Doug Goudie, Director of International Trade Policy for the National Association of Manufacturers, has been reporting from a business and trade mission to South Korea.

This will be my last blog from Korea, as we are completing our final day of meetings. It will not be my last blog ON Korea, however – I will be doing a “macro” kind of blog next week on what we might expect leading up to the crucial KORUS FTA deadline of the G20 meeting in Seoul on Nov. 11-12.

I say “deadline” because, really, it is a very important date set by President Obama. Mr. Obama, at the G20 in Toronto in June 2010, announced he was instructing his negotiators to resolve outstanding auto and beef issues with their Korean counterparts. Mr. Obama noted he wanted this done by the Seoul G20 summit so that when he and President Lee meet there, they can conclude the KORUS and declare it final, and President Obama can then send the completed agreement to Congress for approval in the months that follow.

This is key: While not every “i” needs to be dotted and “t” crossed by the end of G20 on KORUS, if there is no agreement and announcement on resolution of autos and beef, it means the KORUS agreement is in trouble, timing-wise. It means a crucial deadline has been missed. If you want an example of what happens when negotiators miss deadlines, take a gander at the last 10 years of the WTO Doha Round.

That’s an extreme example of course — well, we’ve waited over 3 years on KORUS already — but the G20 deadline is key because it will involve the two Presidents, who agreed to this back in June. Their personal involvement will be crucial to achieving a successful resolution. If they cannot, it is doubtful we’ll see agreement soon, and that could impact Congressional movement on KORUS next year.

After our myriad meetings this week, I continue to be confident that there will be agreement on the outstanding provisions and an announcement at the G20 on KORUS, which clears the way for Congressional approval before mid-year 2011.

Doug Goudie of the National Association of Manufacturers sends his thoughts having toured the DMZ as part of a business delegation’s trip to South Korea.

In the years after the truce for the Korean conflict was signed in 1953, it was assumed by both sides that a permanent peace treaty would be signed, ending the 4 km wide demilitarized zone (DMZ) and replacing it with an established legal border. However, 57 years later, this hasn’t happened. So, a pre-war village on the South Korean side within the DMZ continues to function — harvesting rice, ginseng, and other products. As the North and South Korean positions hardened in the years following the end of the war, North Korea engaged in a PR battle.

North Korea's "Freedom Village" and the largest flagpole in the world. Photo: Doug Goudie

The South Korean village, known as “Freedom Village,” is unique. They pay no federal taxes but must reside for 240 nights per year in village. They are within the DMZ, which means that there are no walls protecting them from the North (South Korea’s protective barriers are behind them). The fences in Korea are not at the border — they are on both sides of the DMZ. Villagers have security, but a number have been killed or kidnapped by North Korean forces, as there is no barrier between them and NK.

So the North Koreans built their own “Freedom Village.” It lacks a few elements. Namely, residents. OK, the buildings look nice. But many of the windows are simply painted on to the walls. US forces say that the concrete shells have no floors, as lights at the top story simply fade as you gaze at windows below. No one lives in the NK village. No farms surround it. The ROK village, in contrast, predated the war and still continues to exist.

And the BIG flag? A few decades ago, South Korea built a really tall flagpole. North Korea built one a bit higher. An arms race of flagpoles ensued, but South Korea eventually pulled out. The pole in this picture is 160 meters high, the tallest in the world until Azerbaijan built one 162 meters tall a few years ago. The flag on the NK pole weighs 600 lbs dry and is so heavy it would require a class III typhoon to unfurl.

Earlier posts:

• U.S.-Korea Ties Build on Trade, Trust and Defense of Freedom
• In Korea, Infrastructure, Consumer Spending, and Opportunities
• In Korea, Business and Manufacturing Delegation Seeks Trade Opportunities

The National Association of Manufacturers’ Doug Goudie has been reporting from his travels on  a business and trade mission to South Korea. Earlier posts: Day One, Day Two.

