reported in The Economist, a free-trade agreement between the United States and Columbia has just come into

effect this month. By having this free-trade agreement in place, the government of Columbia believes that export of Columbia will increase by 10%, while the economy will grow by 1% and 300,000 jobs will be created. However, the agreement does not benefit everyone. Ricegrowers and poultry farmers are believed to be at a disadvantage as imported goods from the United States are much cheaper. It was mentioned that Columbias trade minister has offered help to industries that suffer, but no clear details were given in the article. If you were the trade minister of Columbia, what kind of help to the suffering industries will you consider? Evaluate the pros and cons of at least three different options and fully support your argument.Lastly, given that this weeks topic is relatively simple, you will need to display a strong command of logic as well as English fluency in order to get a top mark. Remember to cite your sources Signed on November 22, 2006, the U.S.- Colombia Free Trade Agreement finally goes into effect on May 15, 2012 after 6 years negotiation. According to the agreement, over 80 percent of U.S industrial and consumer exports to Colombia will become duty free and remaining tariffs will be phased out over the next 10 years. (Whitefield & Wyss,2012) The agreement greatly eliminates barriers to both countries exports, expanding the trade and economic cooperation between two countries. It seems that the agreement creates a win-win situation that both nations benefit greatly. The government of Colombia estimates that there will be a 10% increase in the national export and one percent point of economic growth upon the implementation of the deal. Moreover, the agreement will attract more foreign investors and bring approximate 300, 00 new job opportunities to Colombia labor market. Thanks to the agreement, the American exports value to Columbia could rise by $1.1 billion. (The Economist, 2012) In fact, the agreement does not favor every industry. It is expected that the export of natural resources, clothing and shoe will increase to United States while there will be a huge inflow of agricultural products, chemical products and machinery from the United States. The tariffs on these industries used to be 7.4 percent to 14.6 percent. (Whitefield & WYSS, 2012) The duty-free agreements will put Columbian farmers at a disadvantage side because the United States exports are much more competitive. The poultry industry association, Fenavi, expects that American chicken will become at half the price of the Colombian goods. (The Economist, 2012) Columbia was an agrarian country in history. Even though it urbanized rapidly in the twentieth century, there are still approximate 22.7% of the workforce working in agriculture industry. Affected by the implementation of the agreements, the agriculture of Columbia will certainly face a lot of problems. The production of the agriculture will decrease and the employees in agriculture will lose jobs in the coming future. Therefore, effective measures should be done by

the government of Columbia immediately in order to protect the agriculture. Firstly, the government should protect the trade by subsidizing the local industries with tax reduction and direct payment. Compared with the cost of agriculture production in America, the production cost is generally higher in Columbia due to less advanced technology. The government subsidy can help the farmer lower the price of locally produced product. As a result, the local products can compete with the foreign products. This kind of method is popular for the countries to protect their own infant industries in the age of globalization. Secondly, the Columbia government can increase the government spending on the disadvantage industries. It can ensure the local production and protect the sales of the locally produced goods. A good example of this is Buy American Act in the United Sates. Passed in 1993, the Buy American Act required the US government choose American products as the first priority in the purchase. It represents a strong sense of protectionism. One of its provisions required a $90 billion infrastructure investment project shall not use the steel materials from other countries but the United States. (Julia, 2009) By enforcing the law, the government can intentionally reduce the demand for the foreign goods and therefore maintain the business of local industries. The third way of protecting the local industry is imposing quota on imported products. In short term, the Columbia government can limit the amount of the U.S imported goods in specific industries which are less competitive than the American products. Therefore, the local products will not be affected largely by the limited supply from the U.S. At the same time, the local companies can take advantage of this protection period to improve their production ability and increase the competitiveness. Nonetheless, the three methods discussed above are merely suitable for a short period. Even though these seem to be effective and protect the local business, these are harmful to the economic growth of the country in a long term. Firstly, the government subsidy will bring a great financial burden to the country. In order to prepare enough money to help the fragile local industries, the government may increase the tax on other mature and prosperous industries such as clothing and shoes. As result, it hinders the growth of other industries. Moreover, without competition and pressure from the U.S companies, the less competitive industries will never innovate and put efforts on improvement. Also, it is against the law of free market and Columbia consumers will suffer from the product with lower quality and higher price. Eventually, the protectionism will slow down the growth of the national economy. Hence, in order to solve the problem fundamentally, the government should support the local industries in terms of the production technology and methods. Only when the overall productivity increases and the cost declines, will the goods become competitive.