New Trade Agreements Slowly Becoming a Reality
While it has taken an inordinately long time to get trade agreements with South Korea, Panama, and Colombia approved, many believe the benefits will prove to be worth the wait.
At the beginning of the summer, the agreements were almost hopelessly stalled because of political bickering. One of the biggest difficulties was the need for Congressional action on expanded subsidies for jobless workers. The White House was pushing for Congress to authorize more than $2 billion and was willing to hold these major trade agreements hostage to this stipulation.
This hurdle was overcome on September 22, when the Senate handed President Obama a victory with the passage that contained a revamped Trade Adjustment Assistance (TAA) program, which is a demand the President insisted upon before he would release the trade agreements for final Congressional approval. The retraining and assistance program, which dates back to 1962, was expanded in the 2009 Stimulus Bill to cover more workers and provide greater health insurance benefits. The bill that passed renews many of the 2009 provisions through 2013, such as covering service industry workers as well as those employed in manufacturing. The package costs $900 million, as compared with $2.1 billion in the 2009 bill. After overcoming this obstacle, President Obama sent the three trade bills to Congress on October 3, and on October 12 Congress overwhelmingly approved the trade deals.
Generalized System of Preferences
Included in the trade legislation is a renewal of the Andean Trade Preference Act, which was enacted in December 1991 to help Andean countries in their fight against drug production and trafficking by expanding their economic alternatives.
In addition to approval of the Trade Adjustment Assistance Program in September, also approved is legislation to renew the Generalized System of Preferences (GSP), which expired in December 2010. GSP promotes economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories. It also supports American jobs and improves U.S. competitiveness, as many U.S. businesses use GSP imports to manufacture goods in the United States.
Opposition to the Treaties
Throughout the long process leading to eventual passage by both houses of Congress and presidential approval, many opponents of the trade bills have surfaced.
For instance, Congresswoman Marcy Kaptur (D-OH), whose district encompasses an area from Toledo to Cleveland in the "Rust Belt," compared the trade bills to NAFTA (the North America Free Trade Agreement), which she said "killed American jobs." She added that these agreements "simply continue the failed trade policies embodied by NAFTA. We have seen how these trade agreements have led to the outsourcing of U.S. jobs and production. We need new direction in trade policy that puts the needs of working American families first."
Representative Kaptur was particularly concerned with the auto industry because she believes the agreement might jeopardize a major Chrysler assembly plant in Toledo. While others argued the trade agreements would generate large numbers of American jobs, Representative Kaptur estimated that it would cost 150,000 American jobs.
Leading the opposition to passage in the Republican-controlled House were two Democrats from Maine, Chellie Pingree and Michael Michaud. Representative Michaud echoed Kaptur's belief when he said the United States needs "a trade policy that actually encourages business growth and job creation here in America, not overseas."
Representative Pingree likened the agreements with Korea, Colombia, and Panama to NAFTA, which she contended cost her state 30,000 jobs. She insisted there is "no proof" the three agreements will lead to more jobs.
One of the labor movement's biggest opponents of the trade bills has been the International Brotherhood of Electrical Workers (IBEW). In an Internet statement, the IBEW said, "For two decades, Americans have been told that free trade is good for workers and consumers. In reality, trade policies promulgated by both Democratic and Republican administrations have benefited multinational corporations and harmed American workers. Now, the South Korea, Colombia, and Panama agreements threaten to perpetuate the global race to the bottom that has already gutted labor rights and environmental protections. If passed, just like NAFTA before them, these agreements will undoubtedly have a negative effect on IBEW members and the United States."
An Obama Success
In the end, final Congressional passage was a rare triumph for President Obama's consensus-building efforts. However, the President had to do a 180-degree turnaround to make it happen.
During the 2008 campaign, Obama opposed free trade. According to The Wall Street Journal, the administration pushed for passage only when it realized that the nation's unemployment was becoming a major re-election obstacle. In mid-2009, Obama changed his mind and announced he would pursue passage. He explained that closer ties with South Korea would provide a counterweight to China.
The administration then re-negotiated the agreements adding provisions favoring the auto industry and, in so doing, received support from the United Auto Workers. The Obama administration was embarrassed at the G-20 meeting in Seoul in 2010 when a breakdown in negotiations prevented Obama from presenting the revised treaty.
While such agreements generally achieve bi-partisan support, the long battle for ratification only served to widen the rift between the two parties. Only when the TAA deal was worked out did the two parties finally come together to offer their support.
Job Creation and Other Opportunities
Even for those who believe the South Korean, Colombian, and Panamanian trade agreements will have a positive effect, estimates of the number of new jobs that they will produce vary widely. The U.S. International Trade Commission estimates that the Korean agreement alone will create 70,000 jobs. The Senate Finance Trade subcommittee estimates the tariff reductions on goods could create some 280,000 U.S. jobs, while opening Korea's sheltered $580 billion services market could create additional American jobs in the services sector. IndustryWeek.com predicted that passing the trade agreements could add 250,000 jobs, but cautioned that failure to pass the agreements could cost 400,000 jobs.
Beyond the quantitative economic benefits, these agreements offer a number of qualitative strategic benefits. Final passage and enactment of these trade bills might serve to strengthen geopolitical relations with these three key American allies.
The South Korean agreement could enhance the already solid relationship with this well-established U.S. ally and trading partner. It would enhance economic ties and further expand the scope of bilateral relations. Korea is already America's seventh-leading trading partner, but the growing economic relationship doesn't begin to get the attention that the military alliance provides. The free-trade agreement could provide greater emphasis on the economic - rather than the military - ties. In addition, the agreement is a vivid illustration of the United States' future commitment to the Asian economic community.
The decade-long alliance between the U.S. and Colombia is an important inroad for U.S. foreign policy in an area where America's friendship has not been welcomed. Colombian President Juan Manuel Santos is refreshingly committed to the rule of law and a free-market economy. In addition, Colombia has become one of Latin America's fastest-growing economies.
Finally, the agreement with Panama could strengthen U.S. ties with a country located at the crossroads of ever-expanding drug wars that threaten other Central American countries.
A Site Selector’s Checklist for Locating in the U.S.
Location USA 2019
What Should High-Growth Companies Look for in a Community?
Where to Invest in the Booming Aerospace Manufacturing Industry
2019 Auto/Aero Site Guide
A Changing Food Manufacturing Industry
2017 Food Processing
33rd Annual Corporate Survey & the 15th Annual Consultants Survey
The Trade War and Its Impact on the Location Decision Process