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October 29, 2010

Obama's climate solution: undermine green standards abroad?

As we document in a new memo, President Bush's Korea trade deal, and NAFTA-style agreements in general, are the most politically toxic policy since giving Viagra to convicted child molesters.(As Ezra Klein writes, the latter is unfortunately a campaign talking point for some candidates.)

As our day-after election report will show, candidates of both parties are campaigning against unfair trade and offshoring. This includes the few Democrats that could somehow beat the odds and have the party retain the House, or the likely GOP margin makers. And 110 House members, along with the AFL-CIO and Sierra Club, have called for fundamental changes to the Korea deal's harmful deregulatory provisions on financial services and investment.

Somehow, I don't think this is what they had in mind. Mark Drajem at Bloomberg reports that...

The U.S. is asking South Korea to accept American automobile safety and emissions standards in an effort to advance a free-trade agreement, according to three people briefed on the talks.

Under the proposal, if American-made automobiles meet U.S. regulatory standards, South Korea would have to permit the vehicles to be sold in that nation...

Obama campaigned and won on calling for tough auto emissions standards here at home. And the EPA has made some important progress on this front under Obama. However, the U.S. is projected to have lower standards than Korea over the coming years, as Korea will have a 40 miles per gallon proposed standard by 2015, while the U.S. will still only have a 37.8 mpg proposed standard.

Unfortunately, this latest move from the administration is an echo of actions Treasury Secretary Tim Geithner took last year on Europe's (better) hedge fund regulations.

So, it's 2010. The glass is half-to-fully empty on environmental and financial regs here at home, thanks to watering down under industry and Senate pressure. The administration's solution should be to fill up the dang glasses, not try to break other countries' fuller ones through trade deals. We can only hope that this is a testing-the-waters kind of proposal, and that the Obama administration will commit to more robust reform prior to the G-20 in Seoul.

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Comments

John B

Someone at PC has a flimsy grasp of math. The ITC report that you claim shows a rising U.S. trade deficit after passage of KORUS FTA shows just the opposite -- a 0.4% increase in exports and a 0.2% increase in imports.

Travis McArthur

John,

Please look more closely at Table 2.3 in the USITC report, particularly the increase in imports and exports given in dollar terms.

A small increase from a small base can compute to a large percent increase. That's what's happening here. The baseline of exports in the USITC report is $1.2 trillion, but the baseline of imports is over twice as large at $2.2 trillion. A 0.4 percent increase over $1.2 trillion is smaller than a 0.2 percent increase from $2.2 trillion.

The USITC's estimated increase in imports is still larger in absolute dollar terms - i.e. the terms that matter - than the increase in exports. Table 2.3 indicates that the goods trade deficit will increase by between $308 million and $416 million.

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