Colombian farmers have staged widespread and sometimes violent protests over the past week demanding a change in economic policies. One of their main complaints is over the Free Trade Agreement with the United States.
The farmers complain that cheap imports from the United States are crippling their sector. In particular, they complain about three specific products: poultry, dairy and potatoes. Is it the case that freer trade with the United States is responsible for the difficulties of Colombian farmers?
The U.S.-Colombia Free Trade Agreement went into effect on May 15, 2012, which means its prerogatives have been in place for over a year. As in the case with all the other agreements negotiated in the last decade, the FTA with Colombia got rid of most—but not all—tariffs immediately. In the case of some “sensitive” products there is a phasing out of tariffs that can take up to almost 20 years. Let’s take a look at the tariff elimination schedule of the three specific products that draw the loudest complains from Colombian farmers:
Potatoes: Prior to the FTA, Colombia applied tariffs on U.S. potatoes that ranged from 5 to 20 percent. Upon implementation of the agreement, those duties were abolished. According to data from the International Trade Comission, U.S. potato exports to Colombia did increase in 2012 by approximately 25 percent. However, in 2011 (when there was no FTA) potato exports went up by 77 percent. Still, U.S. potato exports to Colombia totaled just $5.6 million in 2012. As a comparison, Panamá (also a potato producer with 1/13th of the population of Colombia) imported more potatoes from the United States in 2012 (almost $7 million).
Poultry: Unlike the case of potatoes, Colombian tariffs on U.S. poultry imports (which range from 5 to over 160 percent) will be phased out over an 18-year period. Moreover, there is a 6-year grace period after the implementation of the FTA. That is, there will be no tariff reduction in poultry products until 2018.
The United States did secure a 27,040-ton quota at zero duties for chicken leg quarters which will increase 4 percent every year. However, that quota only represents 2.5 percent of Colombia’s annual chicken consumption. That’s hardly a massive flood of cheap U.S. chicken imports.
Dairy: As in the case with poultry, most diary imports from the United States will still face tariffs in the early years of the FTA. Some diary products will enjoy tariff protection until 2027. However, several duty-free quotas were secured. One of those is a 5,500-ton quota for milk powder that will increase by 10 percent every year. For 2013 that quota would represent less than 230 grams of powdered milk for every Colombian (that is 1.7 liters of milk). According to the local Federation of Livestock Farmers, each Colombian drinks on average 141 liters of milk every year, which means that duty-free milk powder imports from the United States represent just 1.2 percent of milk consumption in Colombia.
The impact of U.S. milk imports might be even lower given the fact that powdered milk is commonly used as an input for the processed food industry rather than a final consumption product.
As we can see, the FTA is not responsible for the troubles of Colombian farmers. The amount of duty free imports due to the agreement is still quite small. However, it is a fact that U.S. agricultural imports will increase once remaining tariffs barriers are effectively removed and U.S. farmers realize the potential of Latin America’s third largest market. Colombian farmers will then face stiff competition if they don’t adjust. Colombian consumers, 32.7 percent of whom still remain in poverty, would greatly benefit from cheaper food. Ironically, Colombian farmers themselves realize the benefits of free trade since one of their demands is to eliminate tariffs on fertilizers.
If Colombian farmers are hurting, it is not because of freer trade with the United States.