Guest blog: Good outcome for a bad deal

Posted By Clyde Prestowitz Thursday, November 11, 2010 - 6:28 PM Share

Napoleon always said he liked lucky generals. He would have loved Barack Obama. The president is so lucky that he now has the South Koreans doing the dirty work of saving him from committing political suicide by signing a Free Trade Agreement (FTA) that would likely further increase both the U.S. trade deficit and the U.S. unemployment rate.

Reports from Seoul yesterday said the deal was essentially done and that Obama and South Korean President Lee Myung-bak would meet their self-imposed deadline by inking the deal today (Thursday). But no, the Koreans, who have been relentlessly promoting this deal as essential to both Korea's future economic well-being and its national security, suddenly said they couldn't agree to a small increase in imports of U.S. beef or a slight relaxation of emissions rules for imports of small numbers of foreign auto imports.

Since, like China, South Korea already manipulates its currency and imposes a myriad of subtle bureaucratic regulations and informal agreements that make the Korean market one of the most closed in the world, one might wonder why Seoul couldn't agree to these two U.S. requests which would in no way result in any significant increase in Korean imports from the United States. But Obama should really thank his lucky stars for South Korea's economic paranoia because it may save him from his administration's own worst instincts.

I know we're all supposed to be free traders and that opposition to anything labeled free trade is strictly taboo. But really, does anyone truly believe that we have anything like free trade with South Korea? This is a country that, as a matter of policy encourages the infringement of foreign intellectual property, and whose courts routinely annul the Korean patents of foreign based companies.

Yes, the proposed deal would significantly reduce Korean tariffs and facilitate foreign investment in Korea and contains strong language on the protection of intellectual property. But if the courts won't enforce the language what is the point? And tariffs are not the real barriers to foreign penetration of the Korean market, especially since the Korean government can and does manipulate its currency to offset the effect of any tariff reductions. As for facilitating foreign investment in Korea, why do we especially want to do that when we need investment in the United States? Moreover, the proposed deal on investment as presently constituted actually allows the U.S. branches of Korean companies to take disputes over U.S. regulatory rulings and impacts out of the American legal system by appealing to the World Bank and the International Court.

Isn't that something? The United States has consistently refused to join the International Criminal Court on grounds of protecting national sovereignty, but was just on the verge of signing a trade deal that would enable foreign companies to evade the sovereignty of the U.S. legal system in certain disputes. I wonder if the Republicans who have been promoting the deal understand that.

But sovereignty is not really the main point; that would be jobs. Here, the deal fails utterly. Of course, there are lots of studies by the various think tanks around Washington. Not surprisingly they only prove that while figures don't lie, liars figure.

If you are for the deal, you can easily find a computer model that will confirm your view and vice versa. So let me put it in the words of one of the Korean negotiators whom I know and to whom I posed the question of whether, honestly between friends, he thought the deal would significantly increase U.S. exports to Korea or U.S. employment. His answer was an immediate "no." And no one who knows anything about doing business in Korea believes otherwise.

So let's hope Obama's lucky streak keeps holding, at least until he gets out of South Korea.

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.

TIM SLOAN/AFP/Getty Image

EXPLORE:EAST ASIA, OBAMA ADMINISTRATION, TRADE
 

RKERG

11:03 PM ET

November 11, 2010

China is the only reason that we are so involved with S Korea

So, I am going to say this about our "friends" in China...The Rulers of China are in fact a thugocracy which once professed to be communist and now professes to be capitalist. However, if there were a massive student protest in Tianenmen square tomorrow, I have no doubt that the repression would be even more brutal than it was before.
Our "friends" on Wall street told us repeatedly for the last 30 years that opening up trade to China would transform that large country into a democracy, but, like just about every thing else you are likely to hear from Wall street, it was lies designed to line its own pockets. The experiment has failed miserably. Not only have millions of Americans lost their jobs to China, but, in addition, a brutal police state has been enriched and made more powerful. The M0R0NS of the Universe have struck again. I call upon the American corporations to close their factories in that vile place and come home.

 

BALTHAZAR

1:08 AM ET

November 12, 2010

it's exchange deal for KIA and Hyundai on US market

And Oldsmobile, Plymouth, AMC, Studebaker, Nash, Kaiser, Hudson, Packard, MG, Triumph, Austin don't exist anymore.

