U.S. and South Korean negotiators agreed Friday to a free-trade deal that the Obama administration hopes will increase American exports by billions of dollars annually and create momentum for a broader push on free trade in the coming year.
The pact is the administration’s first major foray into the arena of free-trade politics, and officials said it may be followed by efforts to have Congress approve pending deals with Panama and Colombia and reinvigorate the larger Doha round of global trade talks.
Critics, however, say the administration has reneged on its tough campaign line and argue the South Korea agreement should have been more thoroughly renegotiated to include stricter labor and investment rules.
“I had hoped for more from this White House, which campaigned on a need to change the way we negotiate trade agreements so that they truly benefit American workers and businesses. The deal reached today, while beneficial to the auto industry, falls far short of that goal,” said Rep. Mike Michaud, D-Maine, head of a trade policy group in the House. He pledged to work to defeat the South Korea deal.
“We need to finally live up to what the American people have been demanding for years – a substantial departure from the past, not a continuation of its mistakes,” Michaud said.
The South Korea agreement was first negotiated by the George W. Bush administration, but during follow-up negotiations the Obama administration won further concessions considered important by American automakers. Those include a slower reduction of U.S. tariffs on imported South Korean vehicles and a provision under which South Korea will exempt up to 25,000 of any American company’s cars from its strict safety standards, as long as they meet similar U.S. regulations.
In a concession to South Korea’s internal politics, a U.S. demand for unfettered access to the South Korean beef market was set aside for now, leaving in place that country’s ban on the import of older U.S. meat. Linked to an earlier scare over mad-cow disease, the beef restrictions are emotionally charged in South Korea, but the existing limits are of little economic importance to a U.S. cattle industry fighting to regain a market largely lost to Australian producers in recent years.
The changes, coupled with the promised elimination of stiff South Korean tariffs on U.S. farm products and the prospect of a more open market for U.S. financial, engineering and other service companies, was enough for Obama to decide to try to win congressional approval of the South Korea agreement next year.
Announced on a day when the U.S. unemployment rate ticked higher, the agreement sets the stage for a debate in Congress over whether free trade with a major Asian nation can deliver the promised benefits or will instead drain U.S. jobs.
It is a sensitive matter at a time when concern is high over China’s huge trade surplus with the United States, allegations of unfair trade practices on its part, and a general sense that Asian nations have reaped the benefits of free trade without truly opening their markets.
In South Korea’s case, the Obama administration says the agreement will add more than $10 billion annually in U.S. exports and create employment for thousands. South Korea is the United States’ seventh-largest trading partner, and a free-trade agreement between the two would be the largest such deal since the North American Free Trade Agreement in the early 1990s.
Business groups quickly rallied around the pact.
Ford Motor Co. said it was satisfied the agreement will help balance the lopsided trade in motor vehicles between the two countries. Tens of thousands of South Korean cars are shipped to the United States each year, but only a few thousand U.S.-made vehicles move in the other direction. Ford had been the most vocal corporate holdout on an agreement that was pushed aggressively by the U.S. Chamber of Commerce and major American companies.
As a candidate, Obama was highly critical of existing free-trade agreements – including the then-pending South Korea pact – and said that as president he would ensure future trade treaties did more for American workers and include stronger labor, environmental and other safeguards.
The recent financial crisis and recession fueled doubts about those agreements and their value in particular to blue-collar America, but also prompted Obama to refocus on trade as a way to generate jobs. His administration has set a goal of doubling exports in the next few years, and organizations such as the Chamber have pushed in particular for a deeper trade engagement with Asia.
The region is growing rapidly, its middle class is expanding, and trade agreements are being signed at a furious pace. One factor pushing the South Korean-U.S. negotiations was the recent approval of a trade pact between South Korea and the European Union and the prospect that manufacturers in Germany and elsewhere would soon see lower tariffs and other advantages over their U.S. competitors.