Korea-U.S. FTA

Obama slows down

The newsletter World Trade/Interactive reports that the Obama administration, which had shown some interest in the bilateral trade agreements with Panama, Columbia, and Korea earlier this year, has decided to slow down (World Trade/Interactive):

Ron Kirk talks sense to the American people

Trade isn't part of the problem, its part of the solution, says U.S. Trade Representative Ron Kirk: Remarks by Ambassador Ron Kirk United States Trade Representative. (remarks at Georgetown today).

Exports accounted for 13 percent of GDP last year and almost half of overall U.S. trade growth in the three years leading up to the recession.  As exports have fallen 16 percent, unemployment has risen, so:

"An aggressive effort to keep trade flowing and open more markets to American goods and services absolutely must be a big part of our economic recovery here at home...."

"To get our economy back on track, we need to increase exports. That means we need access to growing economies abroad...."

"...a strong case can be made for trade as a creator not just of jobs, but of the better-paying jobs that Americans want and need today."

Here's how the administration plans to proceed:

Sherrod Brown wants to slow down

Ohio Democratic Senator Sherrod Brown wants to slow down any potential effort by the Obama Administration to push for Congressional ratification of the Columbia, Panama or Korea trade agreements: Lawmaker Moves to Delay Free-Trade Pacts.  Speaking to the Washington International Trade Association, Brown

said he would introduce legislation to put pending trade deals on hold until a federal commission and the Government Accountability Office studied the benefits of existing trade policies. He said his intent isn't to delay the pending deals but rather to ensure that decisions on trade are "evidence-based."

Asked whether his effort would ultimately prevent the current Congress from taking up the free-trade pacts, Mr. Brown said, "I don't know the answer to that," before adding, "What's the rush?"

"Prove to me these trade agreements are working," he said.

Here's Brown's prepared statement.

All of these agreements have been evaluated by the U.S. International Trade Commission:

• U.S.-Korea Free Trade Agreement: Potential Economy-wide and Selected Sectoral Effects [Abstract]
• U.S.-Panama Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects [Abstract]
• U.S.-Colombia Trade Promotion Agreement: Potential Economy-wide and Selected Sectoral Effects [Abstract]

A variety of advisory committee reports on each agreement can be found here: Trade Agreements Home

Progress in the U.S.

Suddenly things seem to be happening in the U.S. 

A week ago, Assistant USTR Danny Sepulveda said the USTR's Office hoped the trade agreement with Korea could be approved by Congress without renegotiation: USTR aims to preserve Seoul trade pact.

On the 20th, Ron Kirk, the U.S. Trade Representative, announced plans to review the Columbian and Panamanian agreements with a view to submitting them to Congress: USTR's Kirk: Will Start Review Of Colombia FTA Immediately:

U.S. Trade Representative Ron Kirk announced plans Monday to immediately start reviewing the Colombia and Panama free trade agreements to resolve the outstanding issues before the deals can be submitted for a vote in Congress.

Kirk, speaking to reporters on a call to discuss the Summit of the Americas conference over the weekend...

...the administration has said it would like to address some shortcomings in the Colombia and Panama deals before sending them up to Congress for passage.

Kirk cited "remarkable progress" in reducing violence in Colombia, but said a number of issues still need to be resolved that he plans to discuss with Colombia and congressional leaders.

For Panama, the remaining issues revolve around international labor standards and of the country "possibly being a tax haven," he said.

Doug Palmer covers the same ground for Reuters: Kirk to consult with Congress on Colombia trade.

Also on the 20th, Senators Max Baucus and Charles Grassley (Chair and ranking minority member of the crucial Senate Finance Committee) pointed to the security benefits of the Korea trade agreement to the U.S.: Baucus and Grassley letter:

North Korea’s April 5 launch of a three‐stage Taepo‐dong 2 missile and recent statements that
it will resume its nuclear program demonstrate yet again the threat that North Korea poses in
the northeast Asian region. These are only the latest in a long history of provocative actions.

In the face of this threat, it is vital that the United States maintain and expand its strong and
proven partnership with the Republic of Korea....

As the United States and Korea seek to defuse security threats for the sake of our nations’
safety, so too must we work to resolve bilateral economic issues for the sake of our common
prosperity....

The greatest challenge and opportunity in our bilateral economic relationship is the pending
U.S.‐Korea Free Trade Agreement (FTA)....

On the other hand:

Clearly, there is further work to be done if Congress is to support the agreement. In particular,
Korea has yet to ensure U.S. beef exporters full access to its market in accordance with
international standards. Korea’s long history of non‐tariff barriers to its autos sector also raises
serious concerns with some regarding the agreement. Postponing addressing such issues will
not make them easier to resolve.

