Colombia has been going with economic openness since her independence. However, there have been moments when Colombia increased her tariffs in order to protect her internal market production. Nowadays, Colombia has signed many Free Trade Agreements; for instance, Canada, the United States, European Union and many other countries. Nonetheless, it appears that Colombia instead of reducing her tariff in the last 4 years, she is increasing them; this statement is validated through local data and World Trade Organisation's data. The problem of protectionism is that it makes the local production lazy and unproductive, moreover local consumers have to pay higher prices for goods that can be cheaper whether economic openness works really. Therefore, it can be a call for local authorities to improve their work on better programs for productive industry and to make a really economic openness where consumers enjoy high quality and cheap goods.
Author: Humberto Bernal,
Economist,
e-mail: zhumber@gmail.com
Twitter: Humberto_Bernal
Colombia is a country that depends on huge volume of imported products as many countries in the World, so she has been working on her economic openness since her independence at the beginning of XIX century. However, in some cases she has taken decisions against this objective; moreover, in the last years she has been signed many Free Trade Agreements; nevertheless, the average tariff instead of going down, it has gone up. This note shows the main periods when Colombia has increased her tariffs in order to protect her internal market, and the contradictory behaviour against Free Trade.
At the end of civil internal war called the Thousand of Days' War in 1902, Colombia decided to increase her tariffs in order to promote internal production; after this war, Colombia was in a deep economic crisis, and one can say that this decision was correct in oder to promote internal production. Years latter, Colombia had an economic crisis because of international commodity prices were down, so the the volume of foreign reserves went down also, and government decided to increase the tariff for imported goods to recover the volume of reserves. This increase is showed in figure 1; therefore, through 20’s and 30’s Colombia faced high tariffs; it can be explained by the economic crisis of 1929 also; this crisis brought scarcity of foreign currency (dollars) and Colombia had gotten a huge debt with the United States and the United Kingdom mainly; therefore, it sounded good to increase tariffs to sort out the Balance of Payments Crisis (B.P.C) on 1931. Same situation was by 50’s; Colombia faced again a B.P.C and increased her tariffs. However, the tariff tendency through these years was downward; it means that Colombia was opened to foreign products in general although there had moments when tariffs were higher. This policy was wrapped up with Colombia new economy model started in 1991; the new economic model was in favour of economic openness.
Figure 1. Average tariff in Colombia 1910-2012
(%*)
* It is calculated as the share of value of taxes for imported goods divided in total value of imported goods in percentage.
Source: Central Bank Colombia; Bureau of Statistics Colombia and own calculations.
However, the tariff in the last years, after signed many Free Trade Agreements, are showing an upward tendency. Again, figure 1 shows that the tax charged for imported goods as a share of total value of imported goos went from 5.8% in 2009 to 6.2% in 2012; it means more charges for imported goods. This data goes with World Trade Organisation’s information also; this organisation broadcast that the average tariff in Colombia increased form 8.4% in 2011 to 8.8% in 2012; of course years before this tariff was higher, but nowadays the tendency is changing.
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