Colombia`s economy is the third largest in Central and South America. The International Trade Commission (ITC) estimates that the tariff reductions in the agreement alone will increase U.S. merchandise exports by more than $1.1 billion and support thousands more U.S. jobs. The agreement will provide significant new access to the $166 billion service market in Colombia and provide greater opportunities for U.S. service providers. More than 80 percent of U.S. exports of industrial products to Colombia are immediately exempt from tariffs, including almost all agricultural products and construction equipment, aircraft and parts, auto parts, fertilizers and agrochemicals, as well as computer equipment. The remaining industrial tariffs will be phased out over a 10-year period, which will significantly increase U.S. exports, with average tariffs on U.S. industrial exports between 7.4 and 14.6 percent.
More than half of U.S. agricultural exports to Colombia are immediately duty-free, including wheat, barley, soybeans, high-quality beef, bacon, almost all fruits and vegetables, cotton and processed products. Almost all of the remaining tariffs will be abolished within 15 years. At least in theory, imports could violate workers in different ways: fewer jobs, fewer wages or poor working conditions. Let`s take a look at this in turn. Protectionism certainly saves jobs in the protected industry, but for two reasons it costs jobs in other unprotected sectors. First, if consumers in the protected industry pay higher prices, they will inevitably have less money to spend on goods from other industries and jobs will be lost in those other sectors. Second, if the protected product is sold to other companies, so that other companies now have to pay a higher price for large inputs, those companies will lose sales to foreign producers who will not have to pay the highest price.
The loss of sales leads to job losses. Hidden opportunity costs to save job protectionism in one sector are jobs sacrificed in other sectors. For this reason, in its study on trade barriers, the United States International Trade Commission predicts that removing trade barriers would not lead to widespread job losses. Protectionism kills jobs in industries without import protection in industries that are protected from imports, but it does not create more jobs. Can these jobs created by capital inflows be fully offset by growing trade deficits? It`s possible, but unlikely. Of course, other macroeconomic influences can push an economy into full employment, even given trade deficits. In the late 1990s, for example, employment in manufacturing was lost in trade, while construction jobs (at least partially driven by foreign capital flows) were booming. By contrast, in the early 2000s, trade allowed manufacturing to replace it faster than any other industry (including interest-sensitive industries).