The most definitive data yet are available to answer the question as to whether the Korea-U.S. Free Trade Agreement would increase American exports to South Korea. That, after all, is how the deal was sold by the Obama administration to fast-track it through Congress. And the answer, sadly, is no. Imports have risen, exports have declined and the trade deficit responsible for so many job losses keeps widening. According to Census data, the trade deficit with Seoul is nearly $16.6 billion compared with $13.1 billion in 2011.
The KORUS agreement went into force on March 15 of this year, so perhaps it’s too soon to tell. But since then, South Korean exports have surged while American exports have fallen. These managed-trade agreements always fail to live up to their promises. Last year, the United States had a $61.6 billion trade deficit with Mexico. In 1993, the Clinton administration said that NAFTA would create an additional 200,000 jobs here. But according to a 2011 report by the Economic Policy Institute, it had cost 693,000 American jobs.
This is highly relevant as the administration pushes for the Trans-Pacific Partnership, a far-reaching trade agreement with eight other nations. While there will be winners and losers domestically, it will almost certainly fail to live up to the hype and the losers will be in the majority.
If it’s only about Washington state, we are an outlier. Washington is the third largest exporter to South Korea among the states. Exports in 2012 were nearly $3.9 billion, compared with $1.6 billion in 2005. Add in imports with a final destination here and the state runs a trade surplus with Seoul. But about 44 percent of Washington exports are classified as transportation equipment (read Boeing, whose products are heavily pushed abroad by the other Washington).
As usual, it’s a complicated problem. For example, U.S. exports to Mexico were $51 billion in 1994 as NAFTA took effect. In 2012, they stood at $216 billion. Exports to South Korea grew from $18 billion to $42 billion in the same period. So it’s not accurate to say that American exporters are net losers. But the deficit keeps rising overall, partly because we buy more than we make, and partly because of structural changes in the economy where goods are now made in cheaper labor markets that were once made here. In addition, some trading partners manipulate their currencies and employ stealth barriers. But trade is not proving to be a jobs savior or to the benefit of many business owners who would prefer to produce here at home. Indeed, quite the opposite.
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Today’s Econ Haiku:
New Surface tablet
Better battles against late
May not work iFear