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ABCs of the Colombia free trade agreement (FTA) with Canada

ABCs of the Colombia free trade agreement (FTA) with Canada ABCs of the Colombia free trade agreement (FTA) with Canada
Why is the FTA with Canada important for Colombia?, What characterizes the Canadian economy?, learn more about FTA with Canada
Why is the FTA with Canada important for Colombia?

It is Colombia’s first FTA with a developed country, and it sets a good precedent for future agreements that the country will negotiate.

Canada is one of the major, developed economies and generates 2.6% of world GDP. It is a country with high purchasing power, with a per capita income of U.S. $38,614, about 5 times that of Colombia.

Canada has signed FTAs with Chile (1996), Israel (1996), Mexico and USA (1994), Costa Rica (2002), Peru (2009) and EFTA (2009), Panama and Jordan, and is negotiating others.

Canada has a prominent place both in global trade of goods and services and in investment flows.

According to a study by the Canadian Trade Facilitation (TFO), Canada is a country with one of the world's highest per capita import.


What characterizes the Canadian economy?

Canada is one of the world's richest nations, a member of the G8, and the Organization for Economic Cooperation and Development (OECD).

Its economic performance is based on the services sector (71%), followed by industry (26%), and agriculture (2%).

It has the second largest oil reserves in the world, after Saudi Arabia.

It is the third largest producer of natural gas, and the third largest exporter of wood.

What is the importance of the Canadian market for Colombia?

The Canadian market offers opportunities that will help to increase the growth of the Colombian economy and generate further development.

One of the greatest advantages of integration with Canada is to have preferential access to a market of 33 million consumers with high incomes.


What impacts will the FTA have on the economy?

According to the projections of the NDP, the Agreement will have a positive effect on the Colombian economy, with an increase in real GDP and trade flows from Colombia to the rest of the world.

GDP will have an additional increase of 0.06%, and exports and imports will grow 0.21% and 0.08%, respectively, compared to the baseline scenario.

Also, there will be an increase of 0.06% in the remuneration of skilled and unskilled labor, and 0.07% in return on capital.


Where are the positive impacts on exports?

The entry into force of the FTA between Colombia and Canada will provide positive impacts on sugar, processed rice, textiles, other cereals, vegetable oils and fats, and apparel and clothing, among others.

What are the positive impacts on production?

The projections show that the sectors to benefit from the entry into force of the FTA are sugar, textiles, garments and clothing, oils and fats, vegetable fibers, and processed rice.

What about imports?

The biggest growth will be in wheat, barley, vegetables, non-tropical fruits, such as apples and peaches, and in nuts, beef and pork.
Canadian sales to Colombia will increase competition for industrial products, such as paper, machinery and equipment, hydraulics, and highway trucks

Will Colombia benefit from these imports?

Some imported agricultural products will benefit from the entry into force of the Agreement in response to tariff elimination, as in the case of wheat and barley.

Currently, the majority of wheat is imported from the U.S., but the numbers are beginning to show a shift in purchases to other producers. In 2008, Colombia bought $382 million from the U.S., $95 million from Canada, and $53 million from Argentina; however, in 2009, the distribution changed to $157 million purchased from the U.S., $112 million from Canada, and $71 million from Argentina.

This is significant because many food industries use wheat as a main input.


What agricultural products will enter Canada without paying tariffs?

The FTA has achieved, immediate, duty free access to the current and potential exportable supply of Colombian agricultural. This includes consolidated, free market access to Canada for 98% of agricultural exports from Colombia:

*Beans and coffee.
*White sugar: Colombia will have free market access to Canada through linear tariff reductions over 17 years.
*Flowers, cuttings, and foliage.
*Fruit and vegetables: free access for almost all tariff lines, mainly pineapples, guavas, papayas, mangos, and strawberries.
*Confectionery: cocoa and its derivatives, which have great potential.
*Food products and preparations of fruits and vegetables.
*Tobacco.
*Ethanol & Spirits: immediate access to national treatment in the provinces, which have significant potential.




How were products which already had preferential access to Canada, under the Generalized System of Preferences (GSP), affected?

The GSP was consolidated in the FTA, particularly for coffee, sugar, confectionery, cocoa and its derivatives, and tobacco, as well as for a range of fruit and vegetables.


Where is Colombia, in relation to other countries that trade with Canada?

The preferential access achieved by the FTA will match the commercial marketing of goods and services with other countries that already have FTAs in force with the country, such as Chile, Costa Rica, and Peru.


What happened to the Price Band?

We obtained significant asymmetry in the methods of relief, in favor of Colombia, and, in particular, the impact on sensitive Colombian production was taken into account, thus preserving the Price Band System for specific products.


Will there be real access?

Yes; the FTA establishes the elimination of tariff barriers, quantitative restrictions, and other nontariff barriers, so as to ensure real access for the Colombian agricultural supply.

In addition, we took into account the implementation of the "preference clause" of the Colombia-USA FTA and it as a reference for the negotiation with Canada, as well as for the provisions for most-favored-nation (MFN) of other commercial arrangements.


Are any safeguards included in the FTA?

Indeed, there is a special agricultural safeguard to regulate imports of certain sensitive products in the agricultural sector, such as beef and beans.

In addition, it eliminates all forms of export subsidies and any possibility of reintroduction.


What about tariffs on our exports?

As soon as the FTA enters into force, 98% of Colombian exports to Canada enter duty free into the Canadian market. Of this 98%, 99.8% of trade in industrial goods will become duty free, immediately, while 97.6% of agricultural goods will receive the same treatment.



