Third Year of Korea FTA Data Released, Show Failure of Obama’s ‘More Exports, More Jobs’ Trade Pact Promises, Further Burdening Fast Track Prospects

Trade Deficit With Korea Balloons 104 Percent as Exports Fall and Imports Surge Under Korea Pact Used as TPP Template

Today’s release of U.S. government trade data covering the full first three years of the U.S.-Korea free trade agreement (FTA) reveals that the U.S. goods trade deficit with Korea has more than doubled. In addition, today’s U.S. Census Bureau data show Korea FTA outcomes that are the opposite of the Obama administration’s “more exports, more jobs” promise for that pact, which it is now repeating with respect to the Trans-Pacific Partnership (TPP) as it tries to persuade Congress to delegate Fast Track authority for the TPP.

U.S. goods exports to Korea have dropped 6 percent, or $2.7 billion, under the Korea FTA’s first three years, while goods imports from Korea have surged 19 percent, or $11.3 billion (comparing the deal’s third year to the year before implementation). As a result, the U.S. goods trade deficit with Korea has swelled 104 percent, or more than $14 billion. The trade deficit increase equates to the loss of more than 93,000 American jobs in the first three years of the Korea FTA, counting both exports and imports, according to the trade-jobs ratio that the Obama administration used to project gains from the deal.

“As if the odds for Fast Track were not already long enough, with most House Democrats and many GOP members stating opposition, today’s unveiling of a job-killing trade deficit surge under the Korea FTA puts a few more nails in Fast Track’s coffin,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Who’s going to buy the argument about Fast Track and the TPP creating ‘more exports, more jobs’ when Obama’s only major trade deal, used as the TPP template, was sold under that very slogan and yet has done the opposite?”

In contrast to the decline in U.S. goods exports to Korea in the FTA’s first three years, U.S. goods exports to the world have risen 2 percent during that time, despite the strengthening value of the dollar. And the 104 percent surge in the U.S.-Korea goods trade deficit under the FTA starkly contrasts with the 5 percent decrease in the global U.S. goods trade deficit during the same period.

Record-breaking U.S. trade deficits with Korea have become the new normal under the FTA – in 35 of the 36 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly trade deficit seen in the three years before the deal. In January 2015, the monthly U.S. goods trade deficit with Korea topped $3 billion – the highest level on record.

The administration has tried to deflect attention from the failure of its Korea FTA by claiming that its poor performance has been caused by economic stagnation in Korea. However, Korea’s economy has grown during each year of the Korea FTA, while U.S. exports to Korea have not.

U.S. exports to Korea are actually even lower than today’s numbers indicate and the U.S.-Korea trade deficit is even higher, when properly counting only made-in-America exports. The exports data in today’s U.S. Census Bureau release include “foreign exports” – goods made abroad, imported into the United States and then re-exported without undergoing any alteration in the United States. Foreign exports support zero U.S. production jobs, and their inclusion artificially inflates U.S. export figures and deflates U.S. trade deficits with FTA partners.

Each month, the U.S. International Trade Commission (USITC) reports the official U.S. government trade data with foreign exports removed, typically within two days after the U.S. Census Bureau releases the raw data. USITC likely will release the Korea trade data without the distortion of foreign exports by Thursday, May 7, at which point the more accurate – and even more negative – record of the Korea FTA will be made available at http://www.citizen.org/documents/Korea-FTA-3-years.pdf. 

50 Reasons We Cannot Afford the TPP

How would your state be impacted by the Trans-Pacific Partnership (TPP) – a controversial “free trade” agreement (FTA) being negotiated behind closed doors with 11 Pacific Rim countries? 

Click here for a state-by-state guide to the specific outcomes of the status quo “trade” model that the TPP would expand.  Get the latest government data on how many jobs have been lost in your state to unfair trade, how much inequality has risen, how many family farms have disappeared, and how large your state’s trade deficit with FTA countries has grown. 

The TPP would extend the North American Free Trade Agreement (NAFTA) model that has contributed to massive U.S. trade deficits and job loss, downward pressure on middle class wages, unprecedented levels of inequality, lagging exports, new floods of agricultural imports, and the loss of family farms.

These impacts have been felt across all 50 U.S. states.  Here is a sampling of the outcomes:

• North Carolina: North Carolina has lost more than 369,000 manufacturing jobs – nearly half – since NAFTA and NAFTA expansion pacts have taken effect.  More than 212,000 specific North Carolina jobs have been certified under just one narrow Department of Labor program as lost to offshoring or imports since NAFTA.

• Delaware: Delaware’s total goods exports to all U.S. FTA partners have actually fallen 27 percent while its exports to non-FTA nations have grown 34 percent in the last five years. 

• California: In the last five years, California’s $403 million NAFTA agricultural trade surplus became a $187 million trade deficit – a more than $590 million drop. In contrast, California’s agricultural trade surplus with the rest of the world increased by $3 billion, or 79 percent, during the same time period.  The disparity owes to the fact that California’s exports of agricultural products to NAFTA partners Mexico and Canada grew just 27 percent, or $693 million, in the last five years, while its agricultural exports to the rest of the world grew 70 percent, or $4.3 billion. Meanwhile, California’s agricultural imports from NAFTA partners during this period surged $1.3 billion – more than the increase in agricultural imports from all other countries combined.

• Michigan: Michigan’s trade deficit with all U.S. FTA partners is nearly five times larger than its deficit with the rest of the world. Michigan’s FTA deficit has grown more than three times as much as its non-FTA deficit in the last five years. Today, Michigan’s trade deficit with FTA partners comprises 83 percent of the state’s total trade deficit.

• Louisiana: Before the Korea FTA – the U.S. template for the TPP – the United States had balanced trade with Korea in the top 10 products that Louisiana exports to Korea – including everything from metal to agricultural products. Under two years of the FTA, that balance became a $9 billion annual trade deficit. 

• New York: The TPP and the Trans-Atlantic Free Trade Agreement (TAFTA) would empower 3,067 foreign corporations doing business in New York to bypass domestic courts, go before extrajudicial tribunals, and challenge New York and U.S. health, environmental and other public interest policies that they claim undermine new foreign investor rights not available to domestic firms under U.S. law.