Looking north into North Korea from the South Korean side of the Demilitarized Zone. Photo: Doug Goudie

The focus of today’s meetings and trip makes me consider the national security aspect of the U.S.-Korea FTA. We have a unique and strong bond with Korea, having led the United Nations Joint Combined Forces that fought in the Korean War. After 1953, when the truce agreement was signed, the United States has remained in the Republic of Korea, jointly guaranteeing the peace and securing the nation alongside the ROK military.

I think about this because, for about 5 minutes today, I stood in North Korea. We visited the DMZ this morning, and each mile that brought us closer to the border reinforced how important the U.S.-Korea national security relationship is to both nations,and how the trade agreement is about more than just expanding commerce and removing trade barriers – it is also a sign of trust, mutual dependence and mutual appreciation.

I would be remiss in not noting -at least in passing – that among the 17 or so nations that make up the U.N. joint command still in operation at the DMZ is Colombia. Troops from Colombia fought in the Korean War, and Colombian officers still fill slots in the U.N. command at the DMZ, along with officers from Australia, New Zealand, Great Britain, Turkey and other nations.

For miles before you reach the border, you drive on a highway bordering the Han River, and you can’t help but notice the side of the road is blockaded by rolls of barbed wire and interspersed with guard houses. As you get closer to the DMZ, of course, security grows tighter until you need to be on an official escorted tour to proceed. But it is the fact that for miles and miles before the border – Seoul lies only 50 kilometers from North Korea, and is well within range of 20,000 artillery and missile tubes that could turn the city into rubble – you are reminded that North Korea has an army of 1.6 million, positioned mostly within 90 km of the border. This is a real and active threat – it is a far cry from the undefended borders of the EU or U.S.-Canada. And the United States has guaranteed the security of the border since 1953.

(continue reading…)

Doug Goudie, Director of International Trade Policy of the National Association of Manufacturers, is representing manufacturing in America and NAM’s member companies and associations on a U.S. business delegation to Korea this week. The delegation is in Seoul to meet with senior Korean government officials and private sector representatives to demonstrate the commitment of the U.S. business community for passage of the U.S.-Korea FTA. He’ll be posting updates to the Shopfloor blog.

Monday, 6:45 P.M. Seoul (5:45 A.M. in DC)

We’ve arrived in Seoul on a very smoggy day. Not much on tap for this afternoon/evening – recovering from the long flight seems to be first order of business. This week-long visit by a strong representative group of U.S. companies and trade associations will be meeting with very senior Korean government and private-sector officials to show our support for passage of the U.S.-Korea Free Trade Agreement.

Our message is simple and direct – this agreement will benefit both countries, in all sorts of ways. It will drive growth in U.S. exports, it will drive employment growth, it will benefit manufacturing in America. It is a very strong agreement, especially for manufacturing (it is our largest agreement since NAFTA in terms of two-way trade and projected export growth). Nearly 90 percent of all U.S. exports to Korea are manufactured goods. The U.S. International Trade Commission forecasts a growth of $10 billion annually in U.S. exports after the KORUS agreement takes effect.

President Obama has been clear since his statement at the G20 meeting in Canada in June — and the Coalition supports his position — that outstanding issues in automotive and beef provisions must be addressed before this agreement can be sent to Congress for approval. The NAM has been clear from signing of this agreement in June 2007 that there are automotive issues, particularly in the non-tariff area of standards and regulatory actions, which need to be addressed before the agreement can pass Congress. President Obama has set a deadline of the G20 meeting in Seoul on November 11-12 (which he will attend) for resolution of outstanding issues. We are here to ensure that the Korean negotiators are fully aware that the U.S. business community supports this position.

However, first thing tomorrow, we begin bright and early with a breakfast with Kang Man-soo, Chairman of the Korean President’s Council on Competitiveness, some orientation meetings with some of the AmCham Korea company members, and a dinner with the Executive Board of the AmCham Korea. Wednesday we visit the DMZ during the day, among other activities and meetings.