What is the impact of the FTA on job creation?

It will have an important impact, given that the largest generators of employment will benefit from the Agreement, such as the textiles and garments sector, which will have immediate duty-free access.

It will also open significant opportunities for Colombian exports of biofuels, which will benefit from the zero tariffs, upon entry into force of the FTA.

The sugar industry is also a big winner: Colombia achieved better results than in any prior negotiation.

The Colombian flower industry, which is an area of enormous importance, not only for its export volumes, but also for its important role in job creation, will also benefit from zero tariffs, once the FTA enters into force.



Were some sectors excluded from the negotiation?

The dairy sector was excluded from the negotiations.


How are we on investment?

Canada is already a major investor in Colombia, at more than one billion dollars during the period 2000-2010.

In terms of investment, this allows Canadian companies to offer very attractive conditions, in addition to what is already offered by the Colombian economy.

It is expected that with the FTA, Canadians will embark on new investments in strategic sectors of high added value, especially in the sectors of telecommunications, financial services, and mining. If realized, these investments will benefit Colombian consumers.


Will the FTA open markets for our services?

Yes; companies in the Colombian financial sector, particularly those that manage portfolios, such as pension funds, gained access to the markets of 9 Canadian provinces, which account for about 700 billion dollars.

This is the largest access granted by Canada to a trading partner - even larger than the access granted under NAFTA.


Will we have access to public procurement?

In the field of Public Procurement, through this negotiation, Colombian producers will be able to offer their goods and services to almost all Canadian government agencies, representing an annual market in excess of 17 billion dollars.

With this Agreement, Colombia becomes part of a small group of countries, which include Chile, Mexico and Peru, that can take advantage of this market.


What were the issues on labor and environmental protection?

The parties that are opposed to open markets and free trade often argue that increased trade flows inevitably sacrifice the welfare of workers and adversely affect natural resources and the environment.

In this negotiation, however, stricter rules were included that will ensure adequate protection for workers’ rights and the obligation to maintain high levels of environmental protection.

This important commitment was achieved through the negotiation of two parallel agreements that established these rules and obligations and, of which, shall be significant mechanisms for cooperation in helping to strengthen our institutions and programs in these areas.


Was any consideration given to SMEs?

The negotiations also took into account Colombia’s interests to ensure that international trade negotiations benefit its small and medium-sized enterprises. The Treaty Commission shall periodically review the impact of the Agreement on SMEs and assess what actions may be of best use.

Will there be cooperation?

For the first time, Canada agreed to include in the framework of such negotiations, a chapter devoted exclusively to issues of cooperation on trade. This seeks to develop projects and actions aimed at making better use of this Agreement.


How will the relief occur?

It will occur in three categories:

Category A (immediate access): live animals, beef, yogurt, fertile eggs, flowers, vegetables, fruits, meat products, raw cane sugar, confectionery, cocoa products, cereal products, fruit and vegetable preparations, preparations for soups, ethyl alcohol, spirits, food preparations for animals, tobacco and cigarettes, mannitol and essential oils. It is worth mentioning that Canada has free access to the world for products of export supply in Colombia, such as coffee, bananas, palm oil, cocoa and some vegetable preparations.

Category B (up to 5 years): meat of fowl, uncut (Spent).

Category C (up to 10 years): meat and chicken, turkey, bacon, and pickled beef pieces, as well as other meat preparations, white beet sugar, glucose, malt extract, prepared foods, animal feed and albumin. Preferences are contingent on the WTO for most of these products.

Category D (over 10 years): additional cane sugar (17019990).


Will there be products with Most Favored Nation status (MFN)?

Yes; 1.3% of trade in the agricultural sector is excluded from tariff reductions: dairy, poultry, margarine, beef sausages, chicken pieces, some derivatives of cane sugar (artificial honey, sugar, and caramel), grape wine, brandy, rum, gin, and prepared animal feed and albumin.


What specific opportunities are there for the export of Colombian goods?

PROCOLOMBIA has identified specific opportunities for export of oils and fats, food, sugar, soft drinks, cocoa, cigarettes, candy, flowers, fruits, protein concentrates, baked goods and vegetables, manufactured goods associated with auto parts, car batteries, brake pads, plastics, ceramics, personal care preparations, tile, marble and stone, fiberglass and electrical insulators, synthetic yarns and fibers, suits for men, underwear, knitted dresses, swimsuits, leather goods, and household products, such as decorations, cleaning supplies, personal care materials, toys, etc.


What about services?

In the Services area were established with certainty and transparency for providers of both parties, in order to create opportunities that will allow Colombia to become an export platform of services to the Canadian market, either by moving physical provider or consumer, or without having to travel (consulting services, call centers, online translation, telemedicine, telecommunications, data processing, computer services and other services related to software and design services, including al.) This opens a window of opportunity to increase the export potential Colombian Professional Services.


What is the procedure of the Agreement?

Colombian Law 1363, of December 9, 2009; Law 1360, of November 27, 2009, and Law 1359 of November 25, 2009, contain the Free Trade Agreement and environmental and labor Agreements, respectively.

The Constitutional Court has already issued a ruling on the constitutionality of the laws approving the Free Trade Agreement and the Agreements on Labor and Environmental Affairs, as well as the recent Agreement on annual reports on the effects of trade liberalization on human rights.

All that remains is for the Court to notify the Judgment, and, once accomplished, for the Foreign Ministry to file for exchange notes.

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