Small and Medium Enterprises’ Benefits from the U.S.-Colombia Trade Promotion Agreement
America’s small businesses are the backbone of the U.S. economy. Over the last 15 years, approximately 65 percent of net new private sector jobs were created by small businesses. According to studies by the U.S. International Trade Commission (USITC), small businesses that export tend to grow even faster, add jobs faster, and pay higher wages than small businesses that do not. The U.S.-Colombia Trade Promotion Agreement provides important new export opportunities to U.S. small businesses, supporting growth and jobs at home. U.S. goods exports to Colombia in 2010 were $12.0 billion, and with the implementation of the Agreement these are poised to increase substantially.
Thousands of small businesses across the United States export goods to Colombia. In 2009, U.S. small and medium enterprises (SMEs) exported $3.1 billion in merchandise to Colombia. This represented 34.4 percent of U.S. merchandise exports to Colombia -- above the 32.8 percent SME share of U.S. exports to the world. Of the 13,177 U.S. firms that exported to Colombia in 2008, 11,562 or 87.7 percent, were small and medium businesses.
The Agreement will make it cheaper and easier for more U.S. small businesses to start or expand their exports into this important Latin American market. The Agreement addresses a number of trade barriers that, according to the USITC studies, disproportionately affect small business’ export performance:
Tariff reduction and elimination: Small businesses are more likely than large firms to identify high tariffs as a substantial impediment to exporting. With the Agreement, over 80 percent of U.S. exports of consumer and industrial products to Colombia will become duty free immediately. With average tariffs on U.S. industrial exports ranging from 7.4 to 14.6 percent, this will substantially increase U.S. exports and will provide important cost savings to small U.S. firms. For example, key U.S. small business exports that will gain immediate duty-free access to Colombia include information technology equipment, medical and scientific equipment, and wood.
Customs and trade facilitation: Non-transparent customs requirements and inconsistency in administering customs procedures and regulations can be a significant barrier to SME exports. Customs facilitation provisions in the Agreement include transparency obligations to publish laws and regulations on the internet, specific commitments to expedite the release of goods, special procedures for the release of express delivery shipments, and the ability of U.S. exporters to obtain binding advance rulings on tariff classification, origin of goods, and other customs matters. Such provisions can facilitate SME exports by minimizing costly delays at the border and reducing the time to deliver U.S. products to the Colombian market.
Services access: Without the resources to open foreign offices, small businesses can find their services export opportunities limited by foreign requirements that the business have a local presence. The Agreement not only provides substantial market access across Colombia’s services sectors—including sectors of importance to small businesses such as computer services, business and environmental consulting services, and legal, architectural, and other professional services—it also targets barriers such as local presence requirements that present particular challenges for small businesses.
Technical Barriers to Trade: Foreign government technical regulations and standards that are non-transparent or discriminatory can act as significant barriers to U.S. exports. These kinds of measures can pose a particular problem for small U.S. manufacturers, which often do not have the resources to address these problems on their own. The Agreement provides greater transparency and disciplines on non-tariff barriers to trade, including requirements to publish the full text of proposed standards-related measures, providing interested parties the opportunity to comment on proposed measures, and accrediting or otherwise recognizing U.S. testing and certification bodies.
Intellectual Property Protection: Small firms selling goods and services abroad are more likely to be burdened by insufficient intellectual property protection in foreign markets. The Agreement provides for improved standards for the protection and enforcement of a broad range of intellectual property rights. Such improvements include requirements for IPR protections that are critical to protecting copyrighted works, and requirements for strong, deterrent criminal penalties against copyright piracy and trademark violations. These IPR protections will improve the business environment for small firms seeking new customers in Colombia.
Transparency: Lack of information about foreign laws and regulations are frequently cited by small firms as a significant barrier to exporting. The Colombia FTA requires the prompt publication of laws, regulations, procedures and administrative rulings regarding any matter covered by the Agreement, and to the extent possible advance publication and the opportunity to comment on proposed measures. A more transparent regulatory environment can increase predictability and lower the costs of doing businesses for small companies.