• Texas: U.S. farmers were promised that the Korea FTA would boost U.S. agricultural exports to Korea. But U.S. exports to Korea fell in eight of Texas’ top 10 agricultural export products, from cotton to wheat to meat in the first two years of the Korea FTA.  Meanwhile, U.S. exports to Korea of beef, pork and poultry – all top agricultural exports for Texas – declined 18, 15, and 42 percent, respectively (measuring by volume).

• Nevada: The richest 10 percent of Nevadans are now capturing more than half of all income in the state – a degree of inequality not seen in the 100 years for which records exist.  Study after study has produced an academic consensus that status quo trade has contributed to today’s unprecedented rise in income inequality.  

• Minnesota: Small-scale U.S. family farms have been hardest hit by rising agricultural imports and declining agricultural trade balances under FTAs.  Since NAFTA took effect, 15,500 of Minnesota’s smaller-scale farms (24 percent) have disappeared.

Fact-Checking the Fact-Checker: Washington Post Gets It Wrong on Bogus Trade-Pact Jobs Claims

As the Obama administration seeks to Fast Track the controversial Trans-Pacific Partnership (TPP) through Congress over public and congressional opposition, it has resorted to a familiar tactic – promising job gains from the deal on the basis of unfounded assumptions. We have repeatedly warned against dubious TPP jobs claims by spotlighting the inaccuracy of the administration’s job claims for the last major trade pact – the 2012 Korea “free trade” agreement (FTA). The Korea FTA was used as the U.S. template for the TPP.

The White House promised that the Korea FTA would create 70,000 jobs based on a report issued by the U.S. International Trade Commission that projected an increase in U.S. goods exports and a decrease in the U.S. goods trade deficit with Korea. In contrast, in the first three years of the Korea pact, U.S. goods exports to Korea have fallen while our goods trade deficit with Korea has surged.

We have shown that, plugging the actual U.S. government trade data into the ratio that the administration used to project job gains from the pact, the first three years of the Korea FTA’s outcomes defy the administration’s “more exports, more jobs” slogan for the deal, providing a cautionary tale for the job claims the administration is currently using to sell the TPP.

The Washington Post’s Fact Checker columnist Glenn Kessler has similarly taken on the administration’s TPP job claims, describing them as a baseless fabrication. But in today’s Post, Kessler takes issue with our fact-checking of the administration’s Korea FTA jobs promise.

Kessler seems to think that we are producing our own jobs projection for the Korea FTA, when we are actually fact-checking the administration’s jobs projection – a projection that Kessler acknowledges “would have earned Pinocchios if it had come to our attention at the time.” It is unclear why Kessler is now assigning Pinocchios to us for calling out the administration’s bogus Korea FTA jobs claim, rather than to those who actually made the claim.

In our recent press release on the third anniversary of the Korea FTA, we stated:

The U.S. goods trade deficit with Korea has ballooned an estimated 84 percent, or $12.7 billion, in the first three years of the Korea FTA (comparing the year before the FTA took effect to the projected third full year of implementation)…The surge in the U.S. trade deficit with Korea under the FTA equates to the loss of nearly 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal.

Kessler’s primary critique of this statement appears to be that we did not replicate the administration’s flawed methodology of only counting exports and disregarding imports when debunking the administration’s jobs projection. Such a misleading approach – ignoring half of the trade equation – contradicts standard economics and empirical data showing the job-displacing impacts of imports, which Kessler even acknowledges in his column today.

As an example of the administration’s one-sided trade accounting, the Office of the U.S. Trade Representative’s (USTR) factsheet on the third anniversary of the Korea FTA touted that 21,255 additional vehicles were exported to Korea under the FTA. It made no mention of the 461,408 additional vehicles imported from Korea during the same time period (using the administration’s same cut of the automotive trade data). That is, for every additional vehicle the United States exported to Korea under the FTA, it imported more than 21 additional vehicles from Korea. The net effect has clearly been a loss for U.S. auto workers. It is not only contrary to mainstream economics, but common sense, to only look at exports and ignore imports when assessing trade’s impact on jobs.

Indeed, when Kessler did a Fact Checker column in January debunking the administration’s “concocted” claim that the TPP would create 650,000 U.S. jobs, he stated that the study used as the basis for that claim actually showed that “the net number of new jobs [projected for the TPP] is zero” because the study “found that imports would increase by virtually the same amount as exports.” That is, Kessler presumed that $1 in imports had a job-displacing effect equivalent to the job-supporting effect of $1 in exports, which matches the calculation used in our press release. (For what it’s worth, respected economists estimate the dollar-for-dollar job-displacing effect of imports may be even greater than the job-supporting effect of exports.)

But even if we were to abandon the common-sense approach that Kessler presumed in January, defy standard trade accounting, and only count exports, U.S. goods exports to Korea fell by more than $2 billion in the first three years of the FTA. Were we to replicate the administration’s exports-only approach, then our fact-check of the administration’s Korea FTA promises would need to say something to the effect of:

The estimated $2.6 billion decline in U.S. goods exports to Korea in the FTA’s first three years equates to the loss of 17,400 American jobs, according to the trade-jobs ratio and exports-only methodology that the administration used to promise job gains from the deal. That methodology ignores the impact of imports and the significant increase in the U.S. trade deficit with Korea since the FTA was implemented. Including imports, the surge in the U.S. trade deficit with Korea under the FTA equates to the loss of 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal. 

The takeaway is the same. Any (reasonable) way you slice it, the administration’s job gains promise for the Korea FTA is the opposite of the deal’s outcome thus far. Indeed, over the Korea FTA’s first three years, the actual results have been consistently the opposite of the specific export growth and job gain figures that the Obama administration used to sell the Korea FTA. And that gets back to our main point: rely on similar promises now being made for the TPP to your own peril.

Kessler also takes issue with our time frame, implying that we should have counted the trade data from January and February of 2012 as part of the results of the Korea FTA, despite the fact that the FTA actually took effect on March 15, 2012. Our measurement compares U.S. trade with Korea in the 12 months before the Korea FTA took effect (April 2011 to March 2012) with the third full year of the FTA’s implementation (April 2014 to March 2015).