I must say again, we have an excellent and diverse group represented in this U.S. business delegation, organized by the U.S.-Korea Business Coalition for Free Trade. The U.S. Chamber of Commerce serves as the secretariat of the coalition and is represented here, led by Tami Overby, who headed up the AmCham Korea before joining the Chamber. NAM is the Chair of the Manufacturing Committee for the Coalition.

As Bill Lane of Caterpillar has noted on earlier U.S. business delegation visits to Colombia and Panama: Manufacturers represent two-thirds of U.S. exports – and we’ve got the NAM here. Services represent two-thirds of U.S. jobs – and we’ve got the Coalition of Services Industries here. And Agriculture – well, the farmers represent two-thirds of the votes in Congress – and the Farm Bureau is here. All three pillars are represented, as are our member companies.

Tomorrow, I’ll look at why this agreement is so important to U.S. manufacturers and look at how we’re falling behind on trade – and what might happen if we don’t get back in the car and put our foot on the gas.

While it has been expected, the signing of the EU-Korea Free Trade Agreement (FTA) today is a jarring reminder that the United States continues to sit on the sidelines when it comes to expanding market access for manufacturing in America, while our competitors around the world race to gain new markets for their goods. The U.S. and Korea signed a Free Trade Agreement more than three years ago, but it has never been approved by Congress. Lack of action to implement this agreement is hurting manufacturing in America now, and it threatens far greater harm going forward.

The European Union (EU) will implement its FTA with Korea early next year. As a result, European manufacturers will see tariffs removed on nearly every product they export to Korea – while American manufacturers continue to face tariffs averaging nearly 12 percent. This will be a significant blow to American manufacturers –- one that we can ill-afford in this economic climate. This is not an idle threat – the EU is not only a significant competitor to the United States in manufactured goods exports to Korea, they are actually ahead of us. (See chart.) With this FTA, they will reap the benefits of zero tariffs, stronger protection for investments, and the removal of myriad non-tariff barriers.

U.S., EU Manufacturing Exports to S. Korea (Source: Census Bureau)

The EU has already surpassed the United States in manufacturing exports to South Korea.  In sectors like machinery, medical equipment, aircraft, chemicals, high-technology products, vehicles, processed foods, and many others, manufacturers in America face significant and direct competition from European producers.

The Obama Administration is working to address outstanding concerns raised in the automotive and beef sectors and has promised that these negotiations will be completed by November 2010, when the President visits Seoul for the G20 meeting. He has vowed to bring the Korea agreement to Congress for approval in the months following that meeting. But every month that the EU has duty-free barrier-free access to Korea and we don’t is another month of booming European manufacturing exports to Korea, and another month of slumping U.S. exports. Every month is one more month for our European competitors to permanently gain market share by taking it away from an American manufacturer.

Korea is a dynamic and fast-growing economy that represents robust and long-term potential for American manufacturing exports. Across Asia, economies are recovering strongly and are rapidly moving to sign trade agreements with each other – China, Japan and Korea are all looking to open Asian markets through FTAs. We are the fourth largest manufacturing exporter to Korea – China, Japan and the EU are all larger and are growing faster. The U.S.-Korea FTA will provide our manufacturing exports with a level playing field so we can compete fairly and freely.

Looking for news on the European Union free trade agreement with South Korea, online readers in India would have encountered these two headlines, one after another.

• Business Standard, “EU trade deal with S Korea gets green light”
• Reuters India, “Obama hopes to move forward on trade pacts”

Sort of tells the story, doesn’t it?

The European Union’s news release has details, “Council approves agreement with South Korea on free trade.” And there’s news coverage …

Euronews, “EU agrees free trade deal with South Korea”

The European Union’s Foreign Ministers have reached agreement on a free trade deal with South Korea. It’s one of the most ambitious trade pacts the EU has yet signed with a third party, and it will be formally signed at a summit with South Korea in Brussels in October, coming into force the following July.

