of Finance, argues in favor of consumers, the benefits of free trade: "Also, as a consumer, anyone would prefer millions of tons of cheap chicken coming in that could feed millions of families. (...) More variety, more competition and lower prices is what matters to the consumer "(El Tiempo, 'Tratado de Libre Comercio: negociadores de quien?', September 2, 2005). So says former minister Carlos Caballero Argaez: "I like the FTA because of another reason, consumers will be the big winners because food prices (...) will lower" (El Tiempo, '¿Por qué no cambiar una realidad inaceptable?', October 21,2011).
However, what they all omit to say is that US farmers receive very large subsidies from the US government, which are inevitable because of 'lobbyists'. Colombia plays chicken while USA subsidizes: "The subsidies granted by certain countries exist and will keep on existing and we should not be scared, because they are inevitable" (El Tiempo, interview with Alberto Carrasquilla, October 21, 2011).
So the US will continue to subsidize agriculture and livestock farmers, despite the agreement. For this reason, Joseph Stiglitz, Nobel laureate in economics, in his statements over Colombia’s FTA with US, said on Caracol, a radio network, on February 2, 2007, “the FTA "is neither fair nor free (...) it is called free, but if it were so, U.S. agriculture subsidies and tariff barriers would be eliminated".
Florentino Gonzalez, the Golgothas ideologue, hoped the New Granada (Colombia today) specialized in agricultural and mining exports, while importing manufactured goods from Europe and USA. (Nieto, Eduardo, 1942, 'Economía y cultura en la historia de Colombia' / 'Economy and culture in the history of Colombia'). However, the "technocrats", those who in economics believe in market omnipotence, expect Colombia to become an importer of not only manufacturing but also subsidized agricultural products, while big mining transnational corporations devastate the environment and other Colombian common property.
Accordingly, in these last two decades, not only was manufacturing destroyed, but also our agriculture. Colombia is de-industrialized, industrial plants were closed in all cities, and became a food importer. The economy became a mining and export one, a productive transformation in reverse with an abysmal infrastructure. Peso revaluation cheapened imports (it works as a subsidy) and exports became more expensive (the revaluation acts as a tax), and incidentally, turned industrial activity into assembly of imported components. Income became more concentrated, the Gini rose from 0.47 to 0.58. And, as a corollary, the most serious economic crisis (1998-2001) of Colombian history ocurred.
Shall we wait another 150 years for the Colombians to realize that we took the wrong road? We must do what the US did [and does], not what the US preaches.
(Translation: Umberto Mazzei).
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