Colombia has accumulated a trade deficit of USD $3.5 billion in the 13 years of the Free Trade Agreement with Canada

August 16, 2023

The Free Trade Agreement with Canada has been in force for 13 years. There are divided opinions about its benefits for Colombia.

Free Trade Agreement with Canada, exports, merchandise, international trade, Colombia, Canadá, Más Colombia

There are birthdays that go unnoticed. One such birthday is that of the Free Trade Agreement with Canada, which came into force in 2011, precisely in the month of August. Although it is not as well known as the FTAs with the United States and the European Union, at Más Colombia we remember it.

The Trade Promotion Agreement between Colombia and Canada, better known as the “Free Trade Agreement with Canada”, celebrates its 13th anniversary this August 15. In addition to trade, it covers issues such as investment or services and is complemented by labor rights and environmental issues. There are opposing opinions between those who make a positive balance and those who are more pessimistic about the benefits of the agreement.

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Exports and imports increase after the Free Trade Agreement with Canada

Although the Free Trade Agreement with Canada includes several economic and social aspects, the one that is most relevant, by its very nature, is trade. One of the promises of the agreement was the opening of a new market for Colombian products and cheaper goods for the population. It is true that exports improved and imports increased.

In the eleven years prior to the entry into force of the Free Trade Agreement with Canada, from 2000 to 2010, exports accumulated USD $2,858 million. In the years for which there are records since the agreement came into force, from 2011 to 2022, exports to Canada totaled USD$7,033 million, according to the Ministry of Commerce, Industry and Tourism (MinCIT).

In the years in which the agreement has been in force, from 2011 to 2022, imports total USD$10,580 million, according to MinCIT information. This means that Colombia has an accumulated trade deficit with Canada of USD$3.5 billion since the Agreement came into force.

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The average annual trade deficit between 2000 and 2010 was USD $191 million. In contrast, the average annual deficit from 2011 to 2022, with the Free Trade Agreement with Canada in place, rose to USD$291 million, as calculated from DANE data. The trade balance has only been positive in 2018 and 2022. This last year the surplus was USD$19 million.

Opinions on the trade part of the Free Trade Agreement with Canada are divided.

For Enrique Daza, director of the Center for Labor Studies (Cedetrabajo), the fact that Colombia’s trade balance with this North American country has remained in deficit is another example that these types of agreements do not lead to improve the conditions of developing countries.

According to the Cedetrabajo specialist, “these types of treaties are calculated to guarantee the sales of powerful countries. In the best of cases, they put rich and small nations on an equal footing. The result is more trade deficits for developing countries”.

The opposite view is held by the Government of Canada, which highlighted on its website that, thanks to the trade agreement between the two countries, Colombia was the third largest destination market for Canadian exports in 2022. The Free Trade Agreement with Canada has served to “dynamize and diversify” bilateral trade, according to the Canadian government.

The director of Cedetrabajo does not believe that it is true that the Agreement has been the great springboard for productive diversification in Colombia. “In the years in which the trade balance was positive, the exports that grew the most were oil and mining, goods whose demand does not depend on the existence of tariffs or trade agreements”, explained Daza.

According to DANE information, between 2011 and 2022, Colombia’s exports to Canada that weighed the most were mining-energy exports, representing 38% on average of the export basket. In 2022, these exports gained even more strength. That year, mining and energy exports totaled USD $625 million, while in 2021 they barely reached USD $280 million.

The Government of Canada has also highlighted exports of flowers from Colombia, a product that has had immediate access since the entry into force of the Free Trade Agreement with Canada.

Indeed, flowers were practically insignificant in Colombia’s export basket to Canada prior to 2011, while from 2011 to 2022 they have accounted for 13% of annual exports on average, as calculated from DANE information. However, this positive performance does not seem to offset the overall results of the Agreement for Colombia.