Kessler dislikes this approach, which he criticizes as “trying to be very precise.” Instead, he states it would be more “appropriate” to compare calendar years. But the selective timeframe for which Kessler advocates would errantly count pre-FTA months as occurring since the FTA, while eliminating the most recent months of actual Korea FTA data.

The Fact Checker column also bizarrely faults us for adjusting for inflation. Typically, trade flow studies are criticized if they fail to perform the standard adjustment for inflation, since this would misleadingly count price increases as export or import increases. Nonetheless, Kessler considers the adjustment for inflation as “an effort to manipulate the data further.” Why?  Because “the price of goods could decrease.” It is precisely because the price of goods could decrease (or increase) that it is important to adjust for inflation. We do so by using a standard inflation adjustment from the U.S. Bureau of Labor Statistics, thereby eliminating the effect of shifts in goods prices. (And, for what it’s worth, if we were trying to “manipulate” the data rather than be scrupulous with it, we would not be the ones controlling for inflation. Failing to adjust for inflation would make the increase in the U.S. goods trade deficit with Korea during the FTA’s first three years appear even larger than it is in real terms, not smaller.)

After deciding to replicate the administration’s usual data distortions of not counting imports, counting non-FTA months as occurring since the FTA, and not adjusting for inflation, Kessler then performs his own assessment of the Korea FTA outcome, claiming that U.S. exports increased by $2.3 billion in the FTA’s first three years.

This claim is in need of a fact check, as we have not been able to replicate it with any cut of the data. If you use the selective timeframe preferred by Kessler (comparing calendar years 2011 and 2014) and skip the inflation adjustment, you get a $750,000 increase in U.S. exports, not a $2.3 billion increase. (And that "increase" owes entirely to price increases - after a standard inflation adjustment, it becomes a real export decline of more than $1 billion.) Even if you misleadingly count foreign-produced goods as “U.S. exports,” as the administration often does, you get a $1 billion increase in exports – still less than half of Kessler’s claim (and still a real decline in U.S. exports merely by properly accounting for inflation).

The only way we see to get a $2.3 billion increase in U.S. exports to Korea is by mistakenly axing an entire year of the FTA and comparing 2014 with 2012 (as if the FTA did not take effect until 2013 – one year later than its actual implementation date). Even with this blunt error, you would still need to use the arbitrary calendar year timeframe, fail to adjust for inflation, count foreign-produced goods as “U.S. exports,” and ignore imports altogether.

Using the accurate FTA time period and excluding foreign-made goods, our total goods exports to Korea actually have fallen since the Korea FTA took effect (whether or not one properly controls for inflation). Rather than acknowledge this aggregate outcome, the Fact Checker column highlights a few specific products as having “shown real gains in the past three years” of the Korea FTA. This is another common  maneuver of USTR: while overall U.S. agricultural exports to Korea increased an estimated zero percent in the FTA’s first three years, for example, USTR focuses on a $78 million gain in cherry exports. The cherry-picking in today’s Fact Checker column, however, includes products, such as apparel, that have actually not seen export gains. U.S. apparel exports to Korea actually have fallen $43 million, or 37 percent, in the Korea FTA’s first three years.

Unfortunately, this exports decline has been more the rule than the exception under the Korea FTA, as overall U.S. goods exports to Korea have fallen. Meanwhile, imports from Korea have risen, and the U.S. trade deficit with Korea has surged. The point that we have repeatedly made stands: the outcome of the FTA thus far is a far cry from the administration’s promise of “more exports, more jobs.” We would do well to keep that failed promise in mind as we now hear its echoes in the administration’s sales pitch for the TPP. 

Unhappy Third Birthday for Korea FTA Drags Down Obama Push for Fast Track

U.S. Exports Down, Imports from Korea Up and Job-Killing Trade Deficit With Korea Balloons 84 Percent on Third Anniversary of Korea Pact, Which Is TPP Template

Three years after implementation of the U.S.-Korea Free Trade Agreement (FTA), government data reveal that the administration’s promises that the pact would expand U.S. exports and create American jobs proved to be the opposite of the pact’s actual outcomes. The post-Korea FTA decline in U.S. exports to Korea and a new flood of imports from Korea have resulted in a major surge in the U.S. trade deficit with Korea that equates to nearly 85,000 lost U.S. jobs. The abysmal FTA record deals a fresh blow to the administration’s controversial bid to Fast Track the Trans-Pacific Partnership (TPP), for which the Korea FTA served as the U.S. template.

“Three years ago we heard the same ‘more exports, more jobs’ sales pitch for the Korea FTA that the administration is making for the TPP, but the reality is that tens of thousands of U.S. jobs have been lost as exports have fallen and trade deficits have surged,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The only silver lining of the Korea FTA debacle is that it further cripples the administration’s push to Fast Track the TPP, which was literally modeled on the Korea deal, perhaps saving us from more of the same pacts that offshore jobs and push down middle-class wages.”

Contrary to the administration’s promise that the Korea FTA would mean “more exports, more jobs,” U.S. International Trade Commission and U.S. Department of Agriculture data reveal that:

• The U.S. goods trade deficit with Korea has ballooned an estimated 84 percent, or $12.7 billion, in the first three years of the Korea FTA (comparing the year before the FTA took effect to the projected third full year of implementation). In January 2015, the monthly U.S. goods trade deficit with Korea topped $3 billion – the highest level on record.

• The surge in the U.S. trade deficit with Korea under the FTA equates to the loss of nearly 85,000 American jobs, according to the trade-jobs ratio that the administration used to promise job gains from the deal.

• U.S. goods exports to Korea have fallen an estimated 5 percent, or $2.2 billion, in the first three years of the Korea FTA. 

• Had U.S. exports to Korea continued to grow at the rate seen in the decade prior to the Korea FTA’s implementation, U.S. exports to Korea in the FTA’s third year would have been 24 percent, or $9.8 billion, higher than they are actually projected to be.

• Imports of goods from Korea have risen an estimated 18 percent, or $10.5 billion, in the Korea FTA’s first three years.

• U.S. exports to Korea of manufactured goods have stagnated under the Korea FTA, growing an estimated zero percent in the first three years of the deal. U.S. manufactured imports from Korea, meanwhile, have grown an estimated 18 percent under the FTA. As a result, the U.S. manufacturing trade deficit with Korea has grown an estimated 44 percent, or $10.1 billion, since the FTA’s implementation.

