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South Korea: The Next ‘Free Trade’ Battleground

The upcoming fight over the proposed Free Trade Agreement with Korea, first negotiated by President George W. Bush but not yet ratified by Congress, is now being promoted by the Obama administration. A majority of Democrats and a few key Republicans have already come out strongly against the proposed treaty calling it managed trade not free trade and citing the toll it will take on American jobs and its threat to sovereignty via international control over its provisions - all buried in 1000 pages of details. Some have labeled it "Son of NAFTA," after the costly and controversial North American Free Trade Agreement. Peter Gemma, a freelance journalist and columnist with Middle American News, recently interviewed Ian Fletcher, Adjunct Fellow at the U.S. Business and Industry Council about the pending agreement.

GEMMA: Your latest book, "Free Trade Doesn't Work," has just been published.Tell me something about the premise - one does not see the issues of globalization, free markets, and trade deficits framed that way.

FLETCHER: It has been taken for granted by our government for decades now that free trade is a good idea.  But in reality, as soon as one makes the effort to dig beneath the surface of the economics that supposedly proves free trade is best, one discovers that free trade has enormous drawbacks—and that for most of American history, our government was well aware of this and America did not have free trade.
 
GEMMA: Isn’t “free trade” a good idea in general?

FLETCHER: No, it isn’t.  Trade is a good idea, but that’s not the same thing as free trade.  We haven’t taken pure laissez faire seriously in our domestic economy in over 100 years, so why should we take it seriously internationally?  You can’t even have real free trade except in a perfect world with no political interference, which is not even remotely the reality.
 
GEMMA: Most conservatives, libertarians and Republicans support free trade. Why shouldn’t I support it?

FLETCHER: For a start, the libertarian answer to this question isn’t the same as the conservative or Republican answers.  The conservative answer is that America’s tradition in trade policy, which goes back to Alexander Hamilton, the man on the $10 bill, is protectionism.  And for the Republican Party, prior to WWII, protectionism was one of its major political principles.  Do you know that Karl Marx was a free trader? Libertarianism is totally naïve about the reality of foreign mercantilism, currency manipulation, state subsidies for industry, and all the other ways foreign nations decline to play by our rules.  And given that China, for example, is kicking our behinds economically right now, why should they believe our rules are better? 
 
GEMMA: Times are tough; isn’t this a pro-business agreement that'll give the economy a boost?

FLETCHER: Depends what kind of businesses you’re talking about.  If you’re talking about multi-national corporations that have no loyalty to the U.S. and call themselves “American” just to get in the door on Capitol Hill, then sure.  These people don’t give a fig about American decline.  Neither do the big retailers like Wal-Mart, who now mainly sell imported goods.  But if you’re talking about Main Street business or the kind of small and medium-sized manufacturing companies that still produce in the U.S., no it’s not pro-business at all.
 
GEMMA: Won’t it benefit the U.S. to eliminate the Korean tariffs on U.S. goods?

FLETCHER: On paper, yes, sure.  But in reality, we’ve been through these games with over a dozen other nations before, and it always seems to turn out that the U.S. actually respects its market-opening agreements, while foreign nations game the system.  How many times do we have to get burned before we learn?  A big part of the problem is that many foreign trade barriers are not tariffs, or indeed any formal legal barrier at all—they’re covert policies and understandings that foreign governments have with their own corporations which enable them to keep out American goods without violating the letter of any treaty they sign with us.
 
GEMMA: Would this treaty somehow threaten U.S. sovereignty as some claim?

FLETCHER: The issue is the WTO [World Trade Organization], because our Constitution says treaties are the supreme law of the land—overriding our right to make our own laws on environmental standards, worker safety, and anything else. 
 
GEMMA: I’ve heard that Korean companies operating here could sue us in foreign courts. That can’t be true.

FLETCHER: Yes, Korean businesses and other multi-national corporations could take any dispute with federal or state laws, regulations, or rules to the WTO. Federal or state courts could see their authority overruled.  There are over a two hundred corporate affiliates of Korean firms in the U.S. that would obtain these new rights under the FTA to challenge local, state and national laws.
 
GEMMA: President Obama says he’s “fixed” the problems in the previous agreement signed by President Bush. Isn’t it better now?

FLETCHER: No, the changes are window dressing.  They’ve mollified the auto sector a bit.  But the U.S. shouldn’t be signing any more free trade agreements at all.  The Economic Policy Institute has estimated the Korea FTA will cost America over 150,000 jobs.
 
GEMMA: What are some examples of industries that will be hardest hard if it passes?

