Balance of the FTA between Colombia and the European Union: trade, labor and environmental aspects

August 10, 2023

The FTA with the European Union has consolidated this region as a relevant trade partner for Colombia. However, the results are not as expected. Analysis by: Miguel Ángel Rodríguez, research director in Cedetrabajo.

FTA, internaional trade, Colombia and the European Union, Más Colombia

The Free Trade Agreement (FTA) between Colombia and the European Union (EU) was the result of negotiations that began in January 2009 and culminated with the signing of the agreement in mid-2012.

As of August 1, 2013, the FTA with the European Union began to operate provisionally in Colombia, due to special procedures within the EU and the need for prior approval from each member state for certain aspects of the agreement.

You may read: The Eolo electric car, manufactured in Colombia, was finally taken out of the yards: how was it made?

Data published by the National Administrative Department of Statistics (DANE) show that the results are negative, since dependence and the reprimarization of the economy were reinforced. The Treaty gave new guarantees to multinationals and, together with the Bilateral Investment Treaties, constitutes an extension of the asymmetrical relationship that the country has had with the European powers for many years.

Despite the current government’s campaign promises, renegotiation is not on its agenda.

Balance of trade under the FTA with the European UnionImports

The balance of trade between Colombia and the EU shows that, after the United States and the countries of the Latin American Integration Association (ALADI), the countries of the European Union are the third largest destination for Colombian exports, representing 13% of the total.

This trade relationship is dominated by sales of Colombian minerals in exchange for European manufactured goods. In terms of value added, 57% of the dollars moved in this market come from sales of European manufactured goods, while Colombian sales represent the remaining 43%, divided into 20% of mining products, 16% of manufactured goods and 7% of agricultural products.

The FTA worsened the balance between what the country buys from and sells to the European Union. The trade balance went from a trade surplus of US$160 million in 2014 to a trade deficit of more than US$2.5 billion in 2022.

Trade balance between Colombia and the European Union, Más Colombia — Trade balance between Colombia and the European Union

Over the life of the FTA, the dollar value of trade (adding exports and imports) showed a U-shaped trend between 2014 and 2022. In 2014, trade volume reached about US$16.5 billion, but declined to US$10.9 billion between 2016 and 2020. However, a recovery was recorded in 2022, exceeding 2014 levels and reaching $18.6 billion.

As for the quantities of products exchanged, it is observed that they have decreased significantly. When comparing the figures for 2014 and 2022, Colombia and the European Union went from exchanging 44.4 million tons of products to 21.3 million, a drop of 50%.

The influence of mining on trade with the EU

Coal and oil concentrated 47% of Colombia’s sales revenue in the European market between 2014 and 2022. Although these exports were affected during the pandemic, the global economic reactivation in 2021 and 2022 contributed to an important recovery, especially due to the favorable behavior of international prices of these raw materials. As a result, Colombia sold close to US$4 billion of mining products to the European Union in 2022.

You may also read: You can still register your ID card to vote in the next elections: this is the deadline and what you should do if you have changed your residence or have not registered your ID card yet

However, when evaluating the quantities exported, the results for these two products are not positive. In fact, the reduction in the quantities of products traded during the FTA is mainly due to the decrease in purchases of Colombian coal and oil, which represent 76% and 6.8% of the tons of products traded between Colombia and the European Union, respectively. These purchases registered a decrease of close to 25 million tons during the period in which the FTA has been in force.

Trade in manufactured goods and agricultural products: Sustained growth, but permanent trade deficit

In contrast to mining products, trade in manufactured and agricultural products has grown steadily.

Trade in manufactured goods increased from 2.7 million tons in 2014 to 3.9 million tons in 2022, most of these manufactured goods being of European origin. In addition, trade in agricultural products grew from 1 million tons in 2014 to 1.7 million tons in 2022, mainly exported by Colombia.

Excluding mining products, Colombian exports of manufactured and agricultural products to the European Union grew by 78.7% in terms of value between 2014 and 2022, which was not enough to curb the trade deficit.

While Colombian manufactured exports to Europe went from US$1.7 billion to US$3 billion, between 2014 and 2022, imports went from US$8 billion to more than US$10.7 billion, in the same period. Thus, the FTA reinforced Colombia’s need for European manufactures, as the manufacturing trade deficit with the EU increased by US$1 billion during the FTA, going from US$6.32 billion to US$7.3 billion.

Within the manufacturing sector, some subsectors have shown a favorable performance, while others have faced difficulties. For example, 42% of manufacturing exports are explained by sales of products such as sugar, coffee products, fish meat and other processed chocolate and fruit products.

In addition, 11% of exports correspond to products from the manufacture of basic chemicals and substances, plastics in primary forms, cleaning and care products, and some fertilizers and agricultural products.

On the other hand, the rubber and plastic products industry leads in sales with an 8.3% share, followed by the leather industry with 7%, clothing with 5.35%, and copper and aluminum waste and scrap with 5.25%.

Labor and environmental balance of the FTA with the European Union

Title IX of the Trade Agreement between Colombia and the European Union contains environmental and labor provisions. Although commitments related to sustainable development, environmental protection and labor standards were signed, reports from the National Trade Union School and Cedetrabajo indicate that they have not been fully complied with.

According to these organizations, public participation in environmental matters has not been promoted, and the Popular Consultation has been distorted, generating social conflicts in Colombia.

The lack of consideration for the community is evident, as Colombia is the sixth country with the highest number of registered environmental conflicts, totaling 130 as of July 2021, according to the Environmental Justice Map. In addition, FTA economic projects have caused problems with local communities and damage to ecosystems, as in the cases of mining exploitation in Cesar and Guajira.

According to the NGO Global Witness, the murder of environmental leaders continues without improvement, and the technical and institutional capacity for environmental issues is deficient.

In labor issues, standards have not improved, and freedom of association, which is the right of workers to form unions and bargain collectively, continues to be a problem. The use of collective bargaining agreements with non-unionized workers and union contracts to cover up labor relations continues to be a detrimental practice.

According to the Colombian Platform for Human Rights, Democracy and Development, these problems are largely attributed to the institutional weakness of environmental control agencies and the Ministry of Labor itself, where the lack of inspectors and precarious conditions affect their performance.

Other considerations on the FTA with the European Union

The FTA with the European Union includes a call for respect for democratic principles and fundamental human rights, as well as a chapter on sustainable development (Chapter IX) with the purpose of ensuring that trade-related labor and environmental rights are respected.

Although the Agreement stipulates the creation of a Commission to hold meetings with civil society interested in the implementation of this chapter, following procedures established by each State. During the implementation of the Agreement, the Colombian government initially tried to control this Commission with organizations designated by it, which led to protests from independent organizations.

Civil society organizations were eventually allowed to organize the Commission autonomously, but were not convened for meetings and did not receive informational, logistical or financial support to carry out their work. As a result, this internal consultative group, which includes NGOs, trade unions and employers, has met only very sporadically over the past year.

The FTA with the European Union has not achieved the results announced by its promoters. This is true both in terms of economic and trade achievements, as well as in terms of environmental and labor guarantees and the promotion of national development. In this context, the voices insisting on the need to rethink the agreement in order to overcome the asymmetries that are an integral part of it gain relevance.