As Costa Rica and Colombia began the second round of negotiations to establish a free trade agreement Monday, five chambers representing different industries in Costa Rica urged the government to abandon these efforts.
The presidents of the chambers, representing manufacturing industries, said that both countries are competitors that produce similar products. However, Colombian manufacturers can make those products cheaper than Costa Rica, they said.
Led by Juan Ramón Rivera, president of the Cámara de Industrias de Costa Rica, the presidents condemned a laissez-faire type of agreement, which would leave local manufacturers without a home-field advantage.
They say that the two countries should not have an agreement at all, but Costa Rica must at least place a tariff on manufactured goods imported from Colombia.
“We believe that they have many competitive advantages with respect to our sector and there is a large group of industries and sectors that are against the treaty,” explained Rivera. “They are asking that their products be excluded from the treaty.”
In recent years, administrators of the Ministerio de Comercio Exterior have been attempting to broaden Costa Rica’s global trade partners by establishing free trade agreements with new partners around the world.
During the Óscar Arias Sánchez and Laura Chinchilla administrations, Costa Rica has agreed to or began negotiating free trade agreements for the first time with China, Singapore, the European Union, the European Association, Peru and Colombia.
In a statement regarding the ministry’s international trade deals, spokespersons of the ministry said that these agreements are tools to diversify and grow the economy. They said that the treaties have accomplished this goal. According to the statement, 400,000 Costa Ricans are working in 2,100 local companies that export their products as of 2010.
According to the ministry, the agreement with Colombia will allow Costa Rica to become a full member in the Pacific Alliance, a Latin American free trade bloc. Right now, Mexico, Colombia, Peru and Chile are full members while Costa Rica and Panamá are partial members.
Although manufacturing industries have benefited from many of these treaties, their operators have worried about others.
Monday morning, the presidents of five chambers gathered to oppose the treaty. They were from the Cámara de Industrias de Costa Rica, the Cámara Costarricense de la Industria Alimentaria, the Asociación Costarricense de la Industria
Plástica, the Asociación de Fabricantes Metalmecánicos y Metalúrgicos de Costa Rica and the Asociación de la Industria Gráfica Costarricense.
José Manuel Hernando, president of the food industry chamber, explained that the free trade treaties are helpful when one country needs the products of the other. He cited the Central American Free Trade Agreement with the United States as an example of a mutually beneficial agreement.
Colombia, however, makes similar products as many of Costa Rica’s manufacturers, and, therefore, the businesses do not complement one another’s industries.
“The United States is a client,” said Hernando. “Colombia is a country that is a competitor. Their supply is very similar to ours.”
The business leaders are concerned that Colombian manufacturers have lower overhead costs than their Costa Rican counterparts. They said that Colombia has access to cheaper energy, raw materials and labor as well as easier access to Costa Rican ports and greater production capabilities.
These benefits make products from Colombia cheaper than the same product from Costa Rica. If the government removes the tariffs on Colombian products, Costa Rican manufacturers will lose their local competitive advantage, they said.
On the other hand, importing Colombian manufactured goods without imposing tariffs on them would give a better deal to Costa Rican consumers.
Rivera said that manufacturers were similarly concerned when Costa Rica negotiated a free trade agreement with China. However, he said that the government eventually kept tariffs in place on Chinese manufactured goods to protect the local industries.
Hernando said that the government should look to the agreements it already has made before making new ones.
“What we want is to deepen the existing treaties,” he said.
The ministry has held two rounds of forums with a variety of sectors effected by the treaty. In these forums, ministry officials consult business people from different industries to hear their views. This is standard procedure for each treaty. The next one will be in October.
The second round of negotiations between Costa Rica, which began Monday, will deal primarily with procedural and regulatory mechanisms of the agreement between the two countries. It will also deal with telecommunications and electronic trade. This round will last until Thursday.
The ministry will host a panel on Wednesday to talk about the commercial opportunities open to Costa Rican businesses in Colombia.