Mid-January, 2009

In early January the standoff over the occupation of the National Assembly was resolved by an agreement that included a provision to postpone consideration of the trade agreement: FTA consideration deferred.

No Action in Congress This Year

Troy Stangarone of the Korea Economic Institute in Washington D.C. doesn't think Congress will act on the trade agreement this year: KORUS FTA Lost in Financial Crisis Shuffle:

As Congress struggled to pass a bailout measure for the U.S. financial industry, the fast-fading hopes for the passage of the KORUS FTA this year were lost in the shuffle of the deepening economic crisis in the United States. As Insight went to press, it was unclear if Congress would be able to pass the president’s financial bailout plan or what the prospects were for the U.S. economy in the near term future.

However, at the end of September, the Congress did pass a continuing resolution (CR) to fund the federal government until March of next year. With Congress’s budgetary responsibilities fulfilled until the next administration, there is no strong reason for Congress to remain in session after the November elections, barring an increasing deterioration in the U.S. economy and financial markets.

Despite the majority of current U.S. economic growth being attributable to increased exports, it is politically unlikely that Congress would take up any trade agreement during a time of continuing economic deterioration. Of note for the agreement’s long-term prospects, continued skepticism was expressed on Capitol Hill about the potential for the KORUS FTA to address the concerns of the automobile industry at a September hearing on the imbalance in U.S.-Korea automobile trade. However, the recently passed CR did include funding for up to $25 billion in low interest loans to help the automobile industry upgrade plants and move towards more fuel efficient vehicles. Measures helping to improve the U.S. automobile industry’s position could help to alleviate concerns within the industry regarding the agreement.

McCain and Obama on KORUS FTA

I've been asked in comments for my opinion about the approaches of McCain and Obama to the Korea-U.S. FTA.

McCain has endorsed the FTA with Korea.  He has a pro-trade voting record in Congress and has expressed his strong support for liberal trading rules. (McCain on Trade) 

However, he will have a challenge getting the Korea agreement through a Democratic Congress in which many members don't like the agreement and have little incentive to cooperate with him and give him a success.  The Democrats are likely to continue to control Congress after the elections.

Obama has repeatedly said that he is opposed to the agreement in its current form (Clinton and Obama Follow Edwards on Trade; Obama's Opposition to the FTA With Korea; Obama Says "No" to KORUS FTA, Again).  His statements in the Democratic primary campaign were often skeptical of past trade agreements. 

He has pointed to several general concerns with the Korea-U.S. FTA: (a) the auto provisions, (b) inadequate labor and environmental provisions, (c) Korean failure to liberalize rice; (d) In February he was concerned about beef.  The beef agreement from this spring may have addressed this concern.  He has also expressed concern over inadequate domestic legislation to protect people who lose their jobs or can only find lower paying jobs because of trade.

Obama has made a number of general statements in favor of freer trade and people I respect think that the rhetoric he used when he was fighting Clinton for the Democratic nomination in the U.S. mid-West may not reflect his ultimate stance (Obama on Trade: An In-depth look; Obama, The Optimist on Trade).

I hope they're right, but I'm still agnostic.  It's too easy to make statements in favor of something in general, but to find reasons to oppose specific instances of it.  His record in Congress is short and I don't think it is very encouraging (How Have Clinton, McCain, and Obama Been Voting on Trade Issues?; Cato Institute Report on Obama's Trade and Subsidy Votes).  As President he will represent a much wider range of interests than he did as Senator from Illinois; this does mean the Congressional voting record may have limitations as a tool for predicting Presidential actions.

I don't expect much progress on the Korea-U.S. FTA for at least a year after he takes office.  If Obama were to push the Korean agreement he might be in a better position to get progress from a Democratic Congress than McCain would be. 

However, he has made very specific and high profile statements against the agreement in its current form.  He may want to renegotiate elements of the agreement before taking it to Congress.  If so, he may want to get some sort of trade promotion authority ("Fast Track") negotiating authority from Congress first. 

Alternatively, if he was interested, he might be able to get Korean agreement to joint letters "clarifying" labor and environmental understandings in the actual agreement, and complement the agreement with domestic legislation giving Detroit things it would like.  That might make it possible to get passage without renegotiation.

But this seems unlikely to me.  Even if he had a strong interest in the agreement, Obama may have other priorities - potentially health reform and climate change legislation.  I also suspect he has more interest in domestic reform than in international agreements and issues.  Finally, my guess is that the initial Democratic trade focus will be on: (a) legislation to create more benefits for persons displaced by trade, and (b) passage of new fast track legislation revamped to build in Democratic interests in labor, environmental, and investment provisions.  Here, by the way, is a draft of the Democratic party's trade platform.

