New Data Feature: Jobs at Risk from the Korea FTA

In previous additions to the Trade Data Center, we have examined the impact of past unfair trade deals such as NAFTA in your community through official government job loss data. But now we wish to look into the future. Or, rather, a future. A future where Congress has voted to approve the Korea Free Trade Agreement (FTA), putting at risk thousands of jobs.

We have tallied the number of jobs in each congressional district and state that are in industries predicted to be harmed by the Korea FTA. The U.S. International Trade Commission projects that implementation of the Korea FTA will lead to a combined $2 billion rise in the U.S. trade deficit in electronics, motor vehicles and parts, other transportation equipment, metal products, iron-containing metals, textiles, and apparel (among other sectors), which could endanger the jobs of workers in those industries. We have determined the approximate number of jobs at risk from the Korea FTA in each state and congressional district with data on individual facilities in these industries and a little programming magic. (Data nerds – you know who you are – can read about how we did it here).

Viewing the number of jobs at risk in your state and congressional district is easy. Just go to the page with the database here, select your state, and type in your congressional district or "Statewide" for your statewide numbers, and click "search". It gives you a breakdown of the jobs in each of the seven sectors most at risk from the Korea FTA.

 

 


 

In the current job climate with almost 10 percent unemployment, we can't afford another job-killing NAFTA-style trade deal like the Korea FTA. Click here to contact your representative and help stop the Korea FTA.

You can explore other great features in the Trade Data Center here.

SOTU Speech Includes 24 Mentions of Job Creation but Calls on Congress to Pass NAFTA-style Korea Free Trade Agreement That Is Projected to Increase U.S. Trade Deficit, Cost U.S. Jobs

Statement of Lori Wallach, Director of Public Citizen's Global Trade Watch
 
It was beyond surreal to hear President Barack Obama talk about the priority of creating U.S. jobs while saying nothing about on fixing our China trade debacle and calling on Congress to pass a NAFTA-style trade agreement with Korea that the government’s own studies show will increase our trade deficit. The Korea pact is projected to cost another 159,000 U.S. jobs – with nine economic sectors, including high tech electronics, as losers.

As Paul Krugman wrote in a recent New York Times column ("Trade Does Not Equal Jobs,” Dec. 6, 2010): “If you want a trade policy that helps employment, it has to be a policy that induces other countries to run bigger deficits or smaller surpluses. A countervailing duty on Chinese exports would be job-creating; a deal with South Korea, not.”

Doing more of the same – more NAFTA-style deals like the Korea pact and continuing the unbalanced mode of China trade – is not going to create American jobs or reduce our trade deficit. After campaigning on the need to reform America's job-killing trade policy, it is stunning for President Obama to call for more-of-the-same trade policies as if these had not resulted in a huge American trade deficit – $810 billion before the economic crisis-related collapse in trade and now again rising – and the net loss of 5.1 million American manufacturing jobs and 43,000 factories closed since we started the damaging experiment with the current trade model in the 1990s.

 

Latest Government Findings Show that the U.S. Trade Deficit May Increase More Under the Korea FTA Than Was Previously Thought

As the New York Times reported in December, the government’s official projections show that the Korea FTA will increase the U.S. trade deficit. “The study was conducted in 2007 by the United States International Trade Commission, an independent agency that analyzed the effect of imports on the American economy, after the Bush administration negotiated the original agreement with South Korea.” 

(In fact, the original study – released in September 2007 – found that the U.S. global and bilateral trade balance would improve with the Korea FTA. However, the USITC found an error in the intervening years, and released a corrected version in March 2010 that found a worsening of the U.S. global trade balance.)

But the December 2010 supplemental deal negotiated by the Obama administration – which lengthened the tariff phase-out period for certain autos and trucks but did not change the fact that the tariffs are ultimately eliminated – does not alter these findings. That is because the USITC model looks at the change in trade flows when the agreement is fully implemented and tariffs are fully phased out. Given that the supplemental agreement did not alter ultimate tariff elimination, but only altered timelines for cuts, it did not alter the USITC findings of an increased U.S. trade deficit. 

Enter new unofficial USITC Numbers…

Sen. Ron Wyden’s (D-Ore.) office released numbers today that it describes as coming from USITC staff economists – but not from the USITC itself.  (More on this below.) While the numbers at first glance appear to paint a rosier picture, a closer look reveals that – like the March 2010 numbers – the U.S. trade deficit is projected to worsen.

Liveblogging the Korea FTA Hearing

After the new Republican majority was seated in the House of Representatives, incoming House Ways & Means Committee Dave Camp (R-Mich.) wasted no time in calling a hearing on the NAFTA-style trade deals with Korea, Panama and Colombia. If you had any doubt as to where Camp and his colleagues would be coming down on these job-offshoring pacts, look no further than the front page of the Ways & Means Committee webpage, newly converted into a propaganda center for more NAFTAs.

