Canada-Colombia Free Trade Agreement Could Be a Lose-Lose Deal

WASHINGTON - Just a few hours prior to meeting his counterparts from all over the Western Hemisphere at the recently concluded Summit of the Americas, Canadian Prime Minister Stephen Harper reaffirmed Canada’s newfound commitment to the region, most clearly reflected in the newly signed free-trade deals with Peru and Colombia. On March 26, the Canadian government submitted legislation to the House of Commons that would implement the Canada-Colombia Free Trade, Labor Cooperation and Environment Agreements. Ottawa is confident that Parliament will ratify the treaties as early as June. But, far from being unanimously supported, the deal has been strongly criticized by human and labor rights organizations in Canada and Colombia, who view the agreement as being both irresponsible and ill-considered on Canada’s part.

The Arrangements
In 2007, officials from both countries began secret talks to achieve a Canada-Colombia Free Trade Agreement (CCFTA). Less than a year later, the deal was underway. Essentially, the CCFTA is a carbon copy of the North American Free Trade Agreement (NAFTA). Consequently, in addition to the trade agreement itself, the accord consists of two additional side agreements, one addressing the environment and the other focusing on labor, which are legally separate from the main text and where both have to be ratified individually by the parliament.

Although Canadian products face much higher tariffs in Colombia than Colombian products do in Canada, both countries have agreed to lower tariffs on imported goods and also to eliminate non-tariff trade barriers as much as possible. Canadian products entering Colombia such as wheat, barley, pork and beef presently face considerable tariffs ranging from 15 percent on cereals to as much as 80 percent on beef. Canada, however, imposes no tariffs on about 80 percent of the Colombian products entering the country including coal, bananas, coffee, palm oil and sugar. Other products which are not duty-free such as cut flowers face moderate tariffs, from 8 to 16 percent. In 2008, Canadian exports to Colombia totaled $703.8 million whereas merchandise imported from Colombia amounted to $643.7 million, representing a meager 0.13 percent of Canada’s total trade.

Far From Unanimous Support
Concerns surrounding human rights are at the center of the controversy surrounding the pending Canada-Colombia agreement. Proponents of the deal, including the Harper government, argue that Colombia is not what it used to be during the 1980s. To a certain degree, it is true that under the presidency of Álvaro Uribe, the Colombian human rights situation has improved in certain respects. In 2001, the year before Uribe was elected, 168 union members were murdered in the country. As of 2008, the number declined to 49 victims. Some of this discrepancy is due to a reclassification of who is a labor leader in Colombia, which is something of legerdemain by Uribe officials rather than the real thing. To promote the FTA with Colombia, Canadian officials repeated a vague and mainly theoretical discourse, maintaining that the CCFTA could improve human rights in Colombia by creating more jobs, consequently diminishing poverty and inequality. In theory, a stronger democracy would be established because the CCFTA would give Canada significant leverage on Colombia, if it was ever prepared to exercise it. This would allow Canada to press for improvements and to encourage the Uribe government to respect its international commitment to protecting human rights.

In spite of these potentially positive outcomes of the FTA, many Colombian and international human rights organizations affirm that human rights violations in Colombia remain a significant problem. In a communiqué dispatched to the Canadian parliament, the Canadian Council for International Co-operation (CCIC) claimed to be “very disappointed to see the government moving ahead with an agreement with Bogotá. It fails to reflect such basic Canadian values as respect for human rights, economic justice and protection of the environment.”

Colombia holds the record for the second highest rate of internally displaced people in the world, only after Sudan. The situation in the country is considered to be one of the worst human rights crises in the hemisphere by independent international bodies such as the United Nations and the Organization of American States. Labor rights activists and union workers particularly bear the brunt of these abuses. On average, throughout the past 21 years, there has been one Colombian trade union worker assassinated every three days. Adding to these statistics, and perhaps most indicative of the severity of the situation in Colombia, the Uribe government is suspected of acting in collusion with right-wing paramilitaries. “We have no doubts, given the evidence received, that the Colombian government of Álvaro Uribe and the security forces are accomplices in human rights abuses,” reported a communiqué written by a delegation of British Labour Party members of parliament as well as trade union leaders from the U.S., Canada and Britain.

