The Troubled Trade Deal With South KoreaAugust 1st, 2012 12:00 am David Cay Johnston
SEOUL — In March, the United States and South Korea implemented a Free Trade Agreement that President Barack Obama touts as more significant than the last nine such agreements combined. He also said it was central to his goal of doubling American exports within five years.
I think the president suffers from irrational trade exuberance, a view reinforced by my reporting in this city of 10 million people.
This deal is likely to turn out badly for American taxpayers and workers, especially autoworkers.
The president predicted 70,000 American jobs would be created as U.S. exports to South Korea grow faster than imports.
That would be terrific for generating taxes and reducing demand for government services like food stamps, which have become the sole income for about 6 million Americans.
But — based on previous major trade deals, the details of this one and a host of Korean business and cultural barriers — I think a much more likely scenario is the destruction of more than 150,000 American jobs over the next few years, as projected by the Economic Policy Institute, a Washington research organization that advocates for low- and middle-income workers.
The president’s optimistic statements, made in December, drew on projections by the U.S. International Trade Commission. It predicted that U.S. exports to South Korea would grow at least 52 percent more than imports, creating tens of thousands of American jobs. A March update predicted that eventually exports of U.S. cars to South Korea will “likely increase significantly.”
This is the same agency that predicted that liberalized trade with China would result in a $1 billion annual trade deficit for the United States. The actual 2011 deficit: $295 billion.
And remember NAFTA? The United States ran a $1.6 billion trade surplus ($2.6 billion in today’s dollars) with Mexico in 1993, the year before NAFTA. Last year, the United States ran a $64.5 billion deficit.
The United States has consistently run trade deficits with South Korea – more than $13 billion last year, according to the U.S. Census Bureau. And, of course, the trade agreement has only been in place a few months. But it is worrisome that the deficit for April and May, after the agreement took effect, soared 63 percent compared with a year earlier.