Free Trade Agreement between Colombia and Israel

Opinion article by: Catalina Tamayo Posada (catalinatamayop1@gmail.com)
Economics student at Universidad EAFIT, Medellin-Colombia.

Few has been written about the free trade agreement (FTA) between the State of Israel and the Republic of Colombia, and that appears to be unexplainable since this FTA is completely beneficial for both countries.

Israel is a relatively new State, with only 66 years it has reached an incredible level of development. Additionally, its GDP per capita (US $32,212)1 makes it a very interesting market with a high purchasing power and great opportunities for Colombian goods to be sold.

This agreement seems to be very promising because both countries’ industries are complementary and not competence, which without any doubt reveals the greatness and importance of the agreement for both countries. The FTA does not only include goods, it also involves services and investment. According to Yoed Magen, Ambassador of Israel in Colombia in a conference at EAFIT University2, “This is the most complete agreement that Israel has ever signed”. In the Economic theory can be found the principle of Comparative advantage which “says that countries prosper first by taking advantage of their assets in order to concentrate on what they can produce best, and then by trading these products for products that other countries produce best”.(WTO.org)

There are no sectors that can be harmed because of the complementarity of the economies. Israel will offer cheaper technology to Colombian farmers and industries. Hopefully, our productivity and efficiency will increase, which would lead to greater international competitiveness and therefore a rise in both trade and foreign direct investment. In addition to this, “Israel also counts with a two-way cooperation framework which will allow the development of projects in priority areas, such as the technification of the agriculture, innovation, telecommunications, biotechnology and the development of environmental technologies, in which Israel is a global leader” (Portafolio.co, 2013).

Furthermore, in the article 5.2, numeral d) of the text of the agreement it says that the parts have given special attention to the strengthening of SMEs (Small and Medium Enterprises) (MinTIC, 2013). The fact that this kind of economic agents are being enhanced and accompanied by a foreign government and supported by the chance of getting cheaper technology, certainly leads the country to grow more in economic terms.

Seeking for this kind of agreements which are completely beneficial for our country is a priority for the government. And of course, is a fundamental duty of the government to make sure that the gains obtained from these agreements are being well distributed in pro of the development.

References:

Ministerio de Comercio, Industria y Turismo. Acuerdo comercial entre Colombia e Israel. Available in: http://www.tlc.gov.co/publicaciones.php?id=2007.

Ministerio de Comercio, Industria y Turismo. Texto del Acuerdo- Español. Available in: http://www.tlc.gov.co/publicaciones.php?id=8077.

Portafolio.co (2013). Colombia e Israel firmaron el TLC. Available in: http://www.portafolio.co/economia/colombia-e-israel-firman-el-tlc.

World Trade Organization. The case for open trade. Available in: http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact3_e.htm.




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1. GDP per capita for 2012, taken from “Ministerio de Comercio, Industria y turismo”.
2. Conference “Agreements and FTA between Israel and Colombia”. February 19/2014. Universidad EAFIT, Medellin-Colombia.

Colombia: A country where everything happens and nothing ever happens

Opinion article by: Catalina Tamayo Posada* (ctamayo8@eafit.edu.co) 

Economics students at Universidad EAFIT, Colombia

If you think about it you will realize that it is actually true. Some many things happen in this magnificent land but we, the Colombians, do nothing about it. It is not necessary to go back in time to see that indifference has always been part of our culture. For instance, the agricultural strike.  For almost 3 weeks Colombian farmers and workers from different sectors have been protesting against the Government because of the lack of policies that can protect them and their products. A lot of people argue that all of these protests are only because of the free trade agreements (FTA), but they are not. The problem in Colombia, as I said before, is the enormous absence of policies that can protect and stimulate our own products.

This whole situation has made me ask myself, why don’t we pay attention to the agriculture sector if, for a country like Colombia with all the resources we have, truly investing in it can actually make us more competitive?

