In 2010 Canadian exports from Colombia totalled $643.8 million, while Canadian imports from Colombia totalled $717.4 million
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Canada – Colombia Free Trade Agreement

The free trade agreement, which passed in June 2010 between Canada and Colombia, will come into effect this summer on August 15, 2011.  So what does this mean for Canadian businesses?

Canada and Colombia’s History

Colombia is a dynamic and emerging market with 44 million people and an economy with high growth potential.  With trade between Canada and Colombia totalling more than $1.4 million in 2010; the agreement is expected to develop the relationship between the two countries further and improve market access for Canadian businesses.

Although the agreement has been met with an outcry from human rights groups who are concerned about Colombia’s history of poor labour standards, it is hoped that Canada’s increased involvement with the country will ensure that progress is made in the area of workers’ rights and environmental protection.

The Definition of Free Trade

The term “free trade” refers to the tariffs applied to products as they are imported.  These tariffs are often considered a barrier to international trade, for big and small businesses alike.  Through the agreement businesses will benefit from the removal of these tariffs as well as the protection from any tax increases, laws or expropriate properties by the Colombian government.

What does this mean for Canadian Businesses?

The free trade agreement will provide greater market access for Canadian exporters of products such as wheat, pulses, barley, paper products, and heavy equipment.  In addition, the agreement will provide greater stability and protection for Canadian businesses involved in oil and gas, mining, manufacturing, and financial services.

Prior to the agreement, Canadian exporters applied tariffs on agricultural products averaged at 16.6% with industrial goods averaging at 11.8%. The abolition of these tariffs will help enhance the competitive position of Canadian exporters in the Colombian markets, and create opportunities for Canadian exporters.

Canadian businesses importing products such as coffee, bananas, coal, oil, sugar and flowers from Colombia will also benefit from the removal of the applied tariffs from Canada.  This will help lower the costs of logistics and operations and is expected to increase the number of imports from Colombia.

Other benefits include the promotion of regulatory practices, including transparency and the use of international standards or their relevant parts, and the streamlining of conformity-assessment procedures; areas which have been lacking prior to the agreement. The benefits of this transparency include facilitated border access, for temporary entry, for a broad range of service providers, technicians, contractors and independent professionals.

Canadian companies have also demonstrated an increasing interest in investing in Colombia. Colombia is an important destination for Canadian Direct Investment Abroad (CDIA). Canadian investors are set to benefit from the agreement, through having a more secure environment in which to invest.  Investment stock in Colombia is projected to grow rapidly over the next two years, largely driven by interest in Colombia’s oil and gas and mining sectors.

The Numbers

In 2010 Canadian exports from Colombia totalled $643.8 million, while Canadian imports from Colombia totalled $717.4 million.  Once implemented, the agreement is hoped to stimulate the growth of Canada’s commercial relationship with Colombia, and help level the playing field for Canadian businesses against their competitors.

Based on current trading patterns, it is estimated that the annual savings on duties will be approximately $9.1 million for Canadian importers once the agreement is fully implemented.

Summary of Benefits to Canadian Businesses

In summary the overall benefits of the agreement for Canadian businesses are:

  • New market opportunities for Canadians in Colombia
  • New opportunities for partnerships in order to diversify your business whether with new products, new markets or new methods of production
  • New customers and target market
  • New investors from Colombia who are keen to invest in Canadian companies or from Canadians who are keen to invest in Colombia through your business
  • New links in supply and production chains – potentially lowering production costs
  • New choices for consumers through the import of Colombian goods or services

About Sandra Light

With a passion for languages, cultures and trade, Sandra Light is a natural fit in an international business environment. She graduated with a Bachelors of Arts in International Business from England and a Masters in International Commerce from France.