FLETCHER: The American automobile industry continues to suffer from the fact that Korea sells us something like nine cars for everyone one we sell over there.  This is unlikely to change by much, though the car companies welcome the opportunity to produce in Korea for the U.S. market.
 
GEMMA: President Obama can’t just shove this through without public debate. Certainly he’s learned his lesson after his healthcare initiative.

FLETCHER: He’s unlikely to avoid serious debate on this agreement, and I personally doubt whether it will pass.  The public is getting more skeptical of free trade every day. An NBC-Wall Street Journal poll in September 2010 found 53 percent of Americans believing free trade agreements hurt the U.S., with only 17 per-cent believing them beneficial; the split had been 30 vs. 39 percent in 1999.
 
GEMMA: Who opposes this agreement?

FLETCHER: A majority of the public is now against more free trade agreements.  The Korea FTA is opposed by much of the President’s own party, many trade unions, and some Republicans, like Ron Paul (TX) and Walter Jones (NC) who don’t consider this trade agreement genuine free trade.  A recent poll even showed most Tea Party sympathizers against free trade agreements.   Also Main Street businesses and the domestic manufacturing community.  Even the official U.S. International Trade Commission says it will increase America’s trade deficit.
 
GEMMA: Who supports this agreement?

FLETCHER:  President Obama and the Republican Congressional leadership.  Multinational corporations and their clubs, the U.S. Chamber of Commerce and the National Association of Manufacturers.  And the big retail chains like Wal-Mart.

GEMMA: Thanks so much for your time Ian. Frankly, I'm afraid that with Washington's political power brokers allied with Wall Street elitists and multi-national corporate moguls, the fight is an uphill battle. We lost the NAFTA fight in similar circumstances. Unless there is early and strong grass roots opposition, the treaty will sneak though under "fast track" maneuvers in the House. The encouraging news however, is that a coalition is being formed to oppose it: the AFL-CIO, Republican Congressmen Ron Paul, consumer advocate Ralph Nader, and Donald Trump have all found common ground in opposing the Korea Free Trade deal. The Observer readers can find more information at the website http://www.stopuskoreanafta.org/

5 Responses »

  1. If the KORUS FTA isn't good for small and medium-sized businesses, then why are they all in favor of it?

    Also, FTAs are not treaties.

  2. This article is spot on on how small and medium manufacturers will be hurt by KORUS. Our business is in textiles with 100 employees.

    The bottom line is the textile sector was “thrown under the bus” from a fairness point of view. The textile industry asked the Obama Administration to make three fixes to the KORUS agreement in order to ensure that U.S. textile, apparel and fiber jobs were not outsourced to Korea and China. These fixes concerned loopholes in the enforcement portions of the agreement that benefit China, a tariff schedule that gives Korean exporters better terms than U.S. companies and immediate duty phaseouts for textile products in the agreement that are important to many U.S. textile companies. Unfortunately, the Administration ignored the concerns of workers in our district and those jobs are now in jeopardy. It is absolutely wrong that our workers should bear the brunt of White House priorities that put textile jobs at the bottom of the basket.

    The textile industry in the USA has seen dramatic contraction since NAFTA and again when China was accepted into the WTO. Over 1,000,000 jobs have been lost in the last 15 years! Our major concern is that with continued industry contraction, all of us lose suppliers, capital equipment providers, and most importantly economies of scale in the supply chain. As an example, less than 10 years ago there were 3 USA producers of HT polyester yarn. Today there is only one and they have reduced capacity and had to raise prices reflecting the higher costs due to lower volume. In our primary market, coated industrial fabrics, Korea imported over 18,000 metric tons of fabric to the USA while the USA exported less than 100 metric tons to them! (Korea’s GNP is 1/10th of the USA’s.) Of greater concern is there is not language in the Treaty restricting the use of Chinese yarn or cloth (transshipment) effectively allowing Chinese manufacturers, and possibly North Korea, to ship material duty free through Korea. Upon passage, USA import duties will drop to zero in most textile classifications immediately, but many of Korea’s import duties will phase in over 5 or even ten years. Textiles are the biggest payer of import duties, at a time our federal government need the money.

    Enough is enough! To get America back on the path of growth, we must have a strong manufacturing base. Our collective voice will help shape the discussion in Washington.

    We are asking for your support individual letters emails and phone calls to your Representative and Senators in Washington. Only a grass roots effort will give our representatives pause and be able to stand up to the multinational and large retailers lobbying efforts for passage.

Trackbacks

  1. South Korea: The Next ‘Free Trade’ Battleground | Conservative Heritage Times
  2. South Korea: The Next ‘Free Trade’ Battleground – Trade Reform
  3. South Korea: The Next ‘Free Trade’ Battleground | Stop U.S.-Korea NAFTA