Prof. Juan Carlos López Díaz (Universidad EAFIT)

In a conversation with Prof. Juan Carlos Lopez (Director of the Study Group in Business History), we could evidence that this problem has always been there but less has been done to try to solve it, this is what I call indifference. He spoke about what he denominates the three stadiums of industrialization which are the pre-industrialization, the industrialization and the post-industrialization. The first stadium refers to the period where gathering resources from coffee growers and traders established the basis for the industrialization. In addition to this, the war of a thousand days forced the creation of new industries such as the textiles, foods and brewers. All of these circumstances led to the second stadium, which denotes the time of the actual industrialization that is the change from the agriculture to the manufactures. For so long Antioquia was the leader region in terms of industrialization, but after the Second World War and because of issues such as the centralization of the country and the narco-terrorism situation, many companies emigrated to the capital, Bogota, and to Cali. And finally, the services sector is what Prof. Juan Carlos Lopez Díez may call the third stadium. This sector has gained a huge importance because almost all the products require the services sector in one or more ways. In the Colombian case, I think that, in a rush to be as industrialized as other countries, we changed so fast to the manufactures that we did not give the primary sector enough time to fully develop and left it completely forgotten.

What is done is done and there is nothing that we can do to change the past, but it is possible to do something to have a brighter future. It is necessary, and fair, to focus on what we think can make us more competitive. Personally, I do not think that is a matter of choosing whether centering on the agro or the industries. It is about making them work out together, creating value chains, especially on the areas that Colombia has strength on, for example coffee, oil, mining, bananas and flowers.
In conclusion, I would like to say that in order to achieve this enormous goal, we must do an giant effort to invest in technology, infrastructure and education, make more technical the crops in order to be more efficient, reinforce our institutions, and create fair policies that can benefit our farmers. This way we can fully compete in global markets and make our economy grow.

The Status Quo of Chaos in Colombia: An opportunity for development

Opinion Article by: Juan Gonzalo Perez* (jperezg@eafit.edu.co)

* International Business Student, Universidad EAFIT, Medellin, Colombia

A year later after the implementation of the Free Trade Agreement (FTA) between Colombia and the United Sates, as a result of the lack of development policies for rural areas, several agricultural sectors are on strike. The status quo of chaos in Colombia has led to a serious economic and political crises.  Protesters are blocking main roads of transportation, causing a shortage of agricultural goods and, consequently, food prices are increasing. Also, according to some government officials, political opposition movements are taking advantage of the urban and rural riots to gain popularity for the upcoming elections.

Protesters are asking the government for subsidies, elimination of import tariffs on agricultural supplies and adjustments in the FTAs already signed. Let’s try to analyze the causes and possible solutions to this problem.

According to Dhanraj Harrypersad from the Export Market Research Centre in Trinidad and Tobago, the reality is that in most cases there is a disconnect between those negotiating FTAs and those which stand to be affected. He also argues that FTAs are often more politically than economically motivated. They are negotiated quickly and do not give sufficient thought to the impact they will have on some of the smaller producers in a country. Usually it is the larger companies, groups and conglomerates which have the say in negotiations because they may have funded the political campaigns of the governments.

It is true that as Colombia becomes more open to international markets it is necessary for local industries and small farmers to become more competitive. The challenge is to develop a higher value added agricultural industry that creates quality jobs and increases the salaries of farmers. To accomplish this task the government should implement clear development policies and take advantage of the benefits from the large amounts of Foreign Direct Investments (FDI) coming into the country as well as the royalties from the extracting industries. 

Although subsidies can solve the farmer’s problems in the short term, the fact is that it affects the country’s welfare. Also, they cannot rely on the government to give subsidies and preferential treatment indefinitely. At some point in time farmers need to be able to stand on their own and compete in international markets. For instance a more feasible solution could be to implement programs to transform the agricultural sector from one of primary goods, like potatoes, raw coffee beans and bananas, which are low cost but also low profit, to one of value added products that can be incorporated in global value chains. For example, Chilean pineapple exporters have recently determined that exporting pineapple juice, a value added product, is more profitable than exporting the pineapple itself. The role of the government should be to get farmers to that state rather than offering subsidies and reducing import duties on inputs.

Furthermore, there is little chance that the government will accept to negotiate the terms of the FTAs because it is a risky political and diplomatic decision, even though it is legal for the Colombian government to establish consultations with the US claiming that the FTA is causing internal social conflicts.

In conclusion, the status quo of crisis in Colombia can be seen as an opportunity to develop the agricultural sectors. But, most important is to establish a clear plan to improve the technology to transform the basic production of agricultural goods into value added products that will allow small farmers to become more competitive in international markets and even become part of global value chains. For now, let’s hope that the protests stop and the parties can come to some sort of agreement soon because the fact that people are using it as an excuse to gain political benefits and damage property just shifts the focus away from the true reasons behind the protest.