The Colombia FTA: A Less Attractive Face for Trade?

The North American Free Trade Agreement (NAFTA), which came into being in December 1994, has been one of the more important free trade agreements of its time. The NAFTA pact was signed by Canada, Mexico, and the United States in hopes of strengthening the prevailing commercial climate and promoting trade among the three member countries. NAFTA has been the model for other trade agreements, including the pending Colombian Free Trade Agreement. Both NAFTA and the Colombian FTA have been controversial in terms of market access, creation of jobs as well as the labor and environmental regulations applicable to them.

Free trade apologists argue that the Colombian FTA will produce more jobs and boost a sluggish global economy through the creation of enhanced market competition, leading to innovation and improved products. Members of various sectors that have been crushed and displaced might beg to differ, and claim that in Mexico, while free trade arguably has revamped the manufacturing sector, it has caused the agricultural industry to progressively wilt. While Congress debates whether to pass or to continue blocking the Colombian FTA, a growing number of FTA critics cites the overall negative effects that NAFTA has had on Mexico, claiming that Colombia will be comparably harmed by the ratification of the FTA.

NAFTA Tidbits
Mexico is one of the United States’ most important trading partners, as it ranks third in U.S. imports after Canada and China. Essential to Mexico’s financial welfare is its reliance on the U.S. as a dominant source for its foreign direct investment and infrastructural development. The U.S. benefits from the large scale of its agricultural exports to its NAFTA partners which has increased by $4 billion since 1994, with real growth of 95.2% to Mexico and 41% to Canada. U.S. export performance has been exceptionally high due to a strong dollar as compared to other world currencies.

Certainly, the economic relationship between the United States and Mexico has ostensibly strengthened since 1994 with the advent of NAFTA. The two countries have collaborated in forming development links such as the Security and Prosperity Partnership of North America (SPP), whereby they advance their joint security and prosperity through a common security strategy and the enforcement of economic growth and competitiveness goals.

NAFTA also has proven to be controversial in many of its economic and social ramifications. Its drafters assumed that the governments involved in formulating and implementing the agreement would behave rationally, markets would respond prudently, and that the agreement would pave the way for Mexico’s entrance into the developed world. Critics of NAFTA claim that the real impact of the agreement has been to destroy the social fabric of existing workers’ rights and the democratic accountability of government authorities, and argue that NAFTA has principally benefited large corporate interests at the expense of small and subsidized farmers. At the end of the NAFTA drafting process, many of its critics speculated that inequality within particular economic sectors in member countries would rise. What was not foreseeable was that the economic gap would steadily increase between Mexico and its northern partners. Additionally, the expropriation of foreign direct investments in Mexico, the imbalance of imports compared to exports, poorly enforced environmental regulations, growing unemployment rates in both the United States and Mexico, negative effects on immigration, and the loss of a competitive edge in Mexico’s agricultural sector, were all unanticipated consequences when NAFTA was being put together.