Sunday, April 20, 2008

Pass the Colombia FTA

Fire of Liberty

If you've been a reader of Fire of Liberty then you know that I'm a big supporter of Free Trade and have been calling for the approval of pending deals on Panama, South Korea and Colombia. In previous posts I've pointed out that such a deal would be good for the strategic and economic betterment of the people of Colombia against the military encroachments and revolutionary socialism of Hugo Chavez but I haven't pointed out the economic a job securing benefits of this nation approving the Colombia FTA. Even though free trade deals are generally dead from the start in the eyes of protectionist politicians and unions, I would suggest that the opponents take a second gander at the US-Colombia Free Trade Agreement and realize that this deal is more beneficial to this nation than the critics claim because it eliminates expensive tariffs that have been tacked on US goods going into Colombia who already ship 90% of there goods into this nation duty free(See here.) Now if these opponents to the Colombia FTA do get their way(Which looks like it's happening with Rep. Pelosi changing the 60 day rule.) in nixing this trade deal based on the argument that they're "keeping jobs in America" they will in fact be killing the said jobs that they are fighting to save. As long as these deals keep us at a big disadvantage against other nations that have drawn similar trade deals with Colombia we will find a lot of the big industrial equipment, machinery contracts, and other goods that are made here going to our competition in Asia, Europe, and Canada. I have to say the editorial board the Wall Street Journal put it best in describing the benefit of such a deal in an editorial titled "Colombia and Cat" when they pointed out the following:

Exhibit A are 8,600 jobs at two Caterpillar Inc. factories in Illinois. Caterpillar exports more to Peru and Colombia than it does to Germany, Japan or the United Kingdom. So keeping and growing market share in both countries is important to union members in both plants. Not all are union jobs but both facilities are United Auto Worker shops.

Consider exports of the off-highway truck, made in Decatur. Customers in Colombia now pay a 15% tariff – equal to $200,000 – on the import of these vehicles. If the FTA goes through, that import tariff goes to zero immediately. Conversely, if the deal dies and Colombia, which is trying to expand its world trade, strikes an agreement with another country where similar vehicles are made, U.S. exports will immediately be at a 15% price disadvantage.

Colombia also has a large mining industry, and there are more Cat D-11 bulldozers in Colombian coal mines today than in any other country in the world. Those bulldozers are made in East Peoria. Colombian customers pay a 5% duty to import Cat bulldozers, which compete against Komatsu bulldozers made in Japan. Union members might ask Mr. Sweeney why he wants to spurn an offer that would give U.S. products a 5% price edge against Japanese competition.

Caterpillar – which has a total U.S. work force of 50,545 – faces an even more imminent threat in the case of its motor graders, a piece of heavy equipment used to level the playing field, literally. A company called Champion also makes motor graders in Canada, and Colombia is also negotiating an FTA with Canada. If Canada seals a deal with Colombia while the U.S. walks away from its Colombia pact, graders made in the U.S. will cost more than those made in Canada. Once again, Mr. Sweeney's agenda makes the U.S. work force less competitive.

I for one hope that such a deal will eventually be passed, but when you have such dogmatic opponents like Sens. Clinton, Obama, Brown, Rep. Nancy Pelosi, AFL-CIO boss John Sweeney and Lou Dobbs banging the drum against such FTA's who will sacrifice the jobs of hard working Americans just make a point.

*See here for more on the Colombia FTA.

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