Profits at big U.S. companies broke records last year, and so did pay for CEOs. The head of a typical public company made $9.FORT WAYNE – The U.S. State Department describes South Korea as being slightly larger in geographic size than Indiana.
The U.S. trade representative describes South Korea as being a huge opportunity for Indiana exporters.
Ambassador Ron Kirk believes Hoosier manufacturers, farmers and service providers will see rewards from recently approved free-trade agreements between the United States and South Korea, Colombia and Panama.
“The words ‘Made in America’ are still three of the most treasured words in the world. It is the most powerful brand,” Kirk said in a telephone interview last week.
“We’re going to fight to make sure … they are going to buy from us rather than buy from someone in Europe or Africa or Brazil,” he said about the trading partners. “That’s why these opportunities are critical.”
Others – including many Democrats in Congress – are unconvinced, fearing U.S. jobs are at risk, especially under the deal with South Korea.
The trade agreements will reduce, phase out or eliminate tariffs on U.S. goods and services sold in the three nations. The pending deals, which date to George W. Bush’s administration, were renegotiated by the Obama White House and won congressional approval this month with little fuss.
“We did it with one of the strongest – and some would say only – bipartisan votes in this Congress,” Kirk said. “When there is a lot of other rancor going on, that’s a nice testament to, at least, how we did it, as much as what we did.”
Free vs. fair
International trade has long been the bailiwick of Republicans, who control the House. Democrats, who control the Senate and White House, insisted first on renewing and expanding the Trade Adjustment Act, which provides benefits, including training, to workers whose jobs are displaced by trade deals.
In the end, the three pacts were endorsed by both the National Association of Manufacturers and the United Auto Workers, groups often at odds on political issues.
In an Oct. 14 op-ed piece, UAW President Bob King praised provisions of the South Korean deal he said would protect U.S. auto jobs: the retention of a 2.5 percent tariff on South Korean cars until the fifth year of the agreement and a 25 percent tariff on South Korean trucks until the eighth year, a halving of South Korea’s 8 percent tariff on U.S.-made electric cars and stipulations for that nation to enforce labor rights.
The U.S. International Trade Commission has said the three deals will create up to 280,000 American jobs and increase U.S. exports by at least $12 billion a year, or almost 1 percent. The country’s total exports were valued at $1.28 trillion last year, including nearly $29 billion worth of Indiana-made products.
Still, many Democrats opposed the deals. In three votes taken in the Senate on Oct. 12, the combined tally was 226-70, with Democrats and one independent legislator accounting for all but three of the “no” votes.
In the House, the combined vote the same day was 840-447, with 411 of the “no” votes cast by Democrats. Rep. Joe Donnelly, D-2nd, who represents the South Bend area and seeks the Democratic nomination for the Senate in 2012, was among the dissenters.
“I support fair trade. I voted against the trade agreements because they don’t live up to that standard,” Donnelly said in an email last week.
“For example, the agreement with South Korea contains a provision limiting the number of vehicles that can be exported duty-free to 25,000 per U.S. automaker while Korean automakers can, duty-free, export an unlimited number,” he wrote.
“Colombia remains a dangerous place for workers seeking basic rights, and Panama has a history of being a haven for money launderers and tax dodgers. In each of these cases, I think that American manufacturers and workers are put at a disadvantage,” Donnelly wrote.
Three House members and two senators who represent northeast Indiana – all of them Republicans – voted in favor of the bills, signed Oct. 21 by President Obama.
“The more markets we can open, the better opportunity we have to export our products, which provide for jobs here at home,” Sen. Dan Coats, R-Ind., said in an interview last week. “This is a global economy we live in; the reality is that if it’s not made here, somebody is going to make it somewhere else. We want to be competitive in that regard.
“We particularly benefit in terms of agriculture,” Coats said.
The American Soybean Association celebrated the agreements, predicting yearly agriculture exports would increase by $3 billion. The group noted the U.S.-Colombia deal will remove tariffs ranging up to 20 percent on U.S. soybean products and phase out 24 percent tariffs on soybean oil.
“Agriculture exports are more dependent on foreign markets than any other product made or grown in America,” said Kirk, who visited the Summit City for a U.S. Conference of Mayors leadership meeting in 1997 when he was Dallas mayor.
A need for goods
Among the opponents of the recent trade agreements is consumer advocacy group Public Citizen.
In a report issued in May, the group said the U.S.-South Korea pact would risk jobs in certain industrial sectors that employ 130,000 in Indiana, including 33,000 in its northeast congressional district.
Public Citizen, basing its forecasts on data from the U.S. International Trade Commission, said Indiana’s 3rd District is the fifth-most vulnerable congressional district in the nation for job losses because of its manufacturing footprint – particularly motor vehicles and related parts, which are major exports for South Korea.
Everything else being equal, the balance of automotive trade should favor South Korea if for no other reason than the Asian nation, with fewer than 50 million residents, is less than one-sixth the size of the U.S. market. South Korea is a car-producing nation (brands include Hyundai and Kia) that has a much smaller consumer market than its car-producing trade partner, the U.S.
“You’re not going to make South Korea larger than it is,” Kirk said. “South Korea is an incredible strategic partnership; South Korea is a very modern economy. But they still have a need for a lot of goods that they don’t produce.
“So if they are going to buy airplanes, I’d damn sure rather they buy them from Boeing than from Europe,” the trade ambassador said. “South Korea is a half-a-trillion dollar services market; that is a great opportunity for American architectural firms and everyone from FedEx and UPS and insurance. We want to compete for those jobs.
“Right now, there are over 230,000 American jobs supported by what we sell to South Korea. This isn’t an issue of comparable markets. If that was the case, the United States wouldn’t have trade agreements. We’re still spectacularly the largest economy in the world.”
‘A better deal’
The federal government has signed free-trade agreements with 20 nations since 1985. Ten are with nations in Central or South America, and four are in the Mideast. The only free-market agreements the U.S. has in Asia are with South Korea and Singapore.
But when President Obama took office in 2009, “the American public was souring on trade,” said Kirk, who joined the administration in March of that year, when U.S. unemployment had risen to 8.6 percent. Since then, national unemployment has stayed stubbornly over 9 percent.
He said despite benefits to American consumers, “they just didn’t think trade could work to support jobs.”
“We just could not ignore the reality that 95 percent of the world’s consumers now live somewhere other than the United States,” he said. “And it was not in our long-term economic interest to only play for 5 percent.
“So going forward, we thought we had two options: One, we could frankly cave in to the critics of trade and say, ‘Hey, take a timeout, let’s pull back.’ We thought that was unwise because all we would be doing would be ceding ground to China and Europe and others.
“Secondly, we also rejected the counsel from those that said, ‘Look, these trade agreements are good, let’s just push them through,’ because that flew in the face of a lot of legitimate concerns that we’d heard, … even from some of our big exporters and farmers and ranchers,” Kirk said.
“We thought the more intelligent path was, let’s try to fix what’s wrong and do trade in a different way. And that’s what we did with each of these agreements.”
Next up for the Obama administration is the Trans-Pacific Partnership free-trade agreement being negotiated by nine countries: Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. Kirk also sees more prospects across the Atlantic.
“Almost half of the fastest-growing emerging economies around the world are now in Africa,” he said. “We have a very tortured, complex relationship with Africa. There are countries in Africa that are doing well. Africa still has challenges in terms of governance in some places and some issues in infrastructure.
“But American businesses are finding very receptive markets in Africa. … I think we miss an opportunity if we don’t take advantage of the unique relationship that we have with Africa.”
