Fall, 2011

From the Editor

Renogotiated Negotiations

Although United States President Barack Obama claims he is focused on creating jobs and helping the economy, his actions in the free trade sphere indicate he is mostly interested in appeasing trade unions whose support is crucial to his campaign for reelection.

Over four years ago, free trade agreements were negotiated with Colombia, South Korea and Panama by then-President George W. Bush. Although economists estimate that the passage of the agreements would result in annual exports about $13 billion higher than they would be without the agreement and that total U.S. employment would increase by 70,000 with the agreements in place, the Obama administration has done nothing but place obstacles to the ratification and implementation of these agreements.

The Obama administration came into office and demanded that the agreements be renegotiated. This itself was a catastrophe for future trade agreements as it established a precedent that a deal with the United States is not necessarily a deal.

On the substance of the matter, the renegotiations changed little. President Obama tried to win the support of labor unions in the United States by insisting that South Korea restrict the use of technical barriers, such as emission standards, as an obstacle to trade in automobiles.

The big “win” for the President — though not the country — was that the United States can now phase out its tariffs on imported pick-up trucks more slowly, which just means that individuals and businesses in the United States who would have bought these Korean pickups have to buy more expensive ones instead. It arguably could depress job creation in the United States as those inexpensive pickups often get used in small businesses that create lots of jobs.

The renegotiations with Panama and Colombia dealt with some extraneous issues such as a tax treaty and with an effort to ensure that workers in the two countries are “protected” with minimum wage laws and various worker’s rights initiatives. Of course, the main protection workers in these countries need is against unemployment, and any “workers’ rights” provisions that actually get enforced will only disadvantage these countries and the workers who live there in their battle for work against competitors such as China, Bangladesh, Pakistan, Africa, etc.

Yet even when these countries swallowed the bitter pill of renegotiation, President Obama still would not send — and as of this writing has not sent — the agreements to Congress for ratification.

This impacts more than short-term jobs. The long-term competitiveness of U.S. industries also is compromised, as other countries have been busy implementing their own free trade agreements. Chilean pork is covered under a Chile/Korea free trade agreement and is thus gaining market share. A free trade agreement between Korea and the European Union will benefit European pork. A Colombia-Canada free trade agreement will favor Canadian wheat over U.S. wheat. In Colombia, Argentina has also been gaining market share in agricultural products over the United States, which faces a 16.5 percent tariff.

The President holds back these agreements, oblivious or unconcerned with the fact that once trade patterns are established, they don’t necessarily change just because the United States appears and is ready to play the game. The President also doesn’t seem to realize that allowing imports is important, too, as competition is what keeps our U.S. producers world-class, while also lowering the cost of living for consumers.

Yet despite the overwhelming argument in favor of these three free trade agreements, President Obama won’t submit them for ratification unless Congress agrees to simultaneously pass something called Trade Adjustment Assistance. The idea behind that program was originally to help workers who lose their jobs due to changes in trade policy. It was a relatively small program until 2009, when the Stimulus Bill expanded its scope substantially. Although the concept started out as providing training to manufacturing workers displaced by trade so they could work in other fields, the program morphed into a program covering the health care costs of laid off government workers and others.

Republicans have said they won’t authorize another billion-dollar program in a time of deficits, and the President is holding the trade agreements hostage to get this sop for labor unions passed.

It is bad enough when domestic matters get manipulated because of politics, but leaving three good friends to the United States dangling in the wind while the President uses these agreements to boost government spending and get support from the unions is really beyond the pale.

Of course, it is also a form of “cutting off one’s nose to spite one’s face.” The President’s reelection is less likely to hinge on the endorsement of some unions than on the general economic prosperity of the United States. Nobody needs the benefits of trade more than a President looking to get reelected. If the current President doesn’t relent soon, this is a lesson the next President will surely recognize.    c