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- Hindrey, Jr. 11
Impact Defense: EconomyThe Economic Advantages of SKFTA are Not Huge, Not Passing Won’t Cause Collapse Cooper, Manyin, Jurenas, Platzer 2011 (3-1-2011, Cornell University, The Proposed US-South Korea Free Trade Agreement (KORUS FTA): Provisions and Implications, http://digitalcommons.ilr.cornell.edu/cgi/viewcontent.cgi?article=1818&context=key_workplace&sei-redir=1#search=%22korus%20collapse%22 Accessed 7/23/11) Economists have released several studies estimating the potential effects of the KORUS FTA. As required by the TPA statute, the USITC conducted a study in 2007 of the KORUS FTA at the request of the President.14 The USITC study concludes that U.S. GDP would increase by $10.1 billion to $11.9 billion (approximately 0.1%) if the KORUS FTA is fully implemented, a negligible amount given the size of the U.S. economy. The USITC based this estimate primarily on the removal of tariffs and tariff-rate-quotas, that is, barriers that can be relatively easily quantified. The study concludes that U.S. exports of goods would likely increase by $9.7 billion to $10.9 billion, primarily in agricultural products, machinery, electronics, transportation equipment, including passenger vehicles and parts. U.S. imports would increase $6.4 billion to $6.9 billion, primarily in textiles, apparel, leather products, footwear, machinery, electronics, and passenger vehicles and parts. The range does not take into account the impact of the reduction of barriers to trade in services and to foreign investment flows and the impact of changes in regulations as a result of the KORUS FTA. The study notes that U.S. exports in services would increase as a result of South Korean commitments under the KORUS FTA, and that changes in the regulatory environment in both countries would also help to increase bilateral trade and investment flows. The study estimates that changes in aggregate U.S. employment would be negligible given the much larger size of the U.S. economy compared to the South Korean economy. However, while some sectors, such as livestock producers, would experience increases in employment, others such as textile, wearing apparel, and electronic equipment manufacturers would be expected to experience declines in employment.16 Other studies draw the same basic conclusions, although the magnitudes differ because they employ different models from the USITC study. For example, a University of Michigan analysis commissioned by the Korea Economic Institute estimates that U.S. GDP would increase by $25.12 billion (0.14% of U.S. GDP). This is larger than the USITC estimate, but in part this is because its authors quantified the effects of liberalization in services trade. The authors also analyzed the impact of a KORUS FTA before the final text had been released and assumed, among other things, that rice trade would be liberalized, which, in the end, was not the case. In December 2005, the Korea Institute for International Economic Policy (KIEP) published a study measuring the potential economic impact of a U.S.-South Korean FTA on South Korea alone. The study estimated some of the dynamic, or long-run, economic effects in addition to the static, or one-time, effects of the FTA on South Korea. The KIEP study estimated that the FTA The benefits of are these agreements are empirically denied, and SKFTA is just another flawed FTA. Hindrey, Jr. 11 (Leo Hindery, Jr., July 12, 2011, Huffpost Politics, “These three Free Trade Agreements are Clunkers—and They Need Some Courage”, http://www.huffingtonpost.com/leo-hindery-jr/these-three-free-trade-ag_b_895503.html) Indeed, the only standard that should govern in considering a new FTA is whether it's in the best interests of American workers and the U.S. economy, and the three FTAs on the table are clearly not. Unfortunately, my gut tells me that despite 'substance' being strongly in favor of rejecting each Agreement, the fates of these three FTAs are going to be determined by the selfish political agendas of America's multinational corporations and major banks unless Congress has some more arrows to shoot at them. In my opinion, the best remaining opportunity to beat these Agreements back is to therefore forcefully show, as Leo Gerard contends, that the promises of job growth from previous pacts have indeed been empty ones. Sam Sherraden of the New America Foundation, who is one of the great young talents in trade analysis, and I have looked carefully at the eleven in-effect multilateral and bilateral Free Trade Agreements enacted since 1985, when the U.S. entered into its first ever, with Israel. These Agreements, which involve seventeen countries, range from quite small (Bahrain in 2004) to extremely material (NAFTA in 1994 and CAFTA in 2004). While promises associated with FTAs are sometimes difficult to assess, looking back at all of our previous bilateral and multilateral trade agreements, these are the facts and, in one case, our observation: • None of the eleven Agreements has come close to meeting the fundamental promises made to the American people about the increase in U.S. net exports and the creation of American jobs which it would produce. This said, for the smaller FTAs it seems not inappropriate, however, to consider non-economic factors provided U.S. values are not compromised (as would be the case with the proposed Colombia FTA). • The two multilateral FTAs --nNAFTA and CAFTA -- are each a particular mess against the promises made to gain approval. As I've written repeatedly, 'one size never fits all' in trade agreements, especially when the differences in relative development are extreme (NAFTA) or when the export mix among the countries is extreme (CAFTA). The failures of NAFTA and CAFTA to perform even remotely as promised argue strongly against advancing the Doha Round as currently structured. • From the year before NAFTA was signed (1993) to five years later, the U.S. trade deficit with Canada actually widened from $13.4 billion to $23.9 billion. During the same time period, America's trade balance with Mexico went from a surplus of $900 million to a deficit of $17.1 billion. By 2010, the U.S trade deficit with Canada and Mexico was $32.2 billion and $68.6 billion, respectively. • From 2003, the year before CAFTA was signed, to five years later, U.S. net exports to the five CAFTA member countries (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) went from a $2.24 billion deficit to a $2.79 billion dollar deficit, a deterioration in the trade balance of $556 million. • Imports from only 2 of the 9 FTA bilateral partners (Chile and Israel) grew faster than imports from the rest of the world. • Out of the 9 bilateral FTAs, exports to 5 of them -- albeit all smallish except for Chile -- grew faster than U.S. exports to the rest of the world grew. • Smallish FTAs are negligible in terms of America's overall trade balance and have little potential to be a driver of exports and job creation. Even with Australia, which is a very large bilateral U.S. trade partner, the U.S. trade balance only improved by $6.6 billion from 2004-2009 (which does not take into account economic growth during this period). • When assessing the likely outcome of the proposed trade agreement with South Korea, one may want to look at Singapore as an example. Singapore is a highly advanced economy with a trade profile similar to South Korea's. In the five years after the FTA with Singapore was signed, U.S. exports grew less than U.S. exports to other parts of the world (a negative sign) while U.S. imports from Singapore grew less than imports from the rest of the world (a positive sign). Two Conclusions and Three Recommendations: (i) Not all future FTAs will necessarily be bad, only those that are concluded along the same lines as the three pending ones. Notwithstanding, future FTAs are unlikely to significantly increase our net exports and they may in fact lead to a deterioration of the U.S. trade balance. (ii) Don't let a moral imperative like extending TAA alone be exchanged for approval of flawed FTAs that will cost American jobs. ********** 1. Re Panama, fix the "challenge provisions" of the proposed FTA, tighten up narco-trafficking oversight, and when that's done, then pass the Agreement. 2. Re Colombia, make the "Action Plan" a formal part of the proposed FTA, as demanded by Congressman Sander (Sandy) Levin (D-MI) and all other friends of workers worldwide, and when that's done, then pass the Agreement. 3. Re Korea, acknowledge that KORUS is deeply, deeply flawed, and use its many flaws, plus the failure of a single one of the eleven FTAs enacted since 1985 -- large and small alike - to keep its trade and jobs promises, as the justification for a substantial renegotiation. 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