Good work on free trade

By John Quiner


President Obama and U.S. trade representatives settled outstanding issues regarding the Korean Free Trade Agreement (KORUS FTA) with South Korea. The trade deal is expected to increase annual exports of American goods by up to $11 billion and support at least 70,000 American jobs.

KORUS FTA was proposed during the Bush administration in 2007, and is now ready to be sent to Congress. Advocates of the agreement seek lowered Korean import tariffs, which they say will help reduce the U.S. trade deficit, and create jobs for America. Various roadblocks have staggered the agreement’s progress.

Free trade agreements like the North American Free Trade Agreement generally stipulate lower tariffs on imports to the respective countries involved. The main goal of the agreement is to lower tariffs, which would in turn help reduce the United States’ trade deficit.

The idea is that because Korea has a growing $1 trillion economy, ratification of the KORUS FTA would stimulate economic growth in a wide range of industries including the pork and auto industry. According the to The Foreign Agriculture Service website, the U.S. provides about 30 percent of Korean agricultural imports, which would increase significantly if Congress ratifies it.

Advocates of the KORUS FTA say that it would be a good implementation for the U.S. because it would reinforce South Korea’s position as a strategic ally for the U.S. in the Pacific Northeast.

The biggest trade barrier that stands right now is the existence of tariffs on U.S. imports, as is the case with most U.S. trade countries that don’t have a trade agreement. According to the Iowa Pork Producers website, Korea is currently the sixth largest pork export market in the world, and Japan has the largest pork market. The Iowa Pork producers also say that South Korea could jump to the number one slot for pork exports if the agreement gets ratified.

According to Foreign Agriculture Service website, failure to ratify the agreement would mean a significant loss of market share to U.S. competitors who have implemented FTAs with Korea. The list includes the European Union, Chile and India. Korea is also negotiating new agreements with New Zealand, Canada, China and Australia.

Up until this point, the public question had been: What is the big holdup? David Spooner, the former Assistant Secretary of Commerce of the Import Administration, helped negotiate the trade during the Bush administration. He said that there were three sectors that were against the agreement, and holding it up.  The textile industry was opposed to the agreement for fear of competition from China. According to Spooner, the main concern was that Chinese textile producers would try to export products to Korea and pass them off as American.

The second sector that was holding out against the agreement was the auto industry. Until the outlines of the agreement were changed this week, South Korea had tougher emissions standards making it more difficult for American car producers to export cars to Korea. The United States exported 7,663 automobiles to South Korea in 2009 while it imported 476,857 from automakers there, according to U.S. Commerce Department figures. If the agreement were to pass, the auto industry would have had a hard time profiting. Ford Motor Company had been leading the opposition to the agreement, but is now satisfied with the revisions.  Alan Mulally, CEO of the Ford Motor Company said Friday that Ford deeply appreciates the tireless efforts of the Obama administration and Congress to improve this agreement and open the Korean auto market.

The third sector that was holding up the agreement, according to Spooner, was the beef industry. President Lee Myung-bak’s decision in April 2008 to allow imports of all cuts of beef and beef products caused a lot of protest from South Koreans. This happened in response to the 2003 Mad Cow Syndrome scare. It currently stands that South Korea will not allow U.S. beef imports older than 30 months to enter the country because of the mad cow scare.  On Monday, Obama said he recognized it would be tough for Lee to fully open the Korean market to U.S. beef exports, given the scare over mad cow disease several years ago. The beef industry is still opposed to the agreement, because there have not been significant changes made.

The biggest aspect of the KORUS FTA that appeals to Iowans concerns the pork industry. In a time where the national unemployment rate is hovering above nine percent, everyone is concerned about creating jobs. According to Department of Commerce figures, every billion-dollar increase in U.S. exports creates 20,000 jobs. If the agreement were to be passed, 90 percent of U.S. pork exports to Korea will become duty free by 2014. This means that the current tariff rates of 22.5 and 25 percent will be reduced to zero.

According to the official government trade website, this agreement will benefit Iowa in many ways. They say that Iowa exported an average of $139 million in goods to Korea between 2007 and 2009, which will increase significantly.  The website also says that exports of manufactured goods support an estimated 138,000 jobs in Iowa, which will also increase if the agreement is ratified.

[TOM QUINER’S NOTE: Quiner’s Diner is frequently critical of the President. We commend him for getting this job-creating bill ready for ratification. Although we would have liked to have gotten it implemented sooner, the treaty offers some improvements over the version written by President Bush’s negotiators. Thanks to John Quiner for his reporting on this issue.]