• U.S. exports to Korea of agricultural goods have stagnated under the Korea FTA, growing an estimated zero percent in the first three years of the deal – even as U.S. agricultural exports to the world increased 6 percent during the same period. U.S. agricultural imports from Korea, meanwhile, have grown an estimated 28 percent under the FTA. As a result, the U.S. agricultural trade balance with Korea has declined an estimated 1 percent, or $72 million, since the FTA’s implementation.

Given the bleak data, the Office of the U.S. Trade Representative (USTR) may repeat past efforts to try to obscure bad Korea FTA results. Congressional upset about the pacts is fueling opposition to the administration’s push to Fast Track the TPP through Congress. Typical USTR data omissions and distortions regarding the Korea FTA include:

• The USTR likely will count foreign-produced goods as “U.S. exports,” falsely inflating the export figures that can be reported. It is by using this raw Census Department data versus the corrected official U.S International Trade Commission (USITC) trade data that USTR falsely claims that U.S. exports to Korea have grown and were at a record level in 2014.  Despite congressional demands to stop using the distorted data, USTR continues to report export figures that include “foreign exports,” also known as “re-exports.” These are goods made abroad that pass through the United States before being re-exported to other countries. By U.S. Census Bureau definition, foreign exports undergo zero alteration in the United States, and thus support no U.S. production jobs. Each month, the UCITC removes foreign exports from the raw data gathered by the U.S. Census Bureau. But the USTR regularly uses the uncorrected data, inflating the actual U.S. export figures and deflating U.S. trade deficits with FTA partners like Korea. In the first three years of the Korea FTA, foreign exports to Korea have risen an estimated 13 percent, or $284 million, which the USTR may errantly count as an increase in “U.S. exports.”

• The USTR might misrepresent the relatively small increase in U.S. exports to Korea of passenger vehicles under the FTA as a large percentage increase, while omitting both that the touted increase amounts to an estimated 23,000 more passenger vehicles exported from a base of fewer than 15,000 and that imports of passenger vehicles from Korea have surged by an estimated 450,000 vehicles – from about 863,000 to more than 1.3 million in the first three years of the FTA. This trick was included in the USTR’s press release on the FTA’s second anniversary. While U.S. automotive exports to Korea have increased an estimated $686 million in the FTA’s first three years, U.S. automotive imports from Korea have ballooned an estimated $6.4 billion. As a result, the U.S. automotive trade deficit with Korea has increased an estimated 36 percent, or $5.7 billion, in the FTA’s first three years.

• The USTR also may claim, as it did in its press release on the Korea FTA’s second anniversary, that the decline in U.S. exports to Korea under the FTA is due to decreases in exports of fossil fuels and corn. But even after removing fossil fuels and corn products, U.S. exports to Korea still have declined by an estimated $1.4 billion, or 4 percent, in the first three years of the FTA. Product-specific anomalies cannot explain away the broad-based drop in U.S. goods exports to Korea under the FTA.

• The USTR also may try to dismiss the decline in U.S. exports to Korea under the FTA as due to a weak economy in Korea – another claim made in the USTR’s press release on the FTA’s second anniversary. But the Korean economy has grown each year since the FTA passed, even as U.S. exports to Korea have shrunk. Korea’s gross domestic product in 2014 is projected to be 9 percent higher than in the year before the FTA took effect, suggesting that U.S. exports to Korea should have expanded, with or without the FTA, as a simple product of Korea’s economic growth. Instead, U.S. exports to Korea have fallen an estimated 5 percent in the first three years of the FTA. 

Exports Lag 20%, Trade Deficits Surge 427% under "Free Trade" Deals

A recent parade of reports from corporate lobbies and think tanks has played a familiar but discordant refrain, alleging that more of the same "free trade" agreements (FTAs) would boost U.S. exports and reduce the U.S. trade deficits that displace U.S. jobs.  It sounds nice.  But this tired promise is simply not supported by the data.  

According to the official government trade data from the U.S. International Trade Commission, the aggregate U.S. goods trade deficit with FTA partners is more than five times as high as before the deals went into effect, while the aggregate trade deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations.

Why do we keep hearing arguments that more of the same will produce different results?  Well, if you (or your corporate backers) wanted to Fast Track through Congress the controversial Trans-Pacific Partnership (TPP), which would expand the status quo FTA model, you might also find it convenient to parrot the standard FTA sales pitch of higher exports and lower trade deficits.  In doing so, you would need to ignore these facts:

• Growth of U.S. goods exports to FTA partners has been 20% lower than U.S. export growth to the rest of the world over the last decade (annual average growth of 5.3 percent to non-FTA nations vs. 4.3 percent to FTA nations from 2004 to 2014). 

• The aggregate U.S. goods trade deficit with FTA partners has increased by about $144 billion, or 427 percent, since the FTAs were implemented. In contrast, the aggregate trade deficit with all non-FTA countries has decreased by about $95 billion, or 11 percent, since 2006 (the median entry date of existing FTAs). See the chart below. Using the Obama administration’s net exports-to-jobs ratio, the FTA trade deficit surge implies the loss of about 780,000 U.S. jobs.

• The North American Free Trade Agreement (NAFTA) contributed the most to the widening FTA deficit – under NAFTA, the U.S. trade deficit with Canada has ballooned and a U.S. trade surplus with Mexico has turned into a nearly $100 billion deficit.

• More recent deals have produced similar results. Since the 2011 passage of the Korea FTA, the U.S. template for the TPP, the U.S. trade deficit with Korea has already surged 72 percent.

“Higher Standards” Have Failed to Alter FTA Legacy of Ballooning Trade Deficits

Some proponents of status quo trade have claimed that post-NAFTA FTAs have included higher standards and thus have yielded trade balance improvements. But the Korea FTA included the higher labor and environmental standards of the May 10, 2007 deal, and still the U.S. trade deficit with Korea has grown over 70 percent in the three years since the deal’s passage. Meanwhile, most post-NAFTA FTAs that have resulted in (small) trade balance improvements did not contain the “May 10” standards. The evidence shows no correlation between an FTA’s inclusion of “May 10” standards and its trade balance impact. Reducing the massive U.S. trade deficit will require a more fundamental rethink of the core status quo trade pact model extending from NAFTA through the Korea FTA, not more of the same.

