US-Korea Trade Treaty after 2 Years: America is Harmed and Obama Wants More!
By Ken Davis and Will Wilkin
(This article is written from a Connecticut perspective but similar dismal results will be found in most states across the USA.)
Creating more American jobs should be Congress’ priority, which is why we cannot afford any more-of-the same trade deals.
The latest evidence: two years after the Obama administration’s major U.S.-Korea Free Trade Agreement (FTA) went into effect, new government data show U.S. monthly trade deficits with Korea have ballooned 47 percent relative to before the agreement, which represents the loss of at least 50,000 additional American jobs in the FTA’s initial 24 months.
Time and again, the American public and Congress are promised that the latest trade deal will expand our exports – creating American jobs and new profits for our farmers and ranchers. With the Korea pact, we were told that modifications had been made to ensure it would not repeat the job loss of the North American Free Trade Agreement. We are now hearing the same promises used to sell the Trans-Pacific Partnership (TPP), a massive deal being negotiated by the Obama administration with 11 other nations. The Korea deal was literally used as the template for the TPP.
But time and again, the reality proves to be the opposite of the promises. On the second anniversary of the Korea FTA, U.S. monthly goods exports to Korea are down 11 percent, with U.S. farmers and auto workers hit particularly hard. Indeed, since the Korea pact went into effect, U.S. exports to Korea have fallen below the pre-FTA average monthly level for 21 out of 22 months for which data is available. The crash in U.S. exports is particularly concerning given that Korea’s overall imports from all countries increased by 2 percent over same years.
The total U.S. trade deficit with Korea under the FTA’s just-completed second year is projected to be $8.6 billion higher than in the year before the deal. Using the administration’s trade-jobs ratio, that would equate to the loss of more than 57,000 American jobs.
Connecticut’s workers have seen their share of losses under the FTA. U.S. monthly net exports to Korea of helicopters – Connecticut’s second largest export – have plummeted 81 percent on average under the FTA, relative to the year before the deal. Indeed, U.S. average monthly net exports to Korea have fallen in seven of Connecticut’s top 10 export sectors under the FTA. The combined U.S. monthly net exports to Korea of these top 10 export products have fallen 12 percent on average – a loss of $40 million each month.
But Connecticut’s losses under the Korea FTA are no exception. Nationwide, U.S. average monthly exports to Korea have fallen in 11 of the 15 sectors that export the most to Korea, compared to the year before the FTA. And while losing sectors have faced relatively steep export declines (e.g. a 12 percent drop in computer and electronics exports, an 11 percent drop in machinery exports), none of the winning sectors has experienced an average monthly export increase of greater than 2 percent.
Ironically, many sectors that the administration promised would be the biggest beneficiaries of the Korea FTA have been some of the deal’s largest losers.
Consider agriculture. Average monthly exports of U.S. farm products to Korea have fallen 41 percent under the FTA. U.S. average monthly poultry exports to Korea have fallen 39 percent, while pork and beef exports have declined 34 and 6 percent respectively. All told, U.S. meat producers have lost a combined $442 million in exports under the deal so far.
The auto industry, meanwhile, has been hit with a post-FTA flood of imports that has increased the average monthly U.S. automotive trade deficit with Korea by 19 percent. While about 125,000 more Korean-produced Hyundais and Kias were imported into the United States in 2013 (after the FTA) than in 2011 (before the FTA), sales of U.S.-produced Fords, Chryslers and Cadillacs in Korea increased by just 3,400 vehicles.
Meanwhile, the growth in U.S. services exports to Korea has dropped 24 percent under the FTA – from an average quarterly rate of 3.0 percent in the year before the FTA to 2.3 percent since the deal’s enactment.
More of the same trade deals will only continue this damage. Indeed, the overall growth of U.S. exports to nations that are not FTA partners has exceeded combined U.S. export growth to U.S. FTA partners by 30 percent over the past decade.
The new evidence of the Korea FTA’s damaging record provides the latest reason why Congress should not delegate away its constitutional trade authority and allow the TPP be fast tracked into place. Rather, Congress must retain its full power to chart a new course that harvests the benefits of expanded trade without destroying what is left of America’s middle class.
Ken Davis is a former Assistant Secretary of Commerce and a former V.P and CFO of IBM Corp. Will Wilkin is a Co-Owner-Operator of Made In USA Solar LLC. They are Founding Members of Balanced Trade Associates in Stamford, CT, dedicated to ending America's trade deficits by replacing our Free Trade policy with a Balanced Trade policy that limits our imports to the same value as our exports. Mr. Davis and Mr. Wilkin thank Ben Beachy and Lori Wallach at Public Citizen for the research behind this article.