From Building Cars to Packing Meat
When the Bush administration tried to sell the
To get a hint of the possible jobs impact of the Korea FTA, we’ll dive more deeply into that U.S. International Trade Commission (USITC) study that we mentioned a few weeks ago.
The USITC study indicates that jobs will likely be lost in
many high-wage industries, including auto manufacturing and electronics
manufacturing. The table below displays the USITC’s estimates of impact of the
Korea FTA upon employment and the trade deficit in a few sectors of the
According to the USITC study, the auto manufacturing industry may lose about 1,750 workers due to the Korea FTA.* The average hourly earnings of workers in the auto industry was $23.61 in 2008, which was 9.2 percent greater than the average hourly earnings of all workers employed in the private sector ($21.62). The average hourly earnings of workers in the electronic equipment manufacturing industry, projected to lose about 5,000 workers, was $30.38 in 2008, which was 40.5 percent greater than the average hourly earnings of all workers employed in the private sector.
As the table shows, large rises in the trade deficit in
these sectors are driving the employment loss, totaling up to almost $1.7
billion for motor vehicles and parts, other transportation equipment, and
electronic equipment alone. Interestingly, the USITC predicted that there would
be an absolute decline in the total value of exports in some manufacturing
sectors, not just a worsening of the balance. For example, total
The structure of the USITC model does not permit the total number of employed workers to vary, so the workers who lost their jobs in these manufacturing sectors are assumed to be employed in other sectors. The USITC projected that the workers shed by these high-paying industries would be absorbed by other industries, principally low-paying industries such as meat processing that are expected to export more goods under the Korea FTA. Employment in the bovine meat production industry was projected to rise by 0.7 to 1.8 percent, the greatest percent increase projected for any industry except for the industry of actually raising cattle, sheep, goats, and horses, whose employment was also projected to rise by 0.7 to 1.8 percent.
Workers in the meat production industry are very poorly paid. Their average hourly earnings are only $13.69, which is 36.7 percent less than the average hourly earnings of all workers employed in the private sector. Working in meat processing is also quite dangerous: the Government Accountability Office [http://www.gao.gov/products/GAO-05-96] noted that, “injury and illness rates among meat and poultry plants remain among the highest of any industry.”
The unfavorable employment effects of the Korea FTA
projected by the USITC model can be thought of as the minimum level of employment displacement and trade deficit increase
that the Korea FTA might bring about, given that past USITC projections have
been overly optimistic. For example, a 1999 USITC study using roughly the same model estimated
Rep. Sander Levin and other members of Congress have
proposed a detailed set of measures
to reduce the nontariff barriers that
The Korea FTA, as currently written, will further erode the American middle class by eliminating jobs in high-paying manufacturing sectors. The Obama administration must fix the Korea FTA to ensure that it benefits workers, in addition to fixing the financial services deregulation and investor-state enforcement provisions.
* The USITC estimated “low” and “high” impacts of the Korea FTA. The figures in this post are from the “low” estimates.