Corporate FTA Boosters Omit Imports, Use Errant Methods to Claim Higher Exports under FTAs

Members of Congress will invariably be shown data by defenders of our status quo trade policy that appear to indicate that FTAs have generated an export boom. Indeed, to promote congressional support for new NAFTA-style FTAs, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) have funded an entire body of research designed to create the appearance that the existing pacts have both boosted exports and reversed trade deficits with FTA partner countries. This work relies on several methodological tricks that fail basic standards of accuracy:

• Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.

• Counting “foreign exports”: NAM has errantly claimed that the United States has a manufacturing surplus with FTA nations by counting foreign-made goods as “U.S. exports.” NAM’s data include “foreign exports” – goods made elsewhere that pass through the United States without alteration before being re-exported abroad. Foreign exports support zero U.S. production jobs and their inclusion distorts FTAs’ impacts on workers.
  

• Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 427 percent aggregate FTA deficit surge, its omission vastly skews the findings.

• Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.

• Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $260 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.

10 Tall Tales on Trade: Fact-Checking Obama’s Top Trade Official

Yesterday was a difficult day for U.S. Trade Representative (USTR) Michael Froman.  He had to go before Congress and explain how the administration’s plan to expand a trade model that has offshored U.S. manufacturing jobs and exacerbated middle class wage stagnation fits with President Obama’s stated “middle class economics” agenda.

Inconveniently for Mr. Froman, it does not.

That did not stop Froman from trying to paint the last two decades of Fast-Tracked, pro-offshoring trade deals – and the administration’s plan for more of the same – as a gift to the middle class. 

The facts he cited to support this depiction actually sounded great.  They just didn’t have the added advantage of being true. 

Here’s a rundown of the top 10 fibs and half-truths that Froman uttered before the Senate Finance Committee and House Ways and Means Committee yesterday in his sales pitch for the administration’s bid to expand the NAFTA “trade” pact model by Fast-Tracking through Congress the controversial Trans-Pacific Partnership (TPP).

1. Fast Track Puts Congress in the Driver’s Seat (of a Runaway Car, without Brakes or a Steering Wheel)

Froman: “[Fast Track] puts Congress in the driver’s seat to define U.S. negotiating objectives and priorities for trade agreements.”

Okay, let’s go with this analogy.  If reviving Fast Track puts Congress in the driver’s seat, it also removes the brakes and steering wheel.  Reviving Fast Track would empower the administration to negotiate and sign a sweeping “trade” pact like the TPP – implicating everything from the cost of medicines to the safety of food to the reform of Wall Street – before Congress had any enforceable say over the deal’s contents, even if they contradicted Congress’ stated negotiating objectives.  Goodbye steering wheel.  Congress’ role would be relegated to an expedited, no-amendments, limited-debate vote on the already-signed deal.  Goodbye brakes. 

Also, if we’re talking about Fast Tracking the TPP, the car is already going 60mph.  As a couple of members of Congress pointed out to Froman, the administration has been negotiating the TPP for more than five years, and Froman himself stated that TPP negotiations are in their endgame.  Even if Froman’s assertion were true that Fast Track allows Congress to define priorities for trade agreements (rather than ensuring that such priorities are not enforceable), it’s a little late for members of Congress to be naming priorities for a deal that has been under negotiation since 2009 and that Froman hopes to close in the coming months.

2. A Trade Surplus with Our FTA Partners (Does Not Appear in Official Government Data)

Froman: “You take all of our FTA partners as a whole, [and] we have a trade surplus. And that trade surplus has grown.”  Froman also claimed that the United States has a trade surplus in manufactured goods with its FTA partners.  And he tried to use red herrings to explain away the surging U.S. trade deficit with Korea under the Korea FTA.

These claims defy official U.S. government data.  Data from the U.S. International Trade Commission show that the United States has a $180 billion U.S. goods trade deficit with all free trade agreement (FTA) partners (in 2013, the latest year on record).  In manufactured goods, the United States has a $51 billion manufacturing trade deficit with all FTA partners.  Froman claimed otherwise, in part, by counting billions of dollars’ worth of "foreign exports" – goods produced abroad that simply pass through the United States without alteration before being “re-exported.”  These goods, by definition, do not support U.S. production jobs.

Contributing to our FTA deficit is the 50 percent surge in the U.S. goods trade deficit with Korea in just the first two years of the Korea FTA, which literally was used as the U.S. template for the TPP. This deficit increase, owing to a drop in exports and rise in imports, spells the loss of more than 50,000 American jobs in the FTA's first two years, according to the ratio used by the administration to claim the pact would create jobs. Froman tried to explain away the ballooning U.S. trade deficit under the Korea FTA as due to decreases in corn and fossil fuel exports.  But even if discounting both corn and fossil fuels, U.S. annual exports to Korea still fell under the FTA, and the annual trade deficit with Korea still soared.  Product-specific anomalies cannot explain away the broad-based downfall of U.S. exports to Korea under the FTA, which afflicted nine of the top 15 U.S. sectors that export to Korea. The disappointing results also cannot be blamed on low growth in Korea since the FTA.  Though Korea's growth rates in the last several years have not been spectacular, the economy has still grown since the FTA (3 percent in 2013), as has consumption (2.2 percent, adjusted for inflation, in 2013). Koreans are buying more goods, just not U.S. goods. 

 

3.  We Wish to Ensure Access to Affordable Medicines in the TPP (but Big Pharma Won’t Let Us)

Froman: “In negotiations, like TPP, we are working to ensure access to affordable life-saving medicines, including in the developing world, and create incentives for the development of new treatment and cures that benefit the world and which create the pipeline for generic drugs.”

These words play politics with people’s lives. They cloak the tragic reality that if the TPP would take effect as USTR has proposed, with leaks showing even greater monopoly protections for pharmaceutical corporations than in prior pacts, people would needlessly die for lack of access to affordable medicines. A new study finds, for example, that the TPP would dramatically reduce the share of Vietnam’s HIV patients who have access to life-saving antiretroviral medicines.  The study reveals that while 68 percent of Vietnam’s eligible HIV patients currently receive treatment, U.S.-proposed monopoly protections for pharmaceutical corporations in the TPP would allow only 30 percent of Vietnam’s HIV patients to access antiretrovirals.  As a result, an estimated 45,000 people with HIV in Vietnam who currently receive antiretroviral treatment would no longer be able to afford the life-saving drugs.