In an open letter to the Canadian International Trade Minister, Stockwell Day, Amnesty International reiterated these persistent concerns over the violation of human rights in Colombia. “It is clear that serious human rights abuses -including death threats and assassinations- are continuing to take place in areas of economic interests.” According to Amnesty International, many union-affiliated victims have been targeted then attacked. They have been subject to coercion in efforts to purge the areas of the local population in order to gain access to land that may possess strategic resources such as oil, mineral and agro-industrial sites. Trade union members in particular have fallen victim to intimidation and brutal attacks in order to discourage them from organizing to protect themselves and their labor rights.

An Ineffective Labor Side Agreement
Theoretically, labor side agreements are directed towards improving labor rights and enforcing labor standards among the signatory members of a free trade agreement. While the CCFTA was secretly being negotiated, many hoped for a labor agreement that would have a credible dispute settlement mechanism, similar to the one of the World Trade Organization (WTO), which would allow such trade sanctions as countervailing measures or abrogation of preferential trade status. These measures could then be implemented in order to coerce the signatory countries to respect their pledges regarding their compliance with labor rights standards.

However, the labor side agreement that was eventually signed only provided for the two signatory countries to enforce their own labor regulations, in accordance with provisions of the International Labor Organization (ILO). The agreement unfortunately focuses on the enforcement of existing statutes rather than speculating over raising labor standards in the future. Moreover, if one of the countries fails to respect the current standards, the only sanctions applicable are fines, never to exceed $15 million per year. Critics say that the labor side agreement is highly apathetic towards the malevolent conditions being faced on a daily basis by trade union workers who routinely face the possibility of being assassinated by right-wing interest groups motivated by greed. They argue that these side agreement measures in fact do nothing to protect the victims. “The FTA’s human rights penalty works on an economy of scale: the more the Colombian government and its paramilitary allies violate the rights of unionists, the cheaper it is for them,” says Canadian author Todd Gordon, in his article “Disaster in the Making: Canada Concludes Its Free Trade Agreement With Colombia.” Violations against labor rights in Colombia are endemic, and the Uribe administration, because of the minimal progress it has made to protect Colombian trade unionists, seems unable, or at least unwilling, to effectively tackle the situation. Issuing fines against the delinquent government is clearly an insufficient remedy for an issue that is too important to be considered in terms of dollars and cents. The fact is that fines fail to address the root causes of human rights violations and do not offer a compelling incentive for Bogotá to seriously address the problem.

Secret Negotiations
Many condemn Ottawa for the secrecy that surrounded the negotiations of the FTA. There were no public hearings held during the negotiations. Moreover, the agreement was only made public after it was signed by the two parties. The Canadian House of Commons’ Standing Committee on International Trade was asked to produce a report on the deal. In that document, “Human Rights, the Environment and Free Trade with Colombia,” the Committee came forth with eight major recommendations, in which critical components of the document called for Canada to “maintain close ties with Colombia without signing a free trade agreement until there is confirmation that the improvements noted are maintained, including continued improvement as regards displacement, labor law and accountability for crime, and until the Colombian government shows a more constructive attitude to human rights groups in the country.” Nevertheless, none of the Committee’s recommendations were considered. Instead, the agreement had been rushed and signed just days prior to the release of the report, which outlined key points for the resolution of an FTA between both countries. Canada gambled on a losing strategy: that free trade will inherently bring democracy to what some would consider a lawless society. Ottawa should only have looked to its neighbor in Washington to see the futility of this approach.

Who Benefits From the CCFTA?
Colombia is not a major trade partner of Canada, representing only a tiny percentage (0.13 percent) of overall Canadian trade. Given this fact, an FTA between Colombia and Canada almost seems unnecessary. However, it is worth remembering the potential created by the CCFTA for Canadian businesses when it comes to foreign direct investment (FDI) in Colombia. In recent years, Canadian direct investment in Colombia has more than doubled, reaching a figure of $739 million. Also, this trend is expected to grow because of the vast investment opportunities offered by Colombia, especially in the oil and gas exploration sector as well as in mining. In November 2008, after initialing the FTA with Canada, President Álvaro Uribe expressed his desire for the accord to help spur oil, gas and mining exploration across half of Colombia’s territory. The CCFTA will provide Canadian entrepreneurs in Colombia with substantial new investment rights and increased security for Canadian companies thinking about investing in the country. Unfortunately, human rights traditionally do not receive such protections.