Obama Says "No" To KORUS FTA, Again

Obama spoke out against the Korea-U.S. trade agreement again on Monday (June 16) in a speech in Flint Michigan.  Unemployment is high in Michigan (8.5% in May, and Flint is an auto town): Obama Renews Attack on Korea-U.S. FTA (Chosun Ilbo, June 19).

Obama's speech dealt with American competitiveness.  He focused on increased funding for education and educational reform, energy security, and increased investment in research and infrastructure.  But these measures also have to be supplemented with "smart" trade policies.  Trade was not the focus of the speech - it only got a couple of paragraphs towards the end.

Here's the full text of the speech: Remarks of Senator Barack Obama: Renewing American Competitiveness. On the agreement with Korea:

But even as we welcome competition, we need to remember that our economic policies must be supported by strong and smart trade policies. I have said before, and will say again – I believe in free trade. It can save money for our consumers, generate business for U.S. exporters, and expand global wealth. But unlike George Bush and John McCain, I do not think that any trade agreement is a good trade agreement. I don't think an agreement that allows South Korea to import hundreds of thousands of cars into the U.S., but continues to restrict U.S. car exports into South Korea to a few thousand, is a smart deal. I don't think that trade agreements without labor or environmental agreements are in our long term interests.

He had a few more remarks about trade in general:

If we continue to let our trade policy be dictated by special interests, then American workers will continue to be undermined, and public support for robust trade will continue to erode. That might make sense to the Washington lobbyists who run Senator McCain's campaign, but it won't help our nation compete. Allowing subsidized and unfairly traded products to flood our markets is not free trade and it's not fair to the people of Michigan. We cannot stand by while countries manipulate currencies to promote exports, creating huge imbalances in the global economy. We cannot let foreign regulatory policies exclude American products. We cannot let enforcement of existing trade agreements take a backseat to the negotiation of new ones. Put simply, we need tougher negotiators on our side of the table – to strike bargains that are good not just for Wall Street, but also for Main Street. And when I am President, that's what we will do.

New Insights on Korean Beef Controversy and FTA

The latest issue of the Korea Economic Institute's Korea Insight has two short issues on the beef and FTA debates in Korea: (a) Troy Stangarone describes A Firestorm in Korea Over U.S. Beef, while James Lister and Stangarone provide an FTA Update. Short, readable, summaries of recent events. Some interesting points:

Back and Forth in DC

On Wednesday, Hillary Clinton and 11 other Democratic Senators released a letter opposing ratification of the agreement with Korea: Hillary, senators tell Bush they oppose Korea FTA (Yonhap News, May 26).

On Friday, Bush made a pitch for Congress to take up and ratify the bilateral trade agreements lined up for consideration ( Bush Pushes for Free-Trade Deal Approvals, John McKinnon, Wall Street Journal, May 24).  Here's the text of his remarks: (President Bush Discusses World Trade Week ).

Obama released a letter Friday, just after Bush's remarks, urging him not to submit the agreement (Obama urges Bush not to submit Korea deal to Congress (Doug Palmer, Reuters, May 23)):

"Instead of provoking unnecessary and potentially corrosive confrontation over this agreement, your administration could make a significant contribution toward re-establishing trust with Congress and restoring bipartisan cooperation on trade by withholding the agreement," Obama said....

"Like many members of Congress, I oppose the U.S.-Korea FTA, which I believe is badly flawed. In particular, the terms of the agreement fall well short of assuring effective, enforceable market access for American exports of manufactured goods and many agricultural products," Obama said.

He singled out the automobile provisions as unfairly tilted in South Korea's favour.

"Approval of the agreement as negotiated would give Korean exports essentially unfettered access to the U.S. market and would eliminate our best opportunity for obtaining genuinely reciprocal market access in one of the world's largest economies," Obama said.

Palmer notes that Obama's letter "...followed a similar letter this week signed by New York Sen. Hillary Clinton, Obama's rival for the Democratic nomination, and nine other Democrats."

Palmer describes one Republican spokesman's response to Obama's letter (Obama urges Bush back off South Korea trade deal) (Palmer, Reuters via bilaterals.org, May 23):

"Barack Obama’s letter is the sort of naive isolationism that will slow job growth at home and damage our relationship with a key ally," Republican National Committee spokesman Alex Conant said in a statement.

"It’s concerning that while Obama lectures us about the need to negotiate with our enemies, he would simultaneously reject a closer relationship with an ally who deployed the third-largest contingent of troops to Iraq," Conant added.

Edit May 31: added sentance about the Clinton letter.