Froman also indicated in the Senate hearing that USTR is pushing to include a special monopoly protection for pharmaceutical firms that contradicts the Obama administration’s own stated objectives for reducing the cost of medicines in the United States. President Obama’s budget proposes to reduce a special monopoly protection for pharmaceutical firms with regard to biologic medicines – drugs used to combat cancer and other diseases that cost approximately 22 times more than conventional medicines.  To lower the exorbitant prices and the resulting burden on programs like Medicare and Medicaid, the Obama administration’s 2015 budget would reduce the period of Big Pharma's monopoly protection for biologics from 12 to seven years. The administration estimates this would save taxpayers more than $4.2 billion over the next decade just for federal programs. However, Froman suggested yesterday that USTR continues to push for the 12 years of corporate protection in the TPP, which would lock into place pharmaceutical firms’ lengthy monopolies here at home while effectively scrapping the administration’s own proposal to save billions in unnecessary healthcare costs.

4. Most Exporters are Small Businesses (that Have Endured Slow and Falling Exports under FTAs)

Froman: “15,600 firms export from Pennsylvania. Almost 90 percent of them are small and medium sized businesses. And the question is whether with these trade agreements we can create more opportunities for these kinds of businesses.”

Implying that exporting is mainly the domain of small businesses because they make up most exporting firms is like implying that the NBA is a league of short people because most NBA players are shorter than 7 feet tall.  The reason small and medium enterprises (defined as 500 employees or less) comprise most U.S. exporting firms is simply because they constitute 99.7 percent of U.S. firms overall (in the same way that those of us below 7 feet constitute more than 99 percent of the U.S. population).  The more relevant question is what share of small and medium firms actually depend on exports for their success. Only 3 percent of U.S. small and medium enterprises export any good to any country. In contrast, 38 percent of large U.S. firms are exporters.  Even if FTAs actually succeeded in boosting exports (which they don’t, per the government data noted below), exporting is primarily the domain of large corporations, not small businesses.

As for whether “with these trade agreements we can create more opportunities” for small firms, the record of past FTAs suggests not. Under the Korea FTA, U.S. small businesses have seen their exports to Korea decline even more sharply than large firms (a 14 percent vs. 3 percent downfall in the first year of the FTA). And small firms’ exports to Mexico and Canada under NAFTA have grown more slowly than their exports to the rest of the world. Small businesses’ exports to all non-NAFTA countries grew over 50 percent more than their exports to Canada and Mexico (74 percent vs. 47 percent) during a 1996-2012 window of data availability. The sluggish export growth owes in part to the fact that small businesses’ exports grew less than half as much as large firms’ exports to NAFTA partners (47 percent vs. 97 percent from 1996-2012).

5. We Try to Be Transparent (with the Corporate Advisors Who Can Access Secret Texts)

Froman: “And to ensure these agreements are balanced, we seek a diversity of voices in America’s trade policy. The Administration has taken unprecedented steps to increase transparency… We have held public hearings soliciting the public’s input on the negotiations and suspended negotiating rounds to host first-of-a-kind stakeholder events so that the public can provide our negotiators with direct feedback on the negotiations.”

“A diversity of voices” is an odd way to describe the more than 500 official trade advisors with privileged access to secretive U.S. trade texts and U.S. trade negotiators.  About nine out of ten of these advisors explicitly represent industry interests. Just 10 of the more than 500 advisors (less than 2 percent) represent environmental, consumer, development, food safety, financial regulation, Internet freedom, or public health organizations.  It’s little wonder that so many of these groups, excluded from setting the content of the TPP, have denounced leaked TPP texts as presenting threats to the public interest.  And as for the claim of “unprecedented steps to increase transparency,” the reality is closer to the opposite. When the Bush administration negotiated the last similarly sweeping trade pact – the Free Trade Area of the Americas – USTR published the negotiating text online for anyone to see amid negotiations. In a step backwards from the degree of transparency exhibited by the Bush administration, the Obama administration has refused repeated calls from members of Congress and civil society organizations to release TPP texts. This secrecy limits the utility of the public hearings and stakeholder events that Froman touts, as it is difficult to opine on a text you are prohibited from seeing.

6. Supporting Manufacturing and Higher Wages (Is a Goal in Spite of Our Trade Policies)

Froman: “In 2015, the Obama Administration will continue to pursue trade policies aimed at supporting the growth of manufacturing and associated high-quality jobs here at home and maintaining American manufacturers’ competitive edge.”

The only objectionable word in this sentence is “continue.” Since NAFTA, we have endured a net loss of nearly 5 million manufacturing jobs – one out of every four – and more than 57,000 manufacturing facilities. While not all of those losses are due to NAFTA, the deal’s inclusion of special protections for firms that relocate abroad certainly contributed to the hemorrhaging of U.S. manufacturing. The U.S. manufactured goods trade balance with Canada and Mexico in NAFTA’s first 20 years changed from a $5 billion surplus in 1993 to a $64.9 billion deficit in 2013. The U.S. Department of Labor has certified (under one narrow program) more than 845,000 specific U.S. workers – many of them in manufacturing – as enduring “trade-related” job losses since NAFTA due to the offshoring of their factories to Mexico or Canada, or import competition from those countries. And under just two years of the Korea FTA, U.S. manufacturing exports to Korea have fallen. Overall, the United States has a $51 billion trade deficit in manufactured goods with its 20 FTA partners. Reviving manufacturing and reviving Fast Track for the NAFTA-expanding TPP are incompatible.

Froman: “At a time when too many workers haven't seen their paychecks grow in much too long, these jobs typically pay up to 18% more on average than non-export related jobs.” 

