While the National Association of Manufacturers is disappointed that President Obama and Korean President Lee were unable to close out the U.S.-Korea Free Trade Agreement negotiations this week, we fully support their efforts. The KORUS FTA would be the largest bilateral U.S. trade deal since NAFTA, and it matters to U.S. manufacturers. The agreement eliminates tariffs on 95 percent of consumer and industrial products between the countries within three years, opening up the world’s seventh largest economy. But the NAM has said from the day the agreement was signed that the U.S. auto industry believes there has to be more market access in Korea, particularly by reducing non-tariff barriers. We sincerely hope that when the U.S. and Korean trade negotiators meet again, that they will achieve that market access so that the United States can begin receiving the benefits of free trade that our competitors are about to receive. The stakes are getting higher.
In just the past week, the United States’ two largest trading partners have announced aggressive trade policies to ensure that their exporters have new access to world markets and keep their economies competitive. Meanwhile, the United States continues to debate whether to take Korea, Colombia and Panama’s offers to eliminate for American exporters their tariffs and other trade barriers. Both Japan and the EU have free trade agreements with these countries already or are proposing to negotiate them.
Japan has long remained in the shadows of international economic leadership because of its inward looking agriculture policies, but the Japanese government announced this week that it will press ahead with fundamental domestic reforms in order to implement comprehensive free trade agreements. It said it will put all goods on the table in trade negotiations. It is going to resume free trade negotiations with Korea. At the same time, Japan will be seeking a China-Japan-Korea FTA and an East Asian Free Trade Agreement (EAFTA). Unlike the United States, Japan also wants to speed up a study of a possible agreement with the European Union.
On the other side of the world, European Commission on Nov. 9 announced a trade policy to help revitalize Europe’s economy. In its announcement, the EU acknowledges that trade is an engine for economic growth and job creation. Like Japan, Europe proposes to launch new trade negotiations with the countries in Southeast Asia and to negotiate investment agreements with key partners. It intends to complete its negotiations with major trading partners like India. Our European friends believe completing this agenda would increase European GDP by more than 1 percent per year.
If the United States were to take similar action and approve the pending free trade agreements, we could see a $12 billion increase in U.S. exports, creating or sustaining tens of thousands of sorely needed jobs. If the United States would be equally aggressive as Japan and Europe and conclude FTAs with significant trading partners, then U.S. exports could reach $100 billion and actually help meet the President’s stated goal of doubling U.S. exports in five years. NAM believes that is possible (see the NAM’s Blueprint to Double Exports in Five Years) but Presidential rhetoric and modest trade promotion programs will not be sufficient to achieve that important goal. We also need to undertake bold new negotiations on trade AND investment agreements if we hope to remain competitive in the world economy.
According to the European Union Commission, the EU “plans to use trade policy to help exit the current crisis and to create the right environment for a strong EU economy.” That’s a model the United States should embrace.
Stephen Jacobs is the NAM’s senior director for international business policy.
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