 

VIKOJHONS

1:50 AM ET

November 12, 2010

VJ

Here you can find your ip address do a reverse DNS lookup to find the ip address of a website, or check if a particular IP address previously attacked other Internet users.

 

FREETRADER

6:27 AM ET

November 12, 2010

WOW!

A full-on defense of knuckle-dragging, mouth-breathing, economically illiterate protectionism! Well, that, at least, is unexpected.

Could we please see some articles now from people who don't live in the 18th Century? That might be a little more relevant. Thanks.

 

WYCOFF

3:41 PM ET

November 14, 2010

Typical

Typical "free" trader response. People concerned about the American working class are mouth-breathing fools. If you don't actively and blindly support "free" trade policies that will have the end result of destroying the American working class, then you're a knuckle dragging idiot.

The globalist, "free" trade mirage is starting to evaporate, "free" trader. The working class of the Western world will not tolerate a return to a pre-1900, third world standard of living, which is the inevitable outcome of "free" trade with countries like China that only have a competitive advantage because they can treat their populace like slaves and despoil their environment with impunity. A race to the bottom will based on human misery is anything but free, which is why I use quotes around the "free" in "free"trade.

 

KUSHIBO

2:03 PM ET

November 13, 2010

All Asians same-same?

Ah, so don't support the KorUS FTA because Korea is "like China." China manipulates its currency to keep it artificially low so it can keep out foreign goods and flood the WalMarts of the world with its own drastically underpriced goods, while South Korea lets its currency generally float but will buy up or sell off dollars when its currency fluctuations are spiking are plummeting.

When the Korean won has seen fluctuations beyond its control from 900 won to the dollar to 1300 won to 1600 won and then down to 1100 won and now back up, they are nothing "like China."

This FP blog piece further goes on to demonize the South Korean side because they won't give in to US-side requests about car emissions. A nice oversimplification but what it's really about is dismantling South Korean emissions laws aimed at cleaning up the air quality — and ALL cars in Korea, whether South Korean, Japanese, German, or American, must follow them. While the Japanese and Germans are doing just fine in those markets, Ford and Chrysler are whining that such regulations (which Kia, Hyundai, Renault Samsung, and GM Daewoo all follow as well) are trade barriers. Why not demand an end to $8/gallon gas, too. That's a non-tariff trade barrier as well!

The remark that Americans shouldn't be concerned about "facilitating foreign investment in Korea" because "we need investment in the United States" is also a bit ridiculous, considering that the FTA would also encourage South Korean investment in the US. Yeah, believe it or not, South Korean companies do invest in the US (folks in Georgia, Alabama, and California certainly know this), and this could increase it more. South Korean money will go to the US instead of China, wouldn't that be wonderful!

Of course, the author may not have thought of that, since he seems to think of South Korea as some poor country that can barely provide for its overpopulating masses, "like China."

Don't let the troglodyte trick you into thinking the sun will melt you if you leave the cave.

 

KWILLETS

10:44 PM ET

November 14, 2010

Now Just Hold On Here One Damn Minute

The following paragraphs are from Korea's Hankyoreh, which helpfully lists the laws in question. The US keeps trying to abolish Korea's gas guzzler taxes, and Korea keeps trying to do its environmental duty and keep them. For a while Obama was able to call them "hidden trade barriers", despite them being neither, but once this phrase was decoded he replaced it with "slight relaxation of emissions rules", which I suppose will only result in a "slight increase in global temperatures".

>The KORUS FTA text signed in April 2007 includes a provision in which the South Korean government abolishes its system of progressive automobile taxation according to displacement and is prevented from levying graduated taxes according to displacement in the future as well. When this was met by a strong wave of public opinion criticizing it as an abandonment of tax sovereignty, the Roh Moo-hyun administration explained, “There is no problem if we introduce an automobile tax system using prices, emissions gases, or fuel efficiency as our standard.”

>Lee Hae-young, international relations professor of Hanshin University, said, “The U.S. government tells its car companies to develop vehicles with good fuel efficiency, but then it takes issue with fuel efficiency in South Korea.”

>“If we put off revising the automobile tax because of the KORUS FTA, that is no different from our giving up tax sovereignty,” Lee added.

http://www.hani.co.kr/arti/english_edition/e_business/436667.html

 

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