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Evidencia 3: Ensayo “Free Trade Agreement (FTA): advantages and disadvantages”

Negociación de Producto Colombiano Faja Cinturilla para mujer basado en el Tratado de Libre

Comercio entre Colombia y Chile, exportado a la ciudad de Santiago de Chile

Grupo de Trabajo N° 18 Hot Shapers Faja Cinturilla

Integrantes:

Alexandra Becerra España

Servicio Nacional de Aprendizaje Sena

Tecnólogo Negociación Internacional

Bogotá

2019 9
Table of contents

Introduction………………………………………………………………………………… 3

1. FTA between Colombia and The United States ………………………………………... 4

2. Advantages ………………….……………………………………….…………………. 5

3. Disadvantages …………………………….…………………………………………… 6

Conclusions……………………………………………………………………………….... 8

Bibliography ………………………………………………………………………………. 9

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Introduction

FTA are trade agreements signed between two to more countries to agree on mutual tariff

preferences and the reduction of non-tariff barriers to trade in goods and services, an FTA

incorporates in addition to the issues of access to new markets, other trade-related policy issues,

such as intellectual property, investment, competition policy, financial services,

telecommunications, e-commerce, labour matters, environmental provisions and trade defence

and dispute settlement mechanisms. The Ftas have an indefinite term, that is, they remain in force

over time and therefore have a perpetual character.

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1. FTA between Colombia and The United States

Since 15 May 2012, Presidents Juan Manuel Santos and Barack Obama agreed at the Summit of

the Americas later this year. This Agreement, like other FTAs, does not have an "expiration date",

but either party may request the other to request its reform or termination following the procedure

contained in the final document of the Agreement.the Free Trade Agreement (FTA) signed by

Colombia and the United States with the aim of promoting trade between the two countries has

entered into force. The Treaty affects all sectors of the economy and national productive life,

including ICTs.

The agreement signed between Colombia and the United States, this is known as TLC, although

its technical name was agreement of commercial promotions, in English trade Promotion

Agreement (TPA). The basic objective of this deal is to reduce tariffs and taxes so that producers

in both countries can trade freely. Under this Treaty, Colombia eliminated the tariffs for entering

the country of about 82% of the industrial products generated in the United States, for its part, the

U.S. eliminated them for almost all of the Colombian products that pass their borders.

This agreement, consisting of rules and procedures, applicable in equal conditions for the two

countries, in this we find a guide on how to export and import between the two countries, to

obtain the best benefits. Each country is free to dictate its economic policies and take steps to

boost international trade and promote the export of its products.


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2. Advantages

- The FTA opens for Colombia the world's largest market in goods and services, with more

than 308 million inhabitants with an annual per capita income of US$47,400.

- The FTA creates a long-term regulatory framework, thus promoting domestic and

foreign investment in Colombia.

- At the conclusion of the FTA negotiations with the United States, multiple studies were

developed showing the positive impact of the agreement on economic growth, increased

exports, and skilled and unskilled employment generation. A time later, Colombia is a

more competitive country, substantially more open to the world, with a productive sector

that has matured and that today has better conditions to attract productive investment and

conquer foreing markets.

- The United States is the main destination for Colombian exports, with a 42%

shareholding.

- The agricultural sector will benefit from greater access to the US market, not only by the

permanent elimination of tariffs but also by the establishment of sanitary and

phytosanitary rules to support real access for our agricultural and agro-industrial

production.

- The agreed tariff reduction scheme for the industrial sector maximizes the competitive

opportunities of our production apparatus. Open duty-free access for 99% of Colombian
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export products immediately. Colombia grants immediate rebate for 82% of our US

imports, most of them capital goods or goods not produced in the country.

- The FTA ensures greater access of the Colombian production apparatus to the

acquisition of capital goods, mainly machinery and equipment imported from the United

States by the immediate elimination of the vast majority of tariffs (between 5% and 20%).

- Increased investor confidence.

- Modernization of the State and organizations related to foreign trade.

3. Disadvantages

- Mismatch in tax revenues, as eliminating entry tariffs on foreign products would no

longer receive taxes for this concept, which could deepen the national fiscal deficit;

however, analysts expect this money to recover from VAT and income tax from the

larger movement of the economy.

- Time ability to adapt domestic companies to international production standards,

generating monopolies and market acquisition by the North American supply entering

the country.

- While the agricultural sector will have the elimination of tariffs, it will be affected, as

the Colombian countryside is not fully industrialized to be able to compete against

U.S. agricultural products, nor does it have enough production and quality
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mechanisms. Colombian farmers also do not have the capacity to meet the demands

that will be made to them.

- May 15 marks seven years since the Colombia-U.S. Free Trade Agreement (FTA)

entered into force. This period has meant a trade setback that forces domestic

companies to improve their productivity and effectiveness to compete in international

markets.

- Although the FTA with the United States has many advantages, in terms of tariffs and

non-tariff barriers, but having this treaty with the world's largest market, it makes the

Colombian market more disadvantaged because there is imbalance between the

subsidies that the Colombian agricultural sector receives and those that farmers in the

United States have. Protection mechanisms for this sector are not very defined.

- Although Colombia is entering a mining-energy bonanza, these products are exported

with no greater added value, which causes them to be processed in industrialized

countries demanding more qualified employment in these latitudes and condemning

Colombia to be exporter of commodities, and at the same time generating little skilled

employment. This situation could be repeated in the agricultural sector if policies

articulated with research, innovation and education are not implemented.

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Conclusions

The Colombia-U.S. FTA has within its sheets many policies, which at first glance allow us to see

that it would be a magnificent opportunity for the Colombian market, since as mentioned the

North American market is the largest in goods and services, but unfortunately after seven years of

entry into force we realize that we have not been able to take advantage of these advantages due

to the backwardness and the low adaptability of national companies in line with international

production standards, generating concentration and market acquisition by foreign companies. For

this reason, the work of the Colombian government is hard to achieve our market to the US states

and thus be able to make the real profit of this FTA.

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Bibliography

http://www.acuerdoscomerciales.gob.pe/index.php?

option=com_content&view=article&id=48:lo-que-debemos-saber-de-los-tlc

https://colombiadigital.net/actualidad/articulos-informativos/item/2057-que-es-el-tlc-colombia-

estados-unidos.html

https://unperiodico.unal.edu.co/pages/detail/siete-anos-despues-colombia-sigue-en-desventaja-en-

el-tlc-con-estados-unidos/

https://www.americaeconomia.com/economia-mercados/finanzas/conozca-los-aspectos-positivos-

y-negativos-del-tlc-entre-colombia-y-eeuu