Steven Vanackere, Acting Belgian Foreign Minister:

“It is I think a very big step in opening markets in Asia for our companies and this will create prosperity and jobs of course in Korea but also in Europe.”

Italy withdrew its objections at the last minute after Foreign Minister Franco Frattini obtained a delay in the deal’s application until July. Officials say the deal will create about 19 billion euros of new European exports.

Our emphasis. That’s almost $25 billion in U.S. dollars.

• New York Times, “EU to Ratify First Free-Trade Deal With Asian Partner”
• Wall Street Journal, “EU Ministers Agree on South Korea Trade Deal“
• The Clare Herald, “Free Trade Deal To Boost Irish Exports To Asia“

John Engler, President of the National Association of Manufacturers, commented after President Obama signed H.R. 4380, the Miscellaneous Tariff Bill, into law:

President Obama signs H.R. 4380, Miscellaneous Tariff Bill.

“Manufacturers are pleased that President Obama signed the Miscellaneous Tariff Bill into law today, which will provide a needed boost to both large and small companies. The NAM has been working relentlessly to educate Congress on the importance of this bill and how it will preserve and expand good American jobs. This legislation will also cut the costs of doing business in the United States and boost American manufacturing exports. In fact, studies show that these provisions can increase production by $4.6 billion and support almost 90,000 jobs.” 

President Obama greeted our attendees at the White House signing ceremony, Ryan Modlin and Doug Goudie, thanking them for the NAM’s efforts on behalf of the bill. Likewise, Mr. President. Thank you. 

• White House blog, “Another Step for American Manufacturing,” with video.
• Transcript of President’s remarks.
• Bloomberg, “Obama Signs Law to Suspend Duties on Imports of Products Not Made in U.S.“
• Washington Times, “Obama signs tariffs bill to aid manufacturers“
• Reuters, “Obama signs bill to ease U.S. manufacturers’ costs“

The Miscellaneous Tariff Bill extends the temporary reductions or elimination of tariffs on materials, chemicals and other items used in U.S. manufacturing but not available here in the United States. It’s traditionally a very popular bill that passes overwhelmingly when standing on its own. (Shopfloor, “Miscellaneous Tariff Bill, a Popular History.”) Still, we appreciate the extra attention the legislation received this year for sharpening the policy focus on the importance of trade and exports to reviving the U.S. economy, especially the manufacturing sector. (continue reading…)

President Obama will host a White House bill-signing ceremony at 2:50 p.m. today  to sign H.R. 4380, the United States Manufacturing Enhancement Act, more commonly known as the Miscellaneous Tariff Bill.

This bill reduces tariffs for materials and chemicals that are essential for U.S. manufacturing processes but are not made or otherwise available in the United States. As the National Association of  Manufacturers’ “Key Vote” letter summarized:

The MTB is one of the most important short-term actions Congress can take to preserve and expand good American jobs, cut the costs of doing business in the United States and boost American manufacturing exports. U.S. manufacturers large and small use the MTB’s tariff suspension provisions to obtain raw materials, proprietary inputs and other products that are not available in our nation.

Without the MTB, the cost of these companies’ products will inevitably increase, forcing them to pass higher costs on to consumers and making their products less competitive. These higher costs translate into lost jobs for American workers.

Passage of the bill was complicated this year by political disputes over the nature of “earmarks” in the House, but H.R. 4380 still passed handily, 378-43, on July 21. The legislation’s signing into law today is terrific news for manufacturers and America’s workers.

But it is just one piece of a pro-jobs, pro-growth agenda. Depicting the Miscellaneous Tariff Bill as the foundation of a trade or manufacturing strategy is overselling it. For one thing, the legislation is about continuing tariff reductions about specific products and materials coming into the United States. The bill has never been controversial before and if considered by itself always elicits overwhelming votes of support. (See accompanying post, “Miscellaneous Tariff Bill, a Popular History.”)

More importantly, the bill does not address the lowering of trade barriers to U.S. exports shipped to foreign markets. Ninety-five percent of the world’s consumers live outside the United States, and U.S.-based companies have to compete to sell goods and services to those billions of people. That’s why it’s essential to enact agreements to lower tariffs and other barriers to U.S. exports, pacts such as the pending Free Trade Agreements with Colombia, Panama and Korea, then the Trans-Pacific Partnership, and multilateral agreements like the Doha round of the WTO.

President Obama has set a goal of doubling U.S. exports within five years, an ambitious goal that will require action on numerous fronts. The NAM recently released its “Blueprint to Double Exports in Five Years to detail the many steps — including major policy action — that Congress and the Administration must take to achieve the worthy, jobs-creating goal.

The President can be expected to highlight manufacturing and trade at the bill signing ceremony this afternoon, and manufacturers are delighted the tariff reduction bill will become law. And after that ….more work to do.

Following a bilateral meeting with Korean President Lee Myung-bak in Toronto on Saturday, President Obama announced that the United States Trade Representative will work closely with its counterparts in Korea to resolve pending issues in the U.S.-Korea FTA by November so that the administration could submit the agreement to Congress in the following months. As President Obama said:

I want to make sure that everything is lined up properly by the time that I visit Korea in November. And then in the few months that follow that, I intend to present it to Congress. It is the right thing to do for our country. It is the right thing to do for Korea. It will strengthen our commercial ties and create enormous potential economic benefits and create jobs here in the United States, which is my number one priority.

Great news!  Korea is more than a $300 billion annual import market, and we are on the verge of being shut out as the European Union implements its trade agreement with Korea – so if the President sends the agreement up in early 2011, we will be able to avoid the export and job loss.  The National Association of Manufacturers (NAM) has done its Congressional nose count, and the votes are there.  All that is needed is for the President to say this agreement is in our interest and he wants it passed.

U.S Trade Representative Ron Kirk appeared before the Senate Finance Committee Wednesday to formally present the President’s 2010 Trade Policy Agenda, and as expected, express support for passage of the three long-pending free trade agreements (FTAs) with Colombia, Korea and Panama were high on the agenda for Senators.

“The FTA’s are a priority,” Kirk told the lawmakers. “We have not given up on any of those.” (Kirk’s statement.)

The ambassador was challenged by both Chairman Baucus and Ranking Member Grassley, who warned him that the United States will lose out to our competitors in Europe and other nations if we don’t advance the pending FTAs with Colombia, Korea and Panama. The goal of doubling exports in five years will be strongly aided by passing these pending FTAs, Kirk heard more than once.

As far as that competition from Europe and other countries, the European Union is certainly not letting any grass grow under its feet. On Tuesday, the EU announced the start of FTA negotiations with Vietnam. On Wednesday, the EU announced the start of FTA negotiations with Singapore. And, of course, the EU is looking to enact its FTA with Korea in the next few months.

The U.S. has an FTA with Singapore, and Vietnam would be included in the Obama Administration’s proposed Trans-Pacific Partnership (TPP) FTA –- the first round of negotiations for the TPP begins in mid-March.

This news all comes on the heels of the announcement by the EU Tuesday that it has concluded its FTA negotiations with Colombia and Peru, and is looking to a May 2010 signing with entry into force by 2012.

Colombia is also nearly finished negotiating an FTA with Canada.

Canada, by the way, is negotiating an FTA with the European Union. And, of course, Canada and Korea are negotiating an FTA too.

There seems to be a trend here: Strong manufacturing countries, whose industries compete with manufacturing in America for exports to these markets, are all fiercely pursuing trade deals with the same group of nations. If past trends continue, once they conclude negotiations, Europe and Canada will move quickly to enact these agreements. So will Peru, Colombia, and Korea. (continue reading…)