Froman neglects to mention a key reason that too many workers haven’t seen their paychecks grow: NAFTA-style deals have not only incentivized the offshoring of well-paying U.S. manufacturing jobs, but forced these workers to compete for lower-paid service sector jobs, which has contributed to downward pressure on wages even in non-offshoreable sectors.  According to the U.S. Bureau of Labor Statistics, about three out of every five displaced manufacturing workers who were rehired in 2014 experienced a wage reduction. About one out of every three displaced manufacturing workers took a pay cut of greater than 20 percent. As increasing numbers of American workers, displaced from better-paying jobs by current trade policies, have joined the glut of workers competing for non-offshoreable jobs in retail, hospitality and healthcare, real wages have actually been declining in these growing sectors. A litany of studies has produced an academic consensus that such trade dynamics have contributed to the historic increase in U.S. income inequality – the only debate is the degree to which trade is to blame. The TPP would not only replicate, but actually expand, NAFTA’s extraordinary privileges for firms that relocate abroad and eliminate many of the usual risks that make firms think twice about moving to low-wage countries like Vietnam – a TPP negotiating partner where minimum wages average less than 60 cents an hour, making the country a low-cost offshoring alternative to even China.

7. The TPP Supports an Internet that Is Open (to Lawsuits for Common Online Activity)

Froman: "We will continue to support a free and open Internet that encourages the flow of information across the digital world."

Repetition of this platitude has failed to assuage the concerns of Internet freedom groups that point out that leaked TPP texts do not support Froman’s assurances. In a July 2014 letter, an array of Internet service providers, tech companies, and Internet freedom groups wrote to Froman about leaked TPP copyright terms, some of which resemble provisions in the defeated Stop Online Piracy Act (SOPA), which could “significantly constrain legitimate online activity and innovation.”  Noting the deal’s terms on Internet service provider liability, the groups stated, “We are worried about language that would force service providers throughout the region to monitor and policy their users’ actions on the internet, pass on automated takedown notices, block websites and disconnect Internet users.”

8. Our Exports Have Grown (More Quickly to Non-FTA Countries)

Froman: “Our total exports have grown by nearly 50 percent and contributed nearly one-third of our economic growth since the second quarter of 2009. In 2013, the most recent year on record, American exports reached a record high of $2.3 trillion...” “By opening rapidly expanding markets with millions of new middle-class consumers in parts of the globe like the Asia-Pacific, our trade agreements will help our businesses and workers access overseas markets...”

U.S. goods exports grew by a grand total of 0 percent in 2013.   The year before that, they grew by 2 percent.  As a result, the administration utterly failed to reach President Obama’s stated goal to double U.S. exports from 2009 to 2014. Most of the export growth Froman cites – which is less than half of the administration’s stated objective – came early in Obama’s tenure as a predictable rebound from the global recession that followed the 2007-2008 financial crisis.  At the abysmal export growth rate seen since then, we will not reach Obama’s stated goal to double 2009’s exports until 2054, 40 years behind schedule.  

Froman ironically uses this export growth drop-off to argue for more-of-the-same trade policy (e.g. the TPP).  The data simply does not support the oft-parroted pitch that we need TPP-style FTAs to boost exports.  In the first two years of the Korea FTA, U.S. exports to Korea have fallen 5 percent.  Overall, growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade.  That’s not a solid basis from which to argue, in the name of exports, for yet another FTA. 

And if we’re seeking to export to those countries that are growing the fastest, then the TPP is the wrong trade pact.  Of the TPP countries with which we do not already have an FTA, all but one are actually growing more slowly than the per capita growth rate of the East Asian and Pacific region overall.     

9. Increases in Food Exports (Have Been Swamped by a Surge in Food Imports)

Froman: “In 2013, U.S. farmers and ranchers exported a record $148.7 billion of food and agricultural goods to consumers around the world.”

Yes, U.S. food exports have increased, but not nearly as much as food imports. In 2013, the total volume of U.S. food exports stood just 0.5 percent higher than in 1995, while imports of food into the United States had more than doubled (growing 115 percent since 1995). Existing FTAs have contributed to the imbalanced food trade. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. And under the first two years of the Korea FTA, U.S. agricultural exports to Korea plummeted 34 percent. Smaller-scale U.S. family farms have been hardest hit. About 170,000 small U.S. family farms have gone under since NAFTA and NAFTA expansion pacts have taken effect, a 21 percent decrease in the total number.

10. The TPP Takes Heed of NAFTA’s Mistakes (and Builds on Them)

Froman: “I think the President has made clear that as we pursue a new trade policy, we need to learn from the experiences of the past and that’s certainly what we’re doing through TPP and the rest of our agenda. For example, when he was running for President, he said we ought to renegotiate NAFTA. What that meant was to make labor and environment not side issues that weren’t enforceable, but to bring labor and environment in the core of the agreement and make them enforceable just like any other provision of the trade agreement consistent with what Congress and the previous administration worked out in the so-called May 10^th agreement.”

When candidate Obama said in 2008 that he would renegotiate NAFTA – a pact that had become broadly unpopular for incentivizing the offshoring of U.S. manufacturing jobs – most people probably didn’t imagine that he meant expanding those offshoring incentives further. But the TPP would extend further NAFTA’s extraordinary privileges for firms that relocate abroad to low-wage countries (like TPP negotiating partner Vietnam).  Most people also probably would not expect “learning from the experiences of the past” to lead to an expansion of the monopoly protections that NAFTA gave to pharmaceutical corporations, thereby reducing the availability of generics and increasing the cost of medicines. But Froman himself stated yesterday that such corporate protections – antithetical to textbook notions of “free trade” – are part of the TPP’s NAFTA-plus provisions.

And though Froman touts the May 10 deal as an improvement over NAFTA for labor rights, a recent government report has shown the May 10 provisions to be ineffective at curbing labor abuses in FTA partner countries. A November 2014 report from the U.S. Government Accountability Office found broad labor rights violations across all five surveyed FTA partner countries, regardless of whether or not the FTA included the labor provisions of the vaunted May 10 deal, including unionist murders in Colombia and impunity for union-busting in Peru.  Several of the TPP negotiating partners are notorious labor rights abusers – four of them were cited in a recent Department of Labor report for using child and/or forced labor. Vietnam, meanwhile, outright bans independent unions. Why would incorporation of the same terms that have failed to curb labor abuses in existing FTAs be expected to end the systematic labor rights abuses of TPP partners? 

