Congressional Democrats in the United States have given the KORUS FTA the gas face [Reuters]:
U.S. House of Representatives Democratic leaders quashed White House hopes on Friday for quick renewal of “fast track” trade negotiating authority and said they cannot support trade pacts negotiated with South Korea and Colombia.
House Speaker Nancy Pelosi and other senior Democrats said renewing President George W. Bush’s expiring authority to negotiate trade agreements, such as faltering efforts to reach a new world trade deal, was not an immediate priority.
“Before that debate can even begin, we must expand the benefits of globalization to all Americans,” the Democrats said in a statement asserting constitutional authority of Congress over trade.
Democrats aren’t the only ones opposing the dead, apparently [AFP]:
Bush’s Republican party lawmakers have also spoken out against the deal.
“I am one of the most ardent free traders in Congress and when I have problems with this, the agreement’s got problems,” said Republican Donald Manzullo from Illinois.
He vehemently objects to the pact’s automobile provisions, which he said did not go far enough in dismantling barriers in South Korea.
Last year, for example, South Korea exported more than 700,000 cars into the United States while the United States exported fewer than 5,000.
Oh, and Hillary Clinton doesn’t like it, either:
Clinton had said the agreement was “inherently unfair” and would increase the US trade deficit, cost good middle-class American jobs and make America less competitive.
Needless to say, lawmakers in beef producing states are wary of the agreement as long as Korea refuses to fully open its beef market.
On this side of the Very Big Pond, it appears Seoul expected something like this might happen (which is why it accepted US demands for revisions to the original deal) and according to Money Today (Korean), Cheong Wa Dae will probably concentrate its efforts on getting the FTA through the National Assembly while simultaneously trying to persuade the US Congress that the FTA isn’t an entirely shitty deal.
Frankly, I’m not entirely satisfied with the deal — the name aside, this is in no way a “free trade agreement.” But it was a major step in the right direction, and certainly an improvement over the trade relations the United States currently enjoys with Korea. Assuming for the moment that for a number of reasons the United States is not going to make trade “fair” by erecting all sorts of reciprocal trade barriers, I fail to see how this deal “hurts” the United States. All it does open up opportunities that weren’t there before. It’s a win-win situation, even if the Korean side wins more.
The political consequences of a US rejection could be severe, too. The Roh administration, for all its faults, did spend a lot of political capital pushing this deal through against the wishes of many of its supporters and perhaps even the administration’s own better ideological judgment. The KORUS FTA, in fact, was supposed to be the Roh administration’s legacy… perhaps its only one.
Well, good, you might say, it serves a guy like Roh right to have perhaps the only good thing he’s managed to accomplish in five years blow up in his face courtesy the US Congress.
Keep in mind, however, that there’s no guarantee that the United States will be able to negotiate a better deal if and when the opposition Grand National Party takes over the country. Yes, the GNP will take a keener interest in improving cooperation with the United States in the security field, but they aren’t free traders, and in the economic field, they’ll play hardball — these are the people who built Korea Inc., after all, with one GNP presidential candidate being the daughter of Korea Inc.’s late founder and the other having spent most of his adult life working for Hyundai. The fact that the GNP and Korea’s business associations have, so far, supported the FTA is a good sign, but that’s easy when you’re the opposition and your enemy is killing its support within its own power base pushing the deal for you. Whether they’ll be so supportive if Washington tries to negotiate a “fair” deal, however, remains to be seen.
44 Comments
Agree that it’s not really a “free” trade agreement but Seoul hasn’t been sending the right signals with all the holdups of beef imports, and the non-tariff barriers and duties on U.S. autos remain, and as for the Kaesong provision: “It would have been indefensible to include goods produced under the wretched conditions of North Korea, directly benefiting its reckless and dangerous regime,” said Republican lawmaker Edward Royce, also from California.”
http://www.channelnewsasia.com.....88/1/.html
So there’s a lot to dislike about this FTA from a U.S. point of view.
On the Korean side, the U.S. is strong-arming them to pay more for some drugs than people in the U.S. pay, and that’s not exactly “fair” either.
I think the deal was rushed and is flawed, and now the Demos smell blood and are going after everything Bush proposes.
The KORUS FTA was a crummy deal from the US side for sure, but it did promise a relatively sweet market opening for US law firms. Looks like we long-term foreign legal consultants will get to answer naïve outsiders’ questions on Next Year’s Legal Market Opening™ for several more “next years” to come. I feel like a Cubs fan.
Robert, You yourself have wondered aloud whether Roh really wanted this FTA, since he often spoke of it as a burden to be borne rather than something that would be a great benefit to Korea. Roh really never did mount a defense of the deal, so many of the people who voted for him were emboldened to oppose it with that much more vehemence. Trying to ban rallies doesn’t work and doesn’t count. Roh never stepped forward to refute silly arguments about brain-washing the kiddies with Spider-Man, neo-colonial conspiracies, or CIA microphones disguises as dragonflies. Instead, he raised Korea’s demands to such an unreasonable level that I was personally sure (perhaps Roh was, too) that the think would never fly.
Shockingly, we agreed to almost all of those unreasonable demands. I was especially stunned that we even agreed to consider including Kim Jong Il in this sweet little deal, something the USTR had said would never happen. I’d like to hear the argument that North Korea has earned the right to FTA benefits that we still haven’t extended to Japan. That shifted me from an FTA supporter to die-hard Congress-writing opponent, and appears to have galvanized surprisingly strong opposition among Democratic members.
The FTA is a sound concept and it will be good for both countries, but not on these terms. Better luck next near.
I wonder if the Korean side can avert the disaster if this fails because I seriously wonder if they can pull off the FTA with the EU and that one is larger than the US one.
Am I missing something? The Koreans have gotten a free ride for too long. Until we make them feel some pain, they won’t be reminded of this.
We slap a huge tarriff of Korean cell phones, consumer electronics, and cars, large enough to completely destroy their margins. Leave it on for about a year or so, and during that time absolutely refuse to return to the negotiating table.
Someone who believes that its possible to sign a true FTA with one of the most protectionist countries in the world is simply being unrealistic.
#5 - Hear, hear. ROK is no longer a developing country dependent upon tariffs to protect domestic industry while building infrastructure. The infrastructure is there now. Time for them to compete on a level playing field.
Accordingly, I think it’s time for the US to implement a policy of strict trade reciprocity: our tariffs should mirror theirs line for line. Under such a plan, all it would take to establish free trade… is for ROK to drop its tariffs. The ball would be completely in their court.
Robert, you’d said you “fail to see how this deal “hurts” the United States.” But the hurt comes from the automobile issue. Korea’s don’t-go-there topic was rice. For America it’s automobiles. The thing is that the negotiators saw a chance to further open up the Korean auto market without much thought about the reciprocal. Korea’s automobile market is small, America’s is huge, so on that balance Korea stands to benefit in nearly any deal. Hyundai has FINALLY learned how to make an appealing car with the latest incarnation of the Sonata, a car that bests the Toyota Camry and is only second to the Honda Accord according to a major US auto magazine. American automobile makers now consider Hyundai a formidable competitor.
The automobile makers have lots of lobbyists. The automobile unions have lots of lobbyists. These groups will not be satisfied with any FTA because they only want to see the Korean market opened while protecting the onshore market. With their deep pockets there is a little chance in my mind of the FTA getting through congress so long as currenty lobbying laws are in place.
I guess if they had cut out automobiles from the FTA there might have been a chance. But then any Korean support for the FTA might have never materialized since that was the big carrot for them.
Hmmmnnn . . . I think his plumpness is right on this one. There are other considerations to this deal, such as building a modern day economic sphere of US, Japan and Korea and I think in 5 years, Vietnam. FTA with Korea neither really helps America or hurt it in any shape or form what so ever. I mean sure, the aggregate sum of FTA with all the rinky dink economies do add up but Korea by itself is on the who gives a crap side of things.
Regarding the FTA and how it’s going to flood the US with Korean cars - I call that pure bull shit.
Eliminating 2% of US tariffs on imported Korean auto is hardly going to effect the price of Korean made autos. Plus, Korea is steadily moving manufacturing to the US soil where they’re already making much of these so called Honda and Camry fighters. FTA won’t mean anything there.
In Auto, it’s the US who stands to benefit more since the FTA will mean no korean tariffs on US cars. (Right now there’s 8% tax on imported US cars.) But I suspect it won’t make that much difference because as pointed out, Korean market is smaller, and because US automobiles do not have any consumer appeal whatsoever in Korea. For anything, it will be the Japanese makers like Honda and Toyota who can now use their US operations to export cars to Korea, who will benefit the most. Japanese cars (and European cars) have big appeal in Korea.
What the US auto industry wants is not a free trade opening. They want a managed deal. Korea sells 600,000 cars in US, then Korea has to buy 600,000 cars from the US in return. In auto, there is absolutely nothing Korea can do to satisfy Detroit other then to guarantee half the Korean market share. I agree with everyone, it looks like this deal is dead.
“Plus, Korea is steadily moving manufacturing to the US soil where they’re already making much of these so called Honda and Camry fighters. FTA won’t mean anything there.”
Yes, Korean companies have been moving production out of Korea to China and South-East Asian countries for years in order to take advantage of their inexpensive and skilled workforce. Simply put, ‘Made in Korea’ is only appealing to the most nationalistic domestic consumers; the rest of the world couldn’t care less if a Samsung TV or a Hyundai Sonata is made long as its of good quality and, more importantly, relatively cheap.
If the deal is so one-sided in favour of Korea as many Americans here seem to think it is, then why would the American trade negotiators, no doubt in consultation with the White House officials, have accepted such a deal? Are they all dummies?
Kaesong is the dealbreaker that Dems and Republicans are united against, so as long as it appears anywhere in the FTA, even in the weasal words “outward processing zones.” If that remains in the FTA I hope it fails.
Good point, Michael.
The Kaesong industrial zone fools few people outside of South Korea. North Korea can have all the money in the world, it still wouldn’t bring the two Koreas closer to reunification.
babarian - It’s because in free-trade deals between countries, there is no “winner” and “loser.” Anytime tariffs are lowered on any products, in either country, the overall populations of BOTH enjoy lower prices and jobs are created in the country where the goods/services are produced or performed most efficiently.
Of course, there will be plenty of individual “losers” within each country as some are put out of business by more efficient operators in the other country (e.g. Hyundai will gain some at the expense of GM). Saved money means investment and job creation in other areas where the U.S. has comparative advantage - this will result in economically positive results in the long run, even if the present cost savings is relatively small (unfortunately, politicians, especially in Congress, have little incentive to focus on the “long run”).
Also, a wealthier Korea means more money that will be chasing after U.S. products and services (especially if there are low tariffs, as made in the FTA). And you can’t forget intangible gains, like increased consumer happiness and the exchange of ideas that is attendant to free trade.
In conclusion, REGARDLESS of the level of Korean (or any other nation’s) tariffs, I as an American citizen support lowering all U.S. tariffs to zero (over a span of some years, to allow for economic adjustments), if only so prices of goods and services would fall dramatically while forcing the U.S. economy to swtich to areas of true comparative advantage.
“Kaesong is the dealbreaker ”
No it’s not. It’s side annoyance, but you know and I know the biggest lobbying are coming from the automobile and beef producing states. While I can understand and agree with the complaints about beef, auto is bullocks.
The auto guys and some in US government are using data that are over 10 years old, to scaremonger - out of date information that Korea does tax audits against imports to keep American cars out - total BS. “Hey, don’t let those Asians in free, they make $2 an hour minimum wage over there, how can we compete?” - yeah right.
But who knows, maybe we’ll start seeing cars that Koreans desperately want to own, like the Hummers and F150’s, on Seoul streets very soon.
my friend went to Detroit. He said it was an awful place, run down everywhere. You could buy flour by the pound, and he said the good restaurants were Cici’s Pizza. Imagine that. The mom and pop store signs were not in English per say, but written in Ebonics.
How did this happen to Detroit?
Oh, and the obligatory rim of welloffness and white population in an area called Oakland something right outside Detroit.
the usual 30 something miles outside.
If Clinton and the Democrats are thinking this is going to be solved by refusing car free trade with Korea, they are badly mistaken.
Democrats are stupid. Strangely enough, GM, Ford, and Chrysler’s biggest bill to pay is paying retired workers their benefits.
My younger brother thinks corp America will stop pensions in the near future.
isn’t it really really odd that Toyota, Nissan, and Hyundai plants in the US actively won’t allow its manufacturing workers to join the AFL-CIO?
#15: Thanks for the Econ 101 lesson. For some reason, our politicos seem to be afraid to explain to the unwashed masses why free trade is good when there is a wealth of info out there (Smoot-Hawley, anyone?) why the alternative sux.
This certainly isn’t Bill Clinton’s Demo party.
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Indeed.
One of the first signs of the impending collapse of civilization.
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The deaththroes of the US Auto industry are what will kill this deal.
This FTA will be the United States’ first free trade agreemwent with an advanced economy, an economy which exports cars that are not only cheaper than the ones built in Detroit, but of higher quality. Combine the factors mentioned above with the US’ extremely low fuel efficiency standards–fuel efficiency standards in China are more stringent than those of the United States–and you have another nail in the coffin of America’s auto industry. The managaers in Detroit are well aware of the ramifications of this deal, and they will fight hard to block it.
These Congressmen need to stop blaming Asian industry for all America’s domestic problems. If this deal is “unfair” its because American politicians don’t have the balls to tell their industries to improve standards.
American politicians know two things:
1. American beef is pretty bad. Sure it’s cheap, but the monitoring standards for American beef are, to put it mildly, lax. Combine lax standards with periodic outbreaks of mad cow disease in Canada and the United States, and you have the recipe for a steak not even a mother could love.
2. Fuel Prices in Korea are high and getting higher. Koreans don’t have time to entertain the notion of buying cars that get only 10 miles to the gallon–or less! Koreans won’t buy American cars because American cars are not fuel efficient.
It’s the weakness in American industry that will kill this deal, not tariffs.
U.S.-Australia
U.S.-Singapore
Australia is an advanced economy? What do those guys export except actors and natural resources? Heh heh, but alright, I suppose we could classify Australia as advanced.
Alright, Singapore is definitely an advanced economy. I stand corrected on that point.
Okay, the KFTA is the first relevant FTA between the US and an advanced economy.
Interesting nobody mentioned the Canucks under the NAFTA deal but then again who cares about that weak ass socialist country with their non existent navy.
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If you want to see what an FTA has done look at the Korea-Chile FTA and the Korean assessment. (http://www.kita.net/tri/eng_tri/tri_research_viw.jsp?no=445)
All good for Korea, marginal for Chile.
Where are all the cheap Chilean Wines?
YoungRocco2
Let’s compare the number of Mad Cows in the US and Canada with the number of Korean Chickens culled due to Avian Influenza and the number of cattle and pigs slaughtered because of hoof and mouth disease in the past 18 months.
Fuel prices in Korea are set by the government and are highly taxed. You don’t have to buy an American car but if you could, you would enjoy the US crash test specifications as everyone drives (alone) on the roads and highways in Korea.
A recent US visitor asked me why so many Korean drive when the public transportation system is fantastic. With the price of gasoline so high, he thought the government must be paying people just to drive around all day.
Grumpy, I think you might be a fellow industry guy so I will cut you some slack. Maybe you don’t read a lot of history. Pinochet appointed his Chicago boys in implementing free market reforms that led Chile from the bottom of the South American heap to being the best donkey, pound for pound. Just think, socialist loving commie bastards are once again leading that country but are now so afraid of the newly wealthy middle class with their well functioning privatized social security benefits that they dare not get in the way of FTA deals. The benefits of the deal mainly go to the consumer and out of the government’s pocket. How about that-ain’t that something? How about buying cars, cellphones and electronics in order to produce goods and services? In the end, inefficiently made products suffer and the good stuff gets cranked out faster–such as pork, wine and good old copper. I am sure the average Jose is screaming about how he got screwed by Korea while throwing a 20 US dollar Samsung microwave into his shopping cart at a Jumbo Supercenter.
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There have been three reported cases of variant Creutzfeld-Jakob Disease in the United States. Two of them involved Britons who fell ill in the US after a lifetime eating British beef. One Saudi man fell ill in the US in 2006 after having immigrated in 2005, and it is suspected that he too was a consumer of British beef, as the only other known Saudi victim was known to have consumed British beef.
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“Koreans don’t have time to entertain the notion of buying cars that get only 10 miles to the gallon–or less! Koreans won’t buy American cars because American cars are not fuel efficient.”
That’s not necessarily true. A lot of smaller American cars minus the SUV’s are fuel efficient, especially GM cars. Even if they’re not, Koreans would still buy as long as the cars are appealing. But the truth is, there are few American makes that are appealing to non-American consumers, in exterior and interior styling.Even Americans themselves don’t buy American, what does that tell us?
As for the beef, Roco’s pure BS. I’ll have no problems having US grade A steak. They are delicious and safe.
So umm does the final text involve Kaesong or not?
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A nice clip for a downtime:
“Top Gear (one of my favorite shows)” show shot in Detroit featuring Ford GT
http://youtube.com/watch?v=msQ6xP7n1vw
On the one hand, at a visceral level I approve of deleting YoungRocco2’s comments because they were generally muttonheaded, as a point of law it is absolutely a mistake to adopt a comments-moderation policy for a freewheeling place like the Marmot’s Hole. A web site operator who moderates comments may be held liable for the content of the comments, while an operator who does NOT moderate comments shall have no liability for the comments.
Schroepfer’s niceness patrol places Koehler at risk for claims. I take responsibility for what I write — that’s why I use my real name. The other commenters, fake names and all, are still identifiable through their IP numbers and e-mail addresses.
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