Today's hearing, set to start any moment, is no exception. A full five out of five witnesses are supporters of the Korea deal, including:

Roy Paulson, President, Paulson Manufacturing Corporation, on behalf of the National Association of Manufacturers
Bob Stallman, President, American Farm Bureau Federation
Michael L. Ducker, Chief Operating Officer and President, International, FedEx Express
William J. Toppeta, President, International, MetLife
Stephen E. Biegun, Corporate Officer and Vice President of International Governmental Affairs, Ford Motor Company

I'll be liveblogging and fact-checking the hearing for the next few hours over at FiredogLake, so grab some Pepto Bismol - you'll definitely need it to stomach what you're about to hear. Feel free to follow along: the Committee is live-streaming the hearing here.

Video: Protesters in San Francisco voice opposition to the Korea trade deal

Last week, the California Fair Trade Coalition organized a rally “to call on Minority Leader Pelosi to join with the majority of Americans in opposing the job-killing NAFTA-style KORUS FTA, which puts corporate profit over worker rights, environmental regulations, food safety, human rights and much more.”

Keynote participants included  

• Kim Kyung-Ran, Director of External Relations, Korean Confederation of Trade Unions
• Howard Wallace, Vice President of San Francisco Labor Council 
• Frank Martin Del Campo, President, Labor Council for Latin American Advancement 
• Larry Wing, President, Air Transit Employees, Local Lodge 1781, IAM 
• Christine Ahn, Korean Americans for Fair Trade 
• Anuradha Mittal, Executive Director, Oakland Institute 
• Victor Menotti, Executive Director, International Forum on Globalization

Rewriting Economic History for the Korea FTA

U.S. Trade Representative Ron Kirk and Han Duk-soo, Korean Ambassador to the U.S., discussed aspects of the Korea Free Trade Agreement (FTA) at a panel on Thursday. They talked about deadlines, little anecdotes, and so forth, but what Ambassador Han had to say about how the Korea FTA would impact Korean domestic economic policymaking was most intriguing. He said:

But more important for Korea is that we develop our economy by opening it to global competition. The Asian Financial Crisis of 1997 and 1998 was a good lesson for us. What the Korea-U.S. Free Trade Agreement offers the Korean people is a comprehensive legally-binding reform package that will lead to the opening of our market.

Here Ambassador Han alludes to what Thomas Friedman called the "Golden Straightjacket". The idea is that you should force harsh economic policies on countries, often through some less-than-democratic means (in this case, a trade agreement that has been negotiated in secret), and they will eventually prosper. Ambassador Han referred to these "painful prescriptions" in an earlier speech here. (In the first chapter of Bad Samaritans, Dr. Ha-Joon Chang does a great job of exploding the Golden Straightjacket myth while demonstrating that Friedman's beloved Lexus in his Lexus and the Olive Tree could never have been produced without significant government involvement in the economy.)

It's quite perplexing that Ambassador Han would invoke the Asian financial crisis as a reason to throw all the chains off financial markets. Sure, the Korean Ambassador to the United States can do a lot, but he can't rewrite history. Financial deregulation was the major cause of the 1997 Asian financial crisis and efforts to further open financial markets during the crisis actually deepened its severity.

As Mark Weisbrot of the Center for Economic and Policy Research has pointed out, the Asian financial crisis developed because of excessive short-term international borrowing among East Asian nations. What was the cause of the excessive debt?

This build-up of short-term international borrowing was a result of the financial liberalization that took place in the years preceding the crisis. In South Korea, for example, this included the removal of a number of restrictions on foreign ownership of domestic stocks and bonds, residents' ownership of foreign assets, and overseas borrowing by domestic financial and non-financial institutions. Korea's foreign debt nearly tripled from $44 billion in 1993 to $120 billion in September 1997.

Indeed, countries that bucked the International Monetary Fund (IMF) prescriptions of greater financial liberalization, such as Malaysia, did better than countries like South Korea that had shed their financial regulations and capital controls. A paper on the Asian financial crisis published by the National Bureau of Economic Research compared the IMF strategy of complete openness to foreign investment and floating exchange rates against Malaysia's strategy of imposing capital controls to combat the crisis. The study concluded that "Compared to IMF programs, we find that the Malaysian policies produced faster economic recovery, smaller declines in employment and real wages, and more rapid turnaround in the stock market."

More than ten years after the Asian financial crisis, even the IMF has come to its senses and reversed its position on capital controls.  As we document in our memo on the Korea FTA's harmful foreign investor and financial deregulation provisions, the Korea FTA bans key measure that governments have at their disposal to prevent and combat financial crises, including capital controls. Far from a prescription for stable growth as Ambassador Han claims, enactment of the Korea FTA will leave both Korea and the United States vulnerable to future financial crises.

With China’s Currency Policy a Tough Topic of Hu Visit, Obama Poised to Push Korean Trade Deal With No Mechanism to Counter, Stop Currency Manipulation

With the trade advantage gained by China’s currency manipulation a top focus of Obama’s meeting with Chinese President Hu Jintao on Wednesday, concerns will rise about entering into yet another trade agreement with no provisions that forbid or redress currency manipulation with another known currency manipulator: South Korea.

Read our press release here.

How much will this party cost?

Earlier this month, the Washington Post reported a dramatic uptick in the number of corporate investor challenges being heard by the International Centre for Settlement of Investment Disputes (ICSID) - a World Bank group charged with arbitrating investment disputes. So much so, that a new legal niche is growing to meet the demand:

Geography has been kind to the District law firms equipped to handle international dispute resolution. As the host city of the ICSID, which has seen its caseload grow from between one and four cases a year from 1972 to 1996 to an apogee of 37 cases in 2007 and 27 in the fiscal year of 2010, the attorneys here are in close proximity to the action. The nation's capital is also seen as a key connection point between Latin America, where nearly a third of ICSID cases originate, and the rest of the world. The Argentine economic crisis of the late 1990s and early 2000s prompted at least 40 ICSID cases on its own, prompting the country to open a special District office to oversee its interests here.

There must a better way to create jobs in Washington, DC - perhaps a way that doesn't also facilitate the  trampling of local public health and environmental protecions or drain taxpayer resources in the United States and in trading partner countries? For more details about the kinds of cases multinational investors bring before ICSID, see Public Citizen's NAFTA Chapter 11 database. Also read up on El Salvador's struggle to preserve its environment in the face of two recent CAFTA cases challenging Salvadoran mining policy decisions. 

In the coming months the U.S. Congress will decide whether to expand the ICSID party! If implemented, the Korea FTA would empower hundreds of U.S. and Korean multinational investors to bring suits against the U.S. and Korean governments at ICSID should they want to argue that their slew of new investor rights has been violated.

Pentagon Can Buy Foreign Solar Panels

The New York Times recently reported about an important step forward with the Pentagon's plan to buy solar panels:

The military authorization law signed by President Obama on Friday contains a little-noticed “Buy American” provision for the Defense Department purchases of solar panels — a provision that is likely to dismay Chinese officials as President Hu Jintao prepares to visit the United States next week...

The new Buy American provision, created mainly by House and Senate conferees during a flurry of activity at the end of the lame-duck session of Congress, prevents the Defense Department from buying Chinese-made solar panels.

The American military is a rapidly growing consumer of renewable energy products, because it is extremely expensive and frequently dangerous to ship large quantities of fuel into remote areas of Iraq and Afghanistan.

The bill is the Ike Skelton National Defense Authorization Act for Fiscal Year 2011. Here's the relevant provision:

SEC. 846. PROCUREMENT OF PHOTOVOLTAIC DEVICES.

      (a) Contract Requirement- The Secretary of Defense shall ensure that each contract described in subsection (b) awarded by the Department of Defense includes a provision requiring the photovoltaic devices provided under the contract to comply with the Buy American Act (41 U.S.C. 10a et seq.), subject to the exceptions to that Act provided in the Trade Agreements Act of 1979 (19 U.S.C. 2501 et seq.) or otherwise provided by law.

      (b) Contracts Described- The contracts described in this subsection include energy savings performance contracts, utility service contracts, land leases, and private housing contracts, to the extent that such contracts result in ownership of photovoltaic devices by the Department of Defense. For the purposes of this section, the Department of Defense is deemed to own a photovoltaic device if the device is--

            (1) installed on Department of Defense property or in a facility owned by the Department of Defense; and

            (2) reserved for the exclusive use of the Department of Defense for the full economic life of the device.

      (c) Definition of Photovoltaic Devices- In this section, the term `photovoltaic devices' means devices that convert light directly into electricity through a solid-state, semiconductor process.

But dig a bit deeper into the NYT story to understand what the phrase "subject to the exceptions..." means in plain English:

Two prominent trade lawyers said in e-mails over the weekend that the law’s language meant that in practice, the Defense Department must buy solar panels from any country that signs the W.T.O.’s side agreement on government procurement. Earlier American trade laws require compliance with that agreement.

Virtually all industrialized countries have signed the side agreement, which requires free trade in government purchases. China vowed to sign it as soon as possible when it joined the W.T.O. in November 2001, but still has not done so.

The two trade lawyers said that the United States was within its rights to discriminate against Chinese solar panels in military procurement.

It's true. We have to exempt the 39 members of the WTO's Government Procurement Agreement from Buy America rules, which includes Korea and other major competitors. These exemptions also apply to an additional 13 countries with whom the United States has so-called "free trade agreements." They would apply to Panama and Colombia if President Obama adopts those Bush-negotiated pacts as his own.

All that's keeping the U.S. Buy America program from giving advantages to Chinese solar panels is a piece of paper (signing the WTO's procurement agreement). China could sign that piece of paper tomorrow, and get those benefits.

Why did U.S. negotiators ever agree to give away the store like that? So much for our bright future of domestic solar panel production.

(Also, the NYT story misrepresents the Buy America legislation. It doesn't prohibit purchases of Chinese solar panels. It just gives a price preference to U.S.-made panels. If Chinese solar panels are as little as six percent less expensive, U.S. authorities can waive Buy American requirements. Note that the Department of Energy has used another exemption - the so-called public interest exemption - to buy foreign made solar cells.)

Stop "Bushama" NAFTA with Korea

Congress is back in session today! Make the deeply flawed, job-killing, NAFTA-style Korea trade deal the first issue on your Representative's mind in the New Year by making a call to his/her office. Read more about how to take action here.