And despite the May 10 deal’s environmental provisions, the TPP’s extraordinary investment provisions would empower thousands of foreign firms to bypass domestic courts, go before extrajudicial tribunals, and challenge new domestic environmental protections as "frustrating their expectations." Corporations have already used such foreign investor privileges under existing U.S. FTAs to attack a moratorium on fracking, renewable energy programs, and requirements to clean up oil pollution and industrial toxins.  Tribunals comprised of three private attorneys have already ordered taxpayers to pay hundreds of millions to foreign firms for such safeguards, arguing that they violate sweeping FTA-granted investor privileges that the TPP would expand.  Provisions, such as those in the May 10 deal, that call for countries to enforce their environmental laws sound hollow under a TPP that would simultaneously empower corporations to “sue” countries for said enforcement. 

Obama’s Legacy: Middle-Class Jobs, Affordable Medicine and Financial Stability, or Fast-Tracked Trade Agreements – But Not Both

New Report ‘Prosperity Undermined’ Fact Checks Administration, Corporate Lobbyists and GOP Leadership With 20 Years of Data on Jobs, Economy

Fast Tracked trade deals have exacerbated the income inequality crisis, pushed good American jobs overseas, driven down U.S. wages, exploded the trade deficit and diminished small businesses’ share of U.S. exports, a new report from Public Citizen’s Global Trade Watch shows. The report, “Prosperity Undermined,”compiles and analyzes 20 years of trade and economic data to show that the arguments again being made in favor of providing the Obama administration with Fast Track trade authority have repeatedly proved false.

President Barack Obama is expected to push Fast Track for the Trans-Pacific Partnership (TPP). The pact, initiated by George W. Bush, literally replicates most of the job-offshoring incentives and wage-crunching terms found in the North American Free Trade Agreement (NAFTA) and would roll back Obama administration achievements on health, financial regulation and more. 

“It’s not surprising that Democrats and Republicans alike are speaking out against Fast Track because it cuts Congress out of shaping trade pacts that most Americans believe cost jobs while empowering the president to sign and enter into secret deals before Congress approves them,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “In their speeches and commentary, the administration, corporate interests and GOP leadership disregard the real, detrimental impacts that previous fast tracked trade deals – which serve as the model for the Trans-Pacific Partnership – have had on America’s middle class over the past 20 years.”

With unprecedented unity among Democratic members of Congress, there will be a handful of Democratic House votes in favor of Fast Track. Last year, seven of 201 House Democrats  supported Fast Track legislation. Meanwhile, a sizable bloc of GOP House members oppose Fast Track, which would grant the president extensive new executive powers and delegate away core congressional constitutional authorities.

The new report shows a 20-year record of massive U.S. trade deficits, American job losses and wage suppression. More specifically, data show that:

• Trade Deficits Have Exploded: U.S. trade deficits have grown more than 440 percent with Fast Tracked U.S. FTA countries since the pacts were implemented, but declined 16 percent with non-FTA countries during the relevant period. Since Fast Track was used to enact NAFTA and the World Trade Organization, the U.S. goods trade deficit has more than quadrupled, from $216 billion to $870 billion. Small businesses’ share of U.S. exports has declined, while U.S. export growth to countries that are not FTA partners has exceeded U.S. export growth to FTA partners by 30 percent over the past decade.  ‘

• Good American Jobs Were Destroyed: Nearly 5 million U.S. manufacturing jobs – one in four – were lost since the Fast Tracking of NAFTA and various NAFTA-expansion deals. Since NAFTA, more than 845,000 U.S. workers have been certified under just one narrow U.S. Department of Labor (DOL) program for Americans who have lost their jobs due to imports from Canada and Mexico and offshored factories to those countries.

• U.S. Wages Have Stagnated, Inequality Soared: Three of every five manufacturing workers who lose jobs to trade and find reemployment take pay cuts, with one in three losing greater than 20 percent, according to DOL data. Overall, U.S. wages have barely increased in real terms since 1974 – the year that Fast Track was first enacted – while American worker productivity has doubled. Since Fast Track’s enactment, the share of national income captured by the richest 10 percent of Americans has shot up 51 percent, while that captured by the richest 1 percent has skyrocketed 146 percent. Study after study has revealed an academic consensus that status quo trade has contributed to today’s unprecedented rise in income inequality.

• Food Exports Flat, Imports Soared: Under NAFTA and the WTO, U.S. food exports have stagnated while food imports have doubled. The average annual U.S. agricultural deficit with Canada and Mexico under NAFTA’s first two decades reached $975 million, almost three times the pre-NAFTA level. Approximately 170,000 small U.S. family farms have gone under since NAFTA and WTO took effect.

• Damaging Results of Obama’s “New and Improved” Korea Trade Deal: Since the Obama administration used Fast Track to push a trade agreement with Korea, the U.S. trade deficit with Korea has grown 50 percent – which equates to 50,000 more American jobs lost. The U.S. had a $3 billion monthly trade deficit with Korea in October 2014 – the highest monthly U.S. goods trade deficit with the country on record. After the Korea FTA went into effect, U.S. small businesses’ exports to Korea declined more sharply than large firms’ exports, falling 14 percent.

“Big dollars for big corporations and special interests calling the shots – that’s what the American people hear when only the country’s top corporate lobbyists are shaping America’s trade agreements,” said Wallach. “With such high stakes, we cannot let the Fast Track process lock Congress and the public out of negotiations that will have lasting impacts on the livelihoods, rights and freedoms of American families, workers and businesses.”

Read the report.          

Release of Two Years of Korea FTA Data Throws More Cold Water on Obama TPP and Fast Track Efforts After Asia Trip Fails to Change Dynamic

U.S. Exports to Korea Down 5 Percent, Imports from Korea Up and Trade Deficit With Korea Swells 50 Percent, Contradicting Obama Claims of U.S. Export and Job Growth

The just-released official  U.S. government trade data covering the first two years of the U.S.-Korea “free trade” agreement (FTA) further chills the prospects for the Trans-Pacific Partnership (TPP) and Fast Track trade authority. Today’s release of the U.S. International Trade Commission (USITC) data likely will intensify congressional antipathy toward Fast Track and concerns about the TPP. The USITC data, corrected to remove re-exports not produced in the United States, show falling U.S. exports to Korea and a ballooning U.S. trade deficit under the Korea FTA, which served as the U.S. template for the TPP.

U.S. goods exports to Korea have dropped 5 percