It is good news that negotiators have concluded a revised trade agreement with South Korea. It is now imperative that President Obama aggressively shepherd the pact through Congress. Not only is the deal essential to his goal of doubling exports, it will show whether he’s serious about rebuilding his relationship with the business community. This is the largest trade agreement to come before Congress since NAFTA was concluded with Canada and Mexico in 1994; it is, to paraphrase Vice President Joe Biden , a (very?) big deal.
President Obama retreated from last month’s G20 summit in Seoul in embarrassment after failing to conclude the Korea trade deal – which he had virtually promised to wrap up and which has languished in a labor-friendly Congress for three years. Sticking points have been mutual tariffs on auto imports and restrictions on U.S. beef exports to South Korea.
As I have written before, the auto frictions have been exacerbated by Ford Motor. GM’s purchase of Daewoo some years ago gave that company an edge in penetrating the Korean market; Ford has trailed, and has consequently been the frontrunner in pressing for more favorable treatment. The good news is that both the U. S. and South Korea have now agreed to agree, with concessions on tariffs phase-outs and reductions being made on both sides. The beef issues, which are viewed as less significant, were unresolved.
Why is the pact important? South Korea is a crucial ally to the United States in Asia, serving as a counterpoint to both North Korea and China. The leadership of the country is pro-U.S. and deserving of support. President Lee Myung-bak has long put his political capital behind securing the agreement, but had promised early on not to alter the terms of the original deal inked in 2007.
Now that the provisions have been tweaked in response to U.S. interests, Lee could face opposition. The floor leader of the opposing Democratic Party has described the changes as “humiliating” and renounced the deal. Lee’s party holds a majority of 171 seats in the 299- seat legislature, and is pushing for a quick vote. A drawn-out argument over the deal in the U.S., though possibly buttressing Lee’s position that Korea did not give too much away, could allow his rivals time to mount a more effective campaign against ratification. He could, as a result, emerge weakened, which would not benefit the U.S.
Building economic relations is essential to furthering our diplomatic ties; South Korea is now the fifteenth largest economy in the world (and our seventh largest trading partner) and is growing rapidly. Other nations have jumped ahead of us in securing favorable trade deals. Just recently the EU concluded an agreement with South Korea, significant enough to inspire a similar push by Japan which fears being left behind. Ahead of the recent Summit, Russian President Medvedev courted the country’s leaders, seeking their business expertise. Trade between Russia and South Korea is up 20% so far this year and has soared 52-fold since diplomatic relations were first established two decades ago.
On announcing the trade deal, President Obama claimed the agreement would “boost annual exports of American goods by up to $11 billion (and) …increase American economic output by more than our last nine free trade agreements combined.” Though there may still be some lingering opposition to the deal (Montana Senator Max Baucus, speaking up for his state’s beef industry, will likely oppose the bill), it is clear that we cannot go back to the well. South Korea feels that it has given considerable concessions; there will be no more horse trading. This will therefore be our last bite of the apple; the pact must be approved.
Unhappily, there is growing opposition to trade deals in the U.S., due to the steady loss of manufacturing jobs overseas. President Obama needs to counter this unease by becoming an inspiring advocate for the economic advantages of trade and specifically for this agreement. He must reassure Americans that we are indeed capable of competing in foreign markets, and that such pacts will free our companies to build exports.
Nearly every country in the world is pushing exports; in the U.S., where our indebted consumer cannot reliably shoulder the entire weight of our economic recovery, export growth is especially vital. He will certainly have the heavy support of the Chamber of Commerce. If for no other reason than to see our business community and the White House finally joining hands, let us hope the deal is quickly approved.
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