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Free Trade Agreements Pass: Success Has Many Fathers

Posted By Bruce Klingner On October 13, 2011 @ 3:14 pm In Featured | Comments Disabled

Free trade advocates can finally rejoice in the long-overdue passage of free trade agreements (FTAs) with South Korea, Colombia, and Panama that will benefit U.S. businesses, workers, and consumers.

The FTAs will generate an estimated $13 billion in new U.S. exports, a $12 billion increase in U.S. GDP, and 70,000 or more new jobs. These benefits are all without a single penny of federal spending, making the FTAs a cost-free job stimulus program.

Amidst the victory euphoria, however, there is the nettlesome annoyance of those now taking credit, including from some who were opposed or working against its passage. The Obama Administration is praising its own efforts on the FTAs as a vital part of the President’s strategy for creating U.S. jobs. But all three of the FTAs were completed and signed years before Obama ever set foot in the Oval Office. The Colombia FTA was signed in November 2006, while the Panama FTA and the Korea FTA were signed in January 2007 and June 2007, respectively.

That’s right: The agreements were all completed during the Bush Administration and have been simply waiting years for approval. The delays cost the U.S. $40 billion in lost exports from the Korea FTA alone. During the time the Korea–U.S. FTA remained dormant, the European Union (which has surpassed the United States as a Korean trading partner) began, completed, signed, and implemented its own FTA with Seoul.

During the first month of the EU FTA, European exports to South Korea increased 16 percent. The U.S. FTA would have given American business years of increased market share had it been approved in 2007. Instead, the FTA was necessary simply to regain lost ground.

The approval delay was due to congressional free trade opponents demanding extra pounds of flesh by rewriting the text (in violation of congressional rules for fast-track authority) and linking the FTAs to special interest causes. Even as the three bills were rushing to approval, Representative Nancy Pelosi (D–CA) was still trying to link their passage with Chinese currency legislation.

In May 2007, Pelosi had engineered an agreement with the Bush Administration that the then-Democratic-controlled House of Representatives would approve the Korea FTA if the U.S. demanded additional labor and environmental concessions from Seoul, despite the agreement already being completed. South Korea acquiesced, but the promise was broken, and the FTA remained stalemated.

Yesterday, U.S. Trade Representative Ron Kirk praised President Obama for his stewardship of the Korea FTA. Yet, during his confirmation hearings, Kirk said the Korea FTA is “not fair [and] simply isn’t acceptable.”

President Obama praised the FTAs as “a major win for American workers and businesses.” Yet during the presidential campaign, Obama characterized the Korea FTA as “badly flawed,” claiming it wouldn’t do enough to increase U.S. auto sales.

The Obama Administration asserts that additional forced changes to the Korea FTA in December 2010 “leveled the playing field” when, in fact, they simply maintained protectionist tariffs for a few years more as demanded by U.S. organized labor. Despite these alterations, the Obama Administration continued to refuse to submit the FTA for another 10 months until free trade advocates made yet another concession—namely, agreeing to link the three FTAs with Trade Adjustment Assistance, a questionable federal boondoggle.

Senator Max Baucus (D–MT) yesterday praised the passage of the FTAs as giving “our economy a much-needed shot in the arm and [creating] tens of thousands of American jobs.” However, Baucus’s demands on greater Korean market access to American beef prevented progress on the Korea FTA for years, even after U.S. beef organizations clamored for the agreement’s approval. Baucus and the U.S. auto industry were the two largest obstructions to earlier passage of the Korea FTA.

Perhaps the starkest indicator of where free trade and protectionist ideologies reside is in the party breakdown of the congressional FTA votes:

Congressional Vote on Free Trade Agreements [1]

It is important to remember who the real free traders are, because the United States has not seen its last FTA negotiation. Even as the Trans Pacific Partnership multilateral FTA moves forward, negotiators should know that they need not accommodate every concern voiced. They start with a pro-trade majority in Congress. It takes only 50 percent plus one to pass. The trade agenda will move much further, much faster if we all keep that in mind.


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