Korea-U.S. FTA

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.

Congressional Prospects

Victoria McGrane reviews the prospects for Congressional approval: Future uncertain for U.S.-Korea FTA (Politico, April 29) and surveys the parties ranged on either side of the debate.  Much of the emphasis is on the auto industry.

Congressional Democrats Remain Unenthusiastic

On Thursday and Friday Korea and the U.S. reached agreement on two issues related to, but not part, of the trade agreement: Korean restrictions on U.S. beef imports, and Korean eligibility to participate in the U.S. visa waiver program.  This should eliminate an important barrier to Congressional consideration of the trade agreement, and should improve the atmospherics in both countries

However, Congressional Democrats still don't seem unduly enthusiastic:

Don't Expect Beef Concessions at Next Week's Summit

Evan Ramstad, who reports on Korea for the Wall Street Journal, says the U.S. shouldn't expect concessions on beef from Korea in next week's summit meeting between Presidents Lee and Bush: Seoul Unlikely to End U.S. Beef Ban (April 11).   

Key U.S. legislators have made it clear for a long time that Congress isn't going to consider the trade agreement until Korea frees up the beef trade; but why should Lee make concessions on beef -and antagoinize his domestic beef interests - to get Congress to consider the agreement, when there are so many other reasons to be concerned about ratification?

Ramstad reports:

Bad News From the Beltway This Week

Congress is supposed to take action on a trade agreement negotiated under the trade promotion authority within 90 days of the date the president submits it.  However the 90 day requirement just lies in the legislature's rules, and a legislature can change the rules it sets for itself. 

Nancy Pelosi announced Wednesday that she is going to try and do that with respect to the Columbia trade agreement: Pelosi Statement on House Removing Timetable from Consideration of Colombia Free Trade Agreement (press release, April 9).  Normally the president doesn't submit until he gets a "go-ahead" from Congressional leaders; in this case that hadn't come, and he got tired of waiting.  Pelosi's statement reads:

Bush Sends the Columbia Agreement to Congress

The Bush Administration wants to take care of Congressional ratification of the trade agreements with Columbia and Panama before it turns to the agreement with Panama. 

Today it sent the agreement with Columbia to Congress: Bush forces trade fight (Ian Swanson, The Hill, April 7, 2007).  The problem is that normally these agreements aren't sent up until Congress signals its readiness to receive them.  In this case, the Administration was concerned that time was running out.