There already are more than 20 Canadian companies operating in the oil and gas sector in Colombia. Yet, it is in these very industries that most of the abuses of labor rights are perpetrated, including 40 percent of the murders of union leaders and workers. What is even more disconcerting is that Canadian oil and mining companies are investing in some of the most conflict-ridden zones of the country. According to several human rights associations, there is a clear correlation between extracting natural resources and the presence of human rights abuses. In fact, the regions that are richest in minerals and oil are also often the most plagued by violence. According to a report of the Canadian House of Commons’ Standing Committee on International Trade, these regions are “the source of 87 percent of forced displacements, 82 percent of violations of human rights and international humanitarian law, and 83 percent of assassinations of trade union leaders in the country.” To some degree, investing in such areas ineluctably would make Canada complicit in Colombia’s endemic human rights problems.

Trying to Attract Investors

Some observers also contend that Colombia does not in fact benefit under the terms of the proposed FTA. Since the tariffs and trade barriers are already very low in Canada on Colombian products, the latter country will reap relatively small benefits from the trade agreement. However, for Colombia, the advantages lie mainly in the gains in FDI, in the hope that this will create much needed employment. But it is difficult to convince investors to place new capital investment in Colombia because of the high level of political risk confronting such projects. In Colombia’s perspective, the FTA with Canada could help change this perception and send a signal to investors from other countries, providing assurance that investing in Colombia is not hazardous and even could provide worthy business opportunities. However, in the current economic context, it is highly doubtful that such a plan would function appropriately. With investors seeing their net worth melting away, businesses are more likely to look for FDI opportunities in more politically stable and economically viable countries. Additionally, signing a deal with Canada would be a way for Colombia to put pressure on the U.S., which has not yet ratified the FTA with Colombia. The deal now has been put on ice by U.S. Congress, over concerns about the human rights situation in the country. But once the deal with Canada is implemented, Bogotá hopes that the United States will want to go ahead with its own bilateral trade agreement, in spite of the reluctance expressed in Washington, so not to be left behind and lose business opportunities in Colombia, in Canada’s favor.

Canadian Multilateralism Left Behind
Many critics point to the fact that Canada, which has always been a proud defender of multilateralism and the WTO, should not be engaging in increased bilateral trade agreements with Latin American countries. Multilateralism diminishes asymmetry between trade partners and levels the playing field, something that has always been a priority for Canada. Since NAFTA was implemented in 1994, only three bilateral FTAs have been enacted by Canada; with Costa Rica, Chile and Israel. However, since Stephen Harper’s Conservative Party was elected in 2006, Canada signed an FTA with Peru and Colombia and is negotiating no less than eight other bilateral trade pacts. If Canada is truly interested in Latin America, it might want to adhere to its “Americas Strategy,” which promotes building “strong, sustainable economies through increased trade and investment linkages, as well as mutual commitment to expanding opportunity to all citizens.” In order to achieve these goals, Canada should work multilaterally with other countries of the hemisphere. Multiplying bilateral trade agreements is just one way to promote Canada’s advantage, without effectively taking into account the benefits in store for Latin America, while at the same time undermining efforts to achieve efficient multilateral trade organizations embracing the entire hemisphere. In a region with some of the highest indicators of inequality, bilateral deals favor different treatment with various countries, a pathway contrary to the WTO’s goals. Some inevitably lose in this process and, more often than not, the poorer country in the bilateral agreement is disadvantaged.

Almost all parties would agree that Canada should actively engage with Colombia to help the country continue to improve its record on human rights and to help build the institutional capacity which, in turn, can be counted on to contribute to hemispheric peace and stability. But Canada has to make certain that a trade agreement is not warranted by the current situation in Colombia. Some standards must be set before the CCFTA is implemented because the existing code is a far cry from being up to the job.

This analysis was prepared by COHA Research Associate Mylene Bruneau

May 1st, 2009