NCPA - National Center for Policy Analysis

TRADE IMPASSE HINDERS ECONOMIC PROGRESS

November 19, 2009

Despite President Obama's pledge to listen more carefully to foreign countries, his Administration has ignored pleas to move forward on trade issues, a refusal that drew strong criticism from several foreign leaders during Obama's recent Asia trip.  Although the Obama Administration pays lip service to free trade, it has allowed a strategically important trade agreement with South Korea to be held hostage to a single industrial sector: automotives, says Bruce Klingner, a Senior Research Fellow for Northeast Asia in the Asian Studies Center at the Heritage Foundation.

The Free Trade Agreement (FTA) would increase U.S. gross domestic product (GDP) by at least $10 billion.  It would be both an economic stimulus package and a jobs creation program without requiring any additional government spending or adding to the U.S. deficit.  Yet the Obama Administration and Congress continue to allow the agreement to languish in limbo, says Klingner.

U.S. Trade Representative Ron Kirk and Commerce Secretary Gary Locke extolled the virtues of the South Korea FTA, but both declared that it would have to wait in favor of pursuing President Obama's domestic political agenda:

  • The Obama Administration and Congress have complained about an unequal playing field for sales of U.S. autos to South Korea but reject the very agreement that would remedy the problem.
  • However, the two years since the June 2007 signing of the FTA exposed the falsehoods of the auto sector's blaming others for its poor competitiveness: GM and Chrysler did not go bankrupt as the result of South Korean non-tariff barriers.

As the Obama Administration and Congress have dithered, the world has not stood still, says Klingner:

  • South Korea ratified an FTA with India and initialed an agreement with the European Union.
  • In recent years, China, Japan and the European Union (EU) have all surpassed the United States as South Korea's major trading partners.
  • Even Democratic Senator Max Baucus (D-Mont.) lambasted the Obama Administration for lacking a "comprehensive trade agenda."
  • The U.S. Chamber of Commerce estimated that failure to implement the FTA while America's trading partners go forward with their Korean FTAs would lead to a decline of $35.1 billion in U.S. exports and a loss of 345,000 jobs.

Source: Bruce Klingner, "Trade Dispute Undercuts Obama's Korea Trip," Heritage Foundation, WebMemo No. 2702, November 17, 2009.

 

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