As I reported from Seoul, Korea last week, there are multiple reasons why passing the U.S.-Korea Free Trade Agreement (KORUS) (as soon as possible) is exactly what the U.S. manufacturing economy needs to jump-start domestic growth, employment and expansion. I’m beginning to feel a bit like Paul Revere, trying to warn Congress and the Administration that as far as our exports are concerned in Korea, “The British are coming, the British are coming!”
Except it’s not just the British but an entire European Union’s worth of manufacturing that is coming, duty free, to Korea next year. We’re not the only ones sounding an alarm, of course. It was good to see Ambassador Han Duk-soo, Korea’s plenipotentiary to the United States, make the same point in San Francisco earlier this week. What Ambassador Han is essentially saying is: America, it is within your power to remove all the barriers in my country and increase your exports and grow your economy.
The decision not to use that power is a unilateral one that the United States has had on hold for more than three years with Korea, Colombia and Panama. We are patently acting against our own best interests, and the Europeans and others are flooding in to take advantage of our absence.
Not to belabor a point that has been raised by international economists and trade policy analysts across the political spectrum: Cutting tariffs and non-tariff barriers in foreign markets through preferential trade agreements does not reduce or outsource American factory jobs, it creates more of them. How? Our market is open, with tariffs averaging 2.5 percent. Most other markets (developing as well as some developed) in the world have tariff and non-tariff barriers that are far higher. When we sign a FTA with a country, its barriers come down, and as a result, our exports go up, both in volume and value, and more than our imports from that country.
Voilà, increased exports. Since manufactured goods are two-thirds of our exports, when we increase those exports, we boost manufacturing output, employment, and growth here at home. While we have a trade deficit overall in manufactured goods, we have a trade SURPLUS in manufacturing with our free trade agreement partners – more than $50 billion worth over the last two years.
It’s exactly these goals that President Obama called for achieving when he proposed the National Export Initiative (NEI) back at the State of the Union. The KORUS agreement, along with Colombia and Panama, represent about $12-14 billion in potential export growth (according to the USITC) that can be a powerful stimulus to manufacturing growth and employment in America. Studies that purport to show differently, as the NAM’s Frank Vargo demonstrated in a blog here a while back, are not making fair use of numbers.
It was disappointing to see the President go against his NEI foundation by making comments about “trade agreements that outsource jobs,” to be sure. These are job creators, not job killers. Put it a different way: For three years we’ve had a pause on trade. We’ve seen what that does to the economy. Maybe we ought to pass a few trade agreements – export promotion agreements, really – and see if that makes a difference.