Why Free Trade Agreements are important?

Free Trade Agreements are contracts between countries or groups that regulate trade relations, mainly regarding tariffs, taxes and duties on imports and exports. In recent decades there has been a significant increase in the number of trade agreements signed by Colombia. The best-known treaty signed is the Free Trade Agreement ("FTA") with the United States, which came into force in 2012. 

In principle, the purpose of trade agreements is to benefit the countries that sign them, increase their economic growth, eliminate tariff barriers, diversify the market, and leave behind the figure of the protectionist state, which has its drawbacks. Protectionism generates goods and services with high prices for consumers, little variety of products, high tariffs for imports and in most cases, only protects national companies in the short term. 

To achieve the economic development countries seek, treaties contain regulations related to investment, financial services, intellectual property, telecommunications, and labour issues.

Currently, 70% of Colombia's exports go to countries with which it has a treaty in force, which means that treaties promote this type of operation by reducing tariff and non-tariff barriers. For example, according to figures from the Colombian American Chamber of Commerce ("AmCham"), the FTA with the United States has allowed "an increase of 16% in the number of exporting companies, 294 new products exported to the United States and 10,500 tariff items to enter that country with zero tariffs, compared to 5,520 that had access under the Andean Trade Preference and Drug Eradication Act (ATPDEA)". In addition, under this FTA, with the total and permanent relief of Colombian goods exported to the United States, Colombian exporters stopped paying more than USD 9,000,000 - a figure corresponding to 2010 - in tariffs.

Another example is Colombia's treaty with the European Union (27 countries), which allows 99% of exports from Colombia to have preferential access to the Community and enter duty-free. 

As for the services sector, the treaties signed by Colombia have allowed access to more than 42 countries, such as Chile, United States, Canada, Ecuador, Peru, Bolivia, Mexico, Honduras, Guatemala, El Salvador, Norway, Iceland, Switzerland, Liechtenstein, and the member countries of the European Union.

Now, concerning the disadvantages of free trade agreements, it can be said that one of the main disadvantages is the impact on specific sectors of the national industry, together with the lower collection of taxes due to the reduction or elimination of these taxes, unemployment, and the effects on the environment.

To conclude, with Colombia's treaties, Colombia has become a more competitive country at a global level. Its productive sector matures and has a better outlook to attract foreign direct investment. Although there are many benefits that FTAs can bring to Colombians, many times, importers, and exporters do not realize these advantages and therefore do not take advantage of them. Although protectionism is not the solution for a country like Colombia, including specific regulations within the treaties that protect the country from the disadvantages that have been evidenced in the agreements can be.