April 9, 2008
Small Business Fact of the Week The Case for U.S.-Colombia TPA: By the Numbers On Monday, April 7, President George W. Bush sent the U.S.-Colombia Trade Promotion Agreement (TPA) to Congress. Since this accord was negotiated under trade promotion authority, Congress must hold up-or-down votes within 90 legislative days. An Associated Press story that ran in the April 8 New York Post referred to this free trade deal as "controversial." When it comes to the economics of this agreement, it is anything but controversial. It has only become controversial in the political realm due to unwarranted opposition from various special interests, such as labor unions. Consider the following regarding U.S. trade, and aspects of the proposed free trade agreement: • International trade has become increasingly critical to U.S. economic growth. For example, total trade (that is, exports plus imports) in 1960 equaled only 7.8 percent of U.S. GDP, while by 2007, that had risen to 28.8 percent of GDP. • Expanding trade means the creation of more high-paying jobs. According to the U.S. Trade Representative's office, U.S. exports support one in every five manufacturing jobs and more than 900,000 agricultural jobs, while export-related positions pay 13% to 18% more than the national average. • And trade most certainly is not just about the big multinationals. The U.S. Small Business Administration's Office of Advocacy has reported that small businesses "made up 97 percent of all identified exporters and produced 28.6 percent of the known export value in FY 2004." • As for Colombia, over the past five years, from 2002 to 2007, U.S. merchandise exports to Colombia rose from $3.6 billion to $8.6 billion - a 139 percent increase, while inflation came in at 15 percent over the same period. • According to the Office of the U.S. Trade Representative, of the more than 9,000 U.S. businesses exporting to Colombia, 8,000 are small and medium-sized firms. • The key policy effect of this trade accord would be to lower Colombia's barriers to trade, and thereby expanding opportunity for U.S. entrepreneurs and businesses. For example, the White House has noted that while "over 90 percent of U.S. imports from Colombia now enter our country duty-free, U.S. exports to Colombia face tariffs up to 35 percent." For good measure, "Once implemented, the agreement will eliminate tariffs on more than 80 percent of American exports of industrial and consumer goods immediately and 100 percent of American exports over time." It's also worth taking a look some key facts regarding the top states in terms of exports to Colombia. Top 15 U.S. States in Terms of Goods Exports to Colombia in 2007 State | Percent Increase in Exports to Colombia from 2002 to 2007 | Exports to Colombia in 2007 | Share of U.S. Exports to Colombia in 2007 | Texas | 231.5% | $2,288.0 million | 26.7% | Florida | 114.4% | $2,060.2 million | 24.1% | Louisiana | 105.7% | $856.7 million | 10.0% | California | 117.2% | $320.8 million | 3.7% | Illinois | 242.4% | $309.6 million | 3.6% | Georgia | 162.4% | $183.1 million | 2.1% | North Carolina | 195.4% | $181.1 million | 2.1% | Alabama | 261.5% | $156.4 million | 1.8% | Tennessee | 118.1% | $150.5 million | 1.8% | Ohio | 172.6% | $133.0 million | 1.6% | New Jersey | 79.8% | $131.5 million | 1.5% | Pennsylvania | 131.2% | $126.3 million | 1.5% | Minnesota | 471.7% | $118.6 million | 1.4% | New York | 23.7% | $113.6 million | 1.3% | Virginia | 135.3% | $103.1 million | 1.2% |
• Finally, keep in mind that the rate of increase in merchandise exports to Colombia from 2002 to 2007 ran well ahead of the increase in overall U.S. merchandise exports - a 138.5 percent increase to Colombia versus a 67.7 percent jump in overall exports. Trade with Colombia is growing and creating new opportunities. Such opportunity will be further enhanced with Colombia's trade barriers coming down under the U.S.-Colombia Trade Promotion Agreement. Raymond J. Keating, Chief Economist
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