US-Colombia Free Trade Agreement goes into effect

Eastern time on Tuesday, a cargo plane loaded with more than 1.2 million Colombian flowers was due at Miami International Airport - the first shipment under the U.S.-Colombia Free Trade Agreement, which took effect at midnight.

Several hours later, U.S. officials were planning to unveil one of the first U.S. products to arrive in Colombia under the pact : a Harley-Davidson motorcycle.

Years in the making, the trade pact - it eliminates most tariffs on trade with Colombia immediately and phases out the rest over time - is expected to give stability to the commercial relationship between the two countries and unleash new opportunities for both.

Everyone from flower importers, shipping lines and consultants to lawyers, investors and exporters is expecting to gain.

The International Trade Commission estimates the deal will expand U.S. product exports by $1.1 billion and support thousands of new jobs in the United States. 

Colombia hopes the pact will increase trade and lure foreign companies and investors. President Juan Manuel Santos has said the agreement will create 300,000 new jobs over time.

South Florida is expected to be a big beneficiary. 

Colombia is the region's second-largest trading partner with $8.3 billion in total trade last year and that number is expected to increase with the pact. 

Enterprise Florida estimates the deal will create 6,400 jobs annually in Florida and increase Florida-origin exports by 13.8 percent.

Julio A. Gomez whose Doral company, Innovair, exports air-conditioning equipment has been doing business in Colombia for three decades.

Most of the products he exports are Chinese-made, but with an eye toward the trade pact, he has been adding more U.S.-made equipment to his mix and has become the Latin American distributor for a U.S. manufacturer.

"We've been getting a lot of calls from Colombia lately. 

I think the free trade agreement will have an immediate impact on our business," Gomez said.

Also expecting a boost is Frontier Liner Services, which owns two cargo ships that run from the Colombian ports of Cartagena and Barranquilla to Port Everglades and Jacksonville. 

Last year, the company carried about 12,000 TEUS, or the equivalent of 600 20-foot containers.

But Frontier is expecting traffic to increase about 20 percent to 25 percent once the trade deal has gained traction, said Gonzalo Rojas, the line's representative in Colombia.

"The real opportunities of the deal come when you can take advantage of traffic in both directions," Rojas said. "

I think we will see lots of raw materials coming in and finished goods heading out."

He expects Colombian clothing and shoe makers will increase production as the country sees an inflow of agricultural goods, chemical products and machinery from the United States.

The trade pact eliminates duties on more than 80 percent of U.S. industrial and consumer product exports with the remaining tariffs phased out over the next 10 years. 

Since these tariffs ranged from 7.4 percent to 14.6 percent, their elimination will immediately make U.S. exports more competitive.

More than half of current U.S. farm products such as soybeans, beef, bacon, cotton and nearly all fruits and vegetables can now enter Colombia duty-free and tariffs on the rest will be dropped within 15 years.

Some Colombian producers, however, are worried U.S.-subsidized agricultural products could swamp local markets.

Colombian Agriculture Minister Juan Camilo Restrepo has said that corn, rice, bean and soy farmers, among others, could be hit by the deal. 

But he said the government is boosting its financial support to those sectors.

Colombia farmers, he said, have no choice but to modernize and compete. 

"We can't cry over spilt milk," he said. 

Neither he nor the government think the pact "represents an apocalyptic cloud hanging over Colombian farming and ranching that's going to wipe out everything the country has built," Restepo said.

Another contentious issue is violence directed at Colombian union workers. 

That issue stalled passage of the trade pact in the United States for years. 

Although negotiations on the deal began in May 2.004, it wasn't until last October that it won congressional passage and President Barack Obama signed it into law.

To overcome objections by U.S. labor organizations, the United States and Colombia agreed on a 37-point action plan to better protect labor unionists. 

But Miguel Morantes, president of the Colombian Workers Confederation, which has more than 250,000 members, contends portions of the action plan haven't been followed and much more needs to be done.

But there are also clear winners in the trade pact, chief among them U.S. exporters. 

That's because most Colombian products already enter the U.S. duty-free under an Andean trade preferences agreement, which needs to be periodically renewed.

It lapsed last year just before Valentine's Day and wasn't renewed until October. 

In the meantime, Miami flower importers had to pay tariffs on flowers imported from Colombia and Ecuador, resulting in an extra $2.5 million a month in duties. 

Coming as it did just before the most important flower holiday, it created cash flow problems for some importers. 

Those duties were to be refunded.

"Now the trade pact makes duty-free status permanent," said Christine Boldt, executive vice president of the Association of Floral Importers of Florida. "

It allows for better long-term planning now that we don't have to worry year-to-year about lapses."

The International Trade Center at the Miami Free Zone has been concentrating most of its recent efforts on getting ready for the trade pact, said David Jones, director of business development. 

ITC, which provides business incubator services, will be hosting a trade mission from Colombia this fall.

ITC also is providing office space and business services to several Colombia companies new to the U.S. market. 

"The free trade agreement was the final push for those companies already well-established at home to try the U.S. market," Jones said.

This week, ITC will begin a series of meetings in 16 Colombian cities doing business in the United States.

"Free trade agreements tend to help companies on both sides become more international," said Mario Suarez, president of Americas Export Corp., a business development consulting firm.