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U.S. exporters vexed as Congress fights over trade

A cargo ship sits at the dock at a port of Miami
A cargo ship sits at the dock at a port of Miami

By Doug Palmer and Rod Nickel

WASHINGTON/WINNIPEG, Manitoba (Reuters) - Jason Speer is eagerly eyeing Colombia's booming oil sector for his Illinois-based company's float valves, but fears his Canadian competitors will get there first.

In the race for new exports to fast-growing, energy-rich Latin America, U.S. manufacturers and farmers say the United States has squandered a lead over Canada by delaying a free trade pact with Colombia and now risks falling behind.

The United States also is struggling to finalize long-delayed pacts with South Korea and Panama, raising questions whether Washington can meet its target of doubling U.S. exports in five years and providing much-needed new jobs.

The South Korea deal is the biggest of three, promising $10 billion to $11 billion in new exports for U.S. farmers and manufacturers as well as significant new business opportunities for U.S. banks and other services companies.

Speer, a vice president at Quality Float Works Inc which makes products for oil industry, plumbing and agricultural applications, said that like its Canadian rivals, Quality Float Works faces an 8 percent tariff on sales to Colombia.

But Canada has already approved a free trade pact with Colombia that would eliminate the duty. So, if Congress doesn't pass the U.S. free trade deal to catch up, "we're at an 8 percent disadvantage automatically," Speer said.

"Once we lose ground, you lose an opportunity, it's basically gone, it's hard to recoup," he said.

The United States and Colombia signed their free trade agreement in 2006 after nearly two years of talks.

But Democrats in Congress then blocked ratification of the agreement because of concerns over a long history of anti-union violence in the Andean country and staunch U.S. ally.

That allowed Canada to step into the gap.

It began talks with Colombia on a free trade agreement in June 2007 and signed a deal in November 2008. The Canadian parliament approved the pact last year and it is expected to go into force in the coming months.

The U.S. Congress still has not voted on the 2006 deal, which would eliminate Colombia's tariffs on most U.S. farm and manufactured goods. That could change soon as the Obama administration and legislators try again to clear hurdles in the way of the three trade pacts.

The Washington-based Latin American Trade Coalition estimates that U.S. exporters have paid nearly $3.6 billion in tariffs to Colombia since the deal was signed.

President Barack Obama, who has had bumpy relations with the U.S. business community, found common ground last year by setting a goal of doubling U.S. exports to $3.14 trillion by the end of 2014 to create or sustain about 2 million U.S. jobs.

EXPORT SURGE

After a big drop during the global financial crisis in 2009, exports surged back in 2010. Helped by a weak dollar and strong demand from developing economies, they are growing at a roughly 15 percent pace this year, hitting record highs in recent months.

Many business leaders worry that the rebound could fizzle without new trade deals to tear down barriers to America's exports.

The Obama administration says it is determined to pass the free trade agreement with Colombia and two other pacts with South Korea and Panama this year.

To that end, it has negotiated side agreements to resolve various concerns that have blocked action on the deals.

Colombia agreed to take a number of steps to address U.S. concerns about the killing of union leaders and its failure to track down and punish those responsible.

The next set of reform actions are due by June 15. On the same day, the U.S. Chamber of Commerce is due to unveil what it promises to be an all-out effort to win approval of all three trade deals.

Business groups also hope a fight between the White House and Republicans over a worker retraining program will soon be resolved, clearing the final hurdle to congressional votes.

WHEAT PRODUCERS

Concerns about ceding the Colombia market to Canada were emphasized when Gordon Stoner, a Montana rancher, testified before the U.S. Senate Finance Committee last month.

"Our share of the Colombia wheat market has declined from 73 percent in 2008 to 43 percent in 2010 and industry representatives in Colombia indicate we could lose our entire market share following implementation of the Canada-Colombia FTA this summer," Stoner said.

"It is estimated that U.S. wheat producers will lose $100 million in sales to Colombia every year without a free trade agreement," he said.

Colombia's young population and growing economy make it an attractive market for Canadian grain exports, said Janelle Whitley, a trade policy analyst for the Canadian Wheat Board, the country's monopoly exporter.

Last year, Canada sold 400,000 metric tons of wheat and barley to Colombia and hopes for even more sales this year.

One reason is Colombia has temporarily suspended a 15-percent tariff on wheat exports because of high prices.

"If in the next six months Colombia were to kick in a tariff, then we would have a competitive advantage over the U.S." because of the Canadian free trade pact, Whitley said.

"It could provide that incentive to move sales over to our side," Whitley said.

(Additional reporting by Anthony Boadle in Bogota; Editing by Will Dunham)

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