The new free-trade agreement between South Korea and the United States may be a boon for Washington state. For other states, not so much. South Korea is Washington’s fourth-largest trade partner. Exports have grown from $1.6 billion in 2005 to nearly $3.3 billion in 2011. President Obama has made the so-called KORUS deal the centerpiece of his plan to double U.S. exports over five years, saying it would create 70,000 new jobs.
But free-trade deals have a way of disappointing. The U.S. International Trade Commission predicted that China’s entry into the World Trade Organization would result in only a $1 billion trade deficit; in 2011, the deficit turned out to be $295 billion. The commission now predicts that U.S. exports will outpace imports from Seoul by at least 52 percent. In April and May, after KORUS was in place, the U.S. trade deficit with South Korea rose 63 percent.
Some good boots-on-the-ground reporting comes from Pulitzer Prize-winner David Cay Johnston, who traveled to Seoul. “I think the president suffers from irrational trade exuberance, a view reinforced by my reporting in this city of 10 million people,” he wrote for Reuters. “This deal is likely to turn out badly for American taxpayers and workers, especially autoworkers.”
The agreement is supposed to be especially good for American automakers. But, Johnston writes, “In Seoul, local people told me that buying an American-made car risked opprobrium from employers and neighbors.” South Korea has a variety of cultural and soft-protectionist barriers to keep American exports low. Meanwhile, like China, its economy is focused on exports, infringes on foreign intellectual property and is a currency manipulator. Overt tariffs, which KORUS winds down, are not the real problem.
Fortunately for Mr. Obama, the real job losses won’t clock in until after the election. American workers on the losing end of the deal won’t be so lucky.
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Today’s Econ Haiku:
Dark pools, hard to see
Swirling ’round the stock market
Average folks get drowned