Tag Archive | "KORUS FTA"

Korea Free Trade Agreement Will Benefit North Korea

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The following statement can be found on Congressman Brad Sherman’s website here.

Congressman Brad Sherman (D-CA) today released the following statement on the planned consideration of the South Korea-U.S. Free Trade Agreement:

Congress should reject the pending FTA with South Korea.  It is likely that the United States would be opened up to North Korean goods under the agreement’s liberal rules of origin.

Goods with up to 65 percent non-South Korean content can enter the United States with preferential, often duty free, treatment under this agreement.  Nothing in this agreement prevents that foreign content from being North Korean.

Also, the language purporting to govern the so-called Kaesong Industrial Complex is intentionally vague.  Goods entirely produced in sweatshops north of the DMZ may end up being given the same treatment as South Korean goods under the agreement.

The 40,000 workers at Kaesong are not paid by their South Korean employers. The money goes to the North Korean government.  Along with several millions in fees, these payments provide hard currency for the North Korean government to maintain its grip on power and pursue nuclear proliferation.

If we are serious about denying North Korea the cash it needs to pursue its nefarious aims, we would ensure that this free trade agreement was clear, that no North Korean goods will be allowed into the United States.

In hearings on July 13, 2007 and again by letter on February 9, 2011, I asked the United States Trade Representative for a clear statement that goods made 100 percent at Kaesong could not be given access to the United States market unless approved by future statutory enactment.  Silence on both occasions provides a clear answer.  As the South Korean Ambassador said in 2007, “the planned ratification of the Korea-U.S. FTA will pave the way,” for Kaesong goods in the United States.

Congressman Sherman is the Ranking Democratic Member on the House Foreign Affairs Subcommittee on Terrorism Nonproliferation and Trade.

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GE’s Immelt should Oppose the Proposed Korean Free Trade Agreement

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The following piece was written by Kenneth Davis, President of Economic Strategy Associates, Inc. and former U.S. Assistant Secretary of Commerce. It can be found here.

Restoring U.S. domestic industry and jobs will require major U.S. initiatives.

That’s the main focus of the new Jobs Council chaired by GE CEO Jeffrey Immelt.

But he also needs to be alert to current U.S. government actions that can add to the huge challenge he already faces. He must try to restore thousands of closed factories and millions of  lost U.S. jobs. But a severe new threat is the KORUS FTA -The Korea – U.S. Free Trade Agreement that’s nearing final approval in Congress. It’s the last thing America needs at this time of crisis. Mr. Immelt has said nothing about it pro or con.

The following is a partial list of the provisions in this disastrous one-sided  agreement favoring Korea that vigilant Americans should protest now, including those with major clout and strong reasons like Mr. Immelt.

1. The KORUS FTA will export jobs and increase our trade deficit. We’re being promised by some that the KORUS FTA will create more American exports, but in reality it will only export American jobs. According to the Economic Policy Institute’s estimates, in the first seven years, the agreement will cost as many as 159,000 American jobs and increase our trade deficit by $16.7 billion. Others have said it would create 70,000 jobs (but mainly low-paid Americans working for foreign-owned companies at less than half what the lost jobs paid).

2. Prevention of takeovers of U.S. companies is greatly inhibited. Foreign monopolies will have more freedom to take over whole U.S. industries.

3. Korea will be able to in-source low wage jobs to its factories in the U.S., but American companies will not get the same access to South Korea.

4. South Korea will still be able to use barriers to trade that the U.S. doesn’t have, such as special tax breaks and subsidies. Korea has a 10 percent value added tax, while we give them tax-free access to our markets.

5. There is nothing in the KORUS FTA to stop South Korea’s often-used currency manipulating practices. We know how much admage that can cause from our experience with China.

Either our leaders aren’t reading what they’re signing or they’re being lobbied by special interests working against the most dire needs of the United States.

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Korea FTA: Some Dems fight it

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This reporting below shows that journalistic understanding of trade has not progressed past 1994.  The article discusses Rep. Michaud and others’ laudable and knowledgeable opposition to the Korea Free Trade Agreement as expressed.  But the issue is framed, by journalists, as being over a dispute about autos and beef.

The modern issues are these: (1) Korea is a currency manipulator, with a currency tariff on U.S. goods and a currency subsidy benefiting their exports; (2) Korea has a 10% VAT tariff on our goods, which is a VAT subsidy benefiting the exports; (3) Korea is a state-managed economy with chaebol (vertically integrated industry structure), the combination of which prevents free trade in a deep, cultural way.

The Korean FTA ignores all these.  It pretends we are free trading with free trading nations.  The pretension is false.  Utterly false.  And it hurts our country.  Simplistically cutting tariffs is irrelevant in the face of these issues.  The U.S. needs a national trade and economic strategy and this FTA does not help.


Korea, US FTA Stirs Controversy in US Congress

Bridges Weekly Trade News Digest • Volume 14 • Number 28 • 28th July 2010

A deep fault line has emerged among members of the US Democratic Party over a pending free trade deal with South Korea. US President Barack Obama has said that he wants the pact, widely known as the KORUS FTA, to be finalised before November’s Group of 20 Summit in Seoul. For that to happen, however, Obama will have to overcome stark divisions within his own political party.

Over the past two weeks, various groups of Democratic lawmakers from both houses of Congress have sent the president letters arguing strongly both for and against the pact.

Late last week, Democratic congressman Mike Michaud rallied a group of 109 Democrats from the House of Representatives to request a meeting with Obama to discuss making “major changes” to the pact.

In their letter, they asked Obama to give them the “opportunity to express our support for a revised trade policy that creates jobs in all sectors of the economy,” according to Agence France-Presse. They cited fears of job losses as the main basis of their concern, particularly in the US manufacturing sector.

“Of course I support trade,” Michaud wrote recently in an editorial in The Exception Magazine, but “signing flawed trade agreements just for the sake of signing them is bad policy and it hurts our economy.”

While acknowledging that trade liberalisation does not – and, in theory, should not – always cause job losses, he noted that “if we keep pushing more bad trade deals, that’s exactly what will happen.”

Senate Democrats lacking unity

The letter from Michaud’s group of House Democrats echoed many of the sentiments expressed by two of their Senate counterparts- Democrats Debbie Stabenow of Michigan and Sherrod Brown of Ohio.

The two senators sent Obama an anti-KORUS letter of their own on 19 July, urging him not to “repeat the mistakes of the previous administration.” They suggested that the US instead pursue agreements that increase market access to US so that the US exports “products, not jobs.”

The day after the Stabenow-Brown letter was released, nine Senate Democrats and one Independent sent a rival letter to Obama. John Kerry – Chairman of the Senate Foreign Relations Committee – and Joe Lieberman – Chairman of the Homeland Security and Governmental Affairs Committee – were among the signatories.

The senators wrote to express their strong support for Obama’s renewed efforts to resolve the outstanding issues of the FTA. They lauded the pact for the potential benefits it could provide to the US economy, especially for “critical sectors” such as agriculture, manufactured goods, services, and technology that would “grow through expanded trade with our seventh-largest trading partner.”

“Failure to bring the KORUS FTA to a swift resolution could have wide-ranging repercussions for US engagement and influence in the Asia Pacific, as well as our leadership position on open markets and mutually beneficial trade,” the group of senators cautioned. Both Kerry and Lieberman also made separate statements in which they insisted that the pact is essential for strengthening Washington’s political ties to the North Asian nation.

A three-year impasse

The original KORUS FTA was signed by the Bush administration in June 2007. Since then the pact has stalled, unable to find the political momentum to move forward, and has not been ratified by legislatures in either country.

At the G20 summit in Toronto in June, Obama vowed to push the deal through Congress – inciting the increasingly public debate within his own party.

The US has two other outstanding FTAs in the works – one with Colombia and another with Panama. However, the pact with Korea – which would be the biggest US trade deal since the North American Free Trade Agreement (NAFTA) – has provoked the most controversy in recent weeks.

Both countries have expressed concern about the implications of the KORUS FTA. The US fears the possible impacts of non-tariff measures on its beef and automobile industries, while South Korea frets over the safety of US beef imports, which would increase under the accord.

The US has complained that South Korea has unfairly restricted US beef and auto exports in the past. In 2007, South Korea exported 700,000 cars to the US in 2007 while only importing 5,000, according to Agence France-Presse – though South Korea insists these numbers are misleading. The Asian nation also maintains a partial import ban on US beef, due to the above-mentioned safety concerns.

Despite the controversy surrounding the bill, estimates from the US International Trade Commission show that the US is likely to benefit from the pact. Recent numbers suggest that reducing Korean tariffs and rate quotas on goods exported from the US would increase US gross domestic product by US$10 billion to US$12 billion each year.

Should both countries ratify the terms of the FTA, 95 percent of bilateral trade in consumer and industrial products would become duty free within three years of the date the FTA becomes active. The majority of the remaining tariffs would then be removed in ten years, according to the US Trade Representative’s office.

Europe making its own move on Korea

As the US Congress struggles to find consensus among its members, the EU is moving quickly toward its own FTA with Korea – which would be the region’s first free trade deal in Asia.

The European Parliament’s Trade Committee began debating the pact, with the input of trade associations and academics, a few days before Obama’s G20 announcement. Like the US, the EU has expressed concerns over the impact that an FTA with Korea could have on jobs and on the European automobile industry. However, the EU seems to be making quicker progress on finalising the deal.

The EU-Korea pact was signed last October, but is still awaiting parliamentary approval. The EU Parliament intends to vote on the FTA this autumn.

ICTSD reporting; “Lawmakers Demand Major Changes to US-S.Korea Trade Deal,” AGENCE FRANCE-PRESSE, 23 July 2010; “Crucial EU-South Korea trade deal edges closer,” EUROPEAN PARLIAMENT, 29 June 2010; “Lawmakers want meeting with Obama on Korean trade deal,” THE HILL, 22 July 2010.

ICTSD, International Environment House 2, Chemin de Balexert 7, 1219 Châtelaine, Geneva, Switzerland


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Korean minister: FTA is good for U.S. pork producers

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The Korean Economic Affairs minister was at the 2010 World Pork Expo in June telling us that the Korea FTA will make pork producers in the U.S. rich.  Funny.

When everyone reduces tariffs, but they replace their tariffs with currency manipulation, VAT tariffs at the border, and non-tariff barriers, then they win and we lose. But the trade negotiators end up handcuffing us and refusing to address the cheating of the others.  And Senators send letters to Obama saying we need more of these same agreements using the same arguments that are now demonstrably false.

Below is the chart showing how agriculture has fared with the countries we’ve already signed trade agreements with.  The data is not good.

Trade deficit in agriculture for FTA countries

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NYT Editorial Page on free trade

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The NY Times editorial board continues their prior-era support for free trade.  It is generalized support for an old theory in a changed world.  No mention of record trade deficits, no crediting job loss, no concept of how countries build wealth.  No discussion of how to respond to state-managed capitalism of trade rivals.

They just say stuff.

Their assertion:

The United States must become a leading voice for open international trade.

Why?  For what quantifiable result?  If you choose increasing “net exports” as a goal, then maybe we can agree.  But we’ve already done what you wanted, and it failed.  What’s your next idea?

Their assertion:

[The U.S.]  must press harder for the completion of the stalled round of global trade talks started nine years ago in Doha, Qatar, and to undo the myriad protectionist measures that governments around the globe — including our own — have adopted since the financial crash.

This presumes we will give up nothing.  Doha.  It’s so last century.  It’s called the “development round” to give trade access to developing countries to the U.S.  Developing countries like Brazil and India and China who still receive World Bank loans for development.  Benefits to the U.S. are not on the table in those discussions.

Their assertion:

The United States and China both put buy-at-home provisions in their stimulus programs.

China always had domestic procurement.  Now we have taken a small step towards a domestic procurement policy.  But China and our WTO and non-WTO trade rivals still have more stringent domestic procurement policies than we do.  The basic trade principle is “reciprocity”.  China committed to undertake many market opening actions in when voted in to the WTO.  They breached.  Hundreds or thousands of times.  Focus on them… perhaps… in your next editorial.  And maybe you could endorse Senator Stabenow’s China Fair Trade Act of 2010 to help China change their domestic procurement policy.

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EPI: Korea Trade Agmt will cost jobs

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This release is from Robert Scott of the Economic Policy Institute.

Free Trade Agreement with Korea will cost U.S. jobs

Robert E. Scott

July 1, 2010

The Obama administration has announced that it intends to finalize a new free trade agreement with South Korea (KORUS FTA) in time for the next G-20 summit in November. Although the U.S. International Trade Commission (USITC) projects this will have a small positive impact on the U.S. trade balance, and “minimal or negligible “ impact on U.S. employment, history shows that such trade deals lead to rapidly growing trade deficits and job loss in the United States.

The Charts below compare USITC’s estimates of the impact of the forthcoming free trade agreement with Korea to EPI’s own calculation. Unlike USITC’s forecast of a small positive impact, EPI’s research shows it will increase the U.S. trade deficit with Korea by about $16.7 billion, and displace about 159,000 American jobs within the first seven years after it takes effect.

The USITC has a history of vastly underestimating the negative impacts that free trade agreements have on the U.S. economy. In 1999, it estimated that China’s entry into the World Trade Organization would increase the U.S. trade deficit with China by only $1.0 billion, and have no significant impact on U.S. employment. In fact, the U.S. trade deficit with China increased by $185 billion between 2001 (when China entered the WTO) and 2008, and 2.4 million U.S. jobs have been displaced or lost. The U.S. trade deficit with Mexico also rose rapidly after the North American Free Trade Agreement (NAFTA) took effect in 1994.

With U.S. unemployment close to 10%, and an employment gap of nearly 11 million jobs, it would be foolish and self destructive for the United States to implement a free trade agreement with Korea that leads to further job loss.

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