A few months ago, during a summit of the European Union with various Latin American countries, the Colombian government signed a long-anticipated Free Trade Agreement, or TLC in Spanish, with the European Union. This was welcomed in many sectors of Colombia for the new markets it would open for Colombian products. However, in my region of Boyaca, this TLC was met with concern and protest. You see, Boyaca is one of the few areas of Colombia that has a high-value agriculture based on small family farms, without many large plantations. Most of the department is in the highlands, around 8000 or 9000 feet altitude, so the major agricultural products are potato, vegetables, and dairy, none of which lend themselves to mega-plantations. Furthermore, our history as the seat of the Muisca culture means that from before the time of the Spanish Boyaca was densely populated by small peasant farmers.
Anyway, the Trade Agreement with the European Union will be good for certain sectors of the Colombian farm economy, like cocoa, coffee, rubber, bananas, palm oil, and sugar, but bad for others like dairy. Even supporters of the agreement acknowledge this, but argue that the gains to certain sectors will outweigh the losses to dairy. The problem is that the farms that will gain are largely plantations in the hands of oligarchs, with lots of hired labor. Cocoa, palm oil, sugar, these are plantation crops, so better export prospects for them will strengthen the unjust division of Colombian in big landlords and peons. Dairy, in Boyaca and in other parts of Colombia, tends to be practiced by small, independent farmers, precisely the kind that any prosperous, relatively egalitarian society depends on. The flood of subsidized (and thus artificially cheap) European milk derivatives like whey, powdered milk, cheese, etc. will drive milk prices way down in Colombia, hence putting a lot of small dairy farmers out of business. And because Colombia does not meet certain sanitary certifications required by the European market, Colombian producers will not be able to export their products to the EU.
In the negotiations leading up to the TLC, the European Union promised to pay 283 million euros over ten years to the Colombian dairy sector, which the Colombian government will match with 30 million euros, to offset the losses resulting from the trade agreement. The money would go to projects that could ostensibly improve Colombian dairy competitiveness, such as genetic improvement of dairy herds. This is an unprecedented sum in such a trade agreement, but nevertheless it adds up to 70 euros per Colombian dairy family per year. Hardly enough to offset the loss of one's livelihood. A dairy federation in the north of Colombia put the loss to Colombian dairy farmers at about $1 billion US per year! And apparently the EU subsidizes its dairy farmers to the tune of 180 million euros a year.
As I understand it, the drop in tariffs will not occur immediately, but rather it will be phased in over the course of 15 years or so. Another part of the Colombian response to the flood of European milk products is that the government plans to increase dairy consumption in Colombia by 40%. This is not only unrealistic, but I have to wonder what the health effects would be of increasing dairy consumption in a population that already has a sufficient, well-balanced diet. Supersize Me, anyone?
This sign says: "The signing of the Free Trade Agreement with the European Union will bring ruin to more than 400000 dairy farming families. No to the TLC, yes to Colombian milk!" Indeed, by some estimates 80000 families in Boyaca make a significant part of their living from the dairy chain, and the department produces over a tenth of Colombia's milk.
So a few months ago, when I was in Tunja, our department's capital, I saw a big anti-TLC rally in the town's center. It was organized by the Boyaca branch of the federation of milk producers. There were also rallies that day and thereafter in other major towns of Boyaca. In Chiquinquirá, dairy farmers dumped 15000 liters of milk into the main plaza in protest of the TLC.
There were lots of reporters in Tunja for the rally.
Here is a poster from the rally, designed to look like the funeral announcements that get posted in the town plazas of Boyaca.
It reads: "The national government and the minister of development invite all to the burial of the Boyaca dairy sector."
In my teenage years, I bought into the watered-down, pop version of classical economics that seems to be almost a religion in the US. I guess that, surrounded by professionals working in teaching, textbook editing, computer programming, and other things not very directly related to basic subsistence, I could buy into the idea that different jobs, different economic activities were interchangeable. If it was more profitable to ship certain jobs or activities overseas, then so be it. I didn't realize that the accounting of comparative and absolute advantage is only one part of value. Economic activity, like any activity, isn't just about the bottom line, but it also touches on jobs, community cohesion, sovereignty, security. So the destruction of a given economic activity in an area, even though it may make economic sense for a country, always brings negative effects as well. Sometimes these negative effects outweigh the economic benefits. In the Colombian case, I would much rather see dairy farmers remain in business and plantation oligarchs lose clients, because the former create social fabric in our communities, and the latter fund perverse laws and illegal private armies.
Even after getting over my dimestore understanding of the Wealth of Nations, I always used to think it was silly when people protested against the increase in the cost of living or the effects of free trade. Wasn't the government one thing, and the economy another? What could the government possibly do to affect trade and the cost of living? Well in this case of the Colombian Free Trade Agreement, we see clearly that the government does indeed have to capacity to affect livelihoods and the economy, depending on the laws it makes and the market rules it allows to operate.
Anyway, the rally had this guy at the head, with a typical horse-drawn milk cart.
The problem was that that day there was also a celebration of schoolkids in the town's main square. I think they were commemorating the anniversary of some great leader.
So the protest's milk cart and the truck with a loudspeaker had to detour around the main plaza.
But the protesters were allowed to march through the plaza.
Eventually the marchers reunited with the vehicles on the other side of the plaza, and they kept marching (note the lovely semi-rural hills to the west of Tunja).
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