“Forget about the Colombian FTA!”
Semana | February 18, 2009
“Forget about the Colombian FTA!”
Steven Pearlstein, business columnist from the Washington Post and winner of a Pulitzer Prize for having predicted the economic crisis, says that given the global economic situation Colombia needs to change its agenda regarding the United States.
Steven Pearlstein has become one of the most sought after economic analysts in the United States. As a business columnist for the Washington Post, he predicted Wall Street’s collapse and the worst financial disaster since 1929. That’s why he was awarded the Pulitzer Prize for commentary last year. Pearlstein spoke with SEMANA correspondent Juan Carlos Iragorri about the global economic situation and the FTA (Free Trade Agreement).
SEMANA: What do you think of the economic stimulus plan of almost 800 billion dollars and of the plan to save the banks?
Steven Pearlstein: It’s expensive, but there is no remedy. Our economy is big and the hole out of which we have to dig is also big. The idea behind the stimulus is to provide a security cushion to people affected by the crisis. I’m referring to a health system and unemployment insurance. The problem that we have is that this country was spending 106 percent of what it was producing and now it has to spend 96 percent. That’s a big change. The idea is that homes and companies will be able to live within their possibilities and that it is the government that spends and loans. The plan for banks is also necessary. But there is a political problem: people want to punish the banks. In order to save them you have to work with them. One can punish the banks or work with them. Both things can’t be done at the same time.
SEMANA: How long will this crisis last?
S.P.: The financial crisis will end for sure before the end of the year. I don’t believe that it could get worse. The economic crisis could last two years. What is serious isn’t the economy of this country but rather the economies in the rest of the world. It is worse than what we thought.
SEMANA: You predicted the crisis. How did you do it?
S.P.: There were ridiculous things like the prices of the companies and housing, as well as the conditions to give out money in loans. I didn’t commit the error of thinking that the bubble was just in the housing market. The automobile market was a good example. They were making seven year loans to buy a car, and cars don’t last seven years! They sold 17 million automobiles in one year. With such easy terms, parents were buying cars for their kids. This economy couldn’t handle that.
SEMANA: Do you think it’s possible that the U.S. Congress will approve the FTA with Colombia?
S.P.: Here and in Colombia people ought to forget about the FTA. The treaty has been given a more symbolic importance than it really has. The majority of the goods produced in Colombia enter the United States without paying tariffs. Supporters of free trade say that if the treaty isn’t approved, it’ll be the end of the world. That’s not true. The challenge is that here we haven’t been able to have free trade which benefits workers who are losing their jobs and lack health insurance. As long as we don’t do it, the Americans will not want to talk about free trade because they associate that with unemployment. In addition, Colombia is not as important for us. Almost no country is, and that is why we are going to say no. And it’s not that we are against Colombia. It’s the current economic situation. There you shouldn’t pull your hair out or feel offended.
SEMANA: President Álvaro Uribe has insisted so much in the passage of the FTA. What should he do?
S.P.: He should understand that it isn’t a good moment for that, and it would be better to increase free trade among the two countries under the current system of tariff preferences. Look: for Colombia, the advantage of having an FTA is that the U.S. multinationals would be able to establish themselves there and export. But today that isn’t going to happen. Even with a treaty in place, Colombia is not going to lose anything in the next two or three years. They should be more realistic, less emotional. It would be useful for President Obama to meet with President Uribe to talk about things other than trade, and postpone the issue until the United States gets back on track. Obama should ask for time to get his house in order. Here we are ready to swallow that bitter pill.
