Oxfam Cries Wolf on US-Colombia Trade Deal

By: Javier Garay - @Crittiko - May 11, 2015, 4:59 pm
Oxfam's report on US-Colombia free trade leaves out "winning" sectors such as flower farmers.
Oxfam’s report on US-Colombia free trade leaves out winning sectors such as flower farmers. (Diario ADN)

EspañolWhy does the statist vision always triumph in economics, particularly when discussing international trade? Recently, Oxfam International presented its report on the impact of Colombia’s free-trade agreement (FTA) with the United States, two years after its implementation. Their conclusions are nothing short of apocalyptic.

This is hardly surprising, given Oxfam’s well-known anti-capitalist views. The report’s authors, Aurelio Suárez and Fernando Barberi, appear eager to jump onto anything that even remotely smells of economic liberalism.

And in this case, it is indeed only the faintest of odors, since this free-trade treaty is more treaty (i.e. bureaucratic state concessions and petitions) than actual free trade. Otherwise, there would be no need to negotiate; individuals could acquire goods and services from any country without the government’s permission.

But I digress. In any case, an FTA appears to open up the economy, and that alone is enough to enrage the activists.

Even still, it would not be fair the leave our analysis at that. To conclude a report is biased simply based on the beliefs of its authors and institution would be to fall into a logical fallacy. One should always engage the substance of an argument: check for internal consistency, contrast it with reality, determine its utility, and so on.

Unfortunately, very little can be said about this report for the time being. It has yet to be published online, and all we know about it so far is what has been reported through media outlets that were eager to post lengthy articles on Oxfam’s doom and gloom findings.

Based on what is known, the report betrays two recurring pitfalls among free-trade critics. The first is the fallacy of composition: the authors speak of imbalances and trade deficits, a blow to agricultural sectors, and the ups and downs of exports and imports. But their analysis doesn’t go much further than that. For instance, they claim the agricultural trade deficit has grown over 300 percent, but they arbitrarily decided to exclude flowers, coffee, and bananas, the three most exported Colombian products to the United States.

In line with the supposedly looming apocalypse, they decry that some sectors are “under threat.” They’re not saying they’ve disappeared, but just worried that they are under duress. However, they fail to consider whether Colombian farmers should always grow every single product, even if they cannot sell it to domestic consumers.

Likewise, they demonstrate how commercial trade between the two countries has increased. In other words, for the authors of this report, the fact that the FTA is fulfilling its stated objectives is somehow a shortcoming. They fail to consider the fact that Colombia’s ability to sustain a trade deficit demonstrates that incomes have improved, and the Colombian people can now benefit from goods and services that they couldn’t before.

They fret so much over the FTA’s results that they’re quick to jump to the conclusion it has been a net loss, despite the fact that some Colombian producers are now exporting more to the United States. Their obsession with aggregates demands that the only acceptable position be that Colombia export everything and buy nothing from the rest of the world.

The second problem is that in order to reach their catastrophic conclusions, the authors took the easy route and based them on the perspectives of campesinos. How were the interviewees selected? Are they a representative sample of the what is happening to all Colombian farmers? Is anecdotal evidence justified, or does it constitute a logical fallacy?

The real problem lies in the opening question of this article. As Carl Menger and Ludwig von Mises pointed out, the public tends to gravitate toward statism on issues dealing with the economy and trade because commerce in itself doesn’t generate satisfaction; it’s a necessity. Commerce is bothersome for most people. They would rather produce everything they need to live themselves, and not go through the effort necessary for trade.

Of course, this is not possible. Human beings, for multiple reasons, need others to live and survive, hence the importance of society and mutual cooperation. Commerce is therefore a series of related activities that generate the largest levels of cooperation.

However, this is not how the majority of the public views trade. Reinforcing their prejudices, they interview each other to validate their preconceived statist views.

Translated by Daniel Duarte. Edited by Guillermo Jimenez.

Javier Garay Javier Garay

Javier Garay is a professor at the Externado University of Colombia. He has written two books on international issues, such as development, after his doctoral dissertation focused on the same topic. Follow him on Twitter @crittiko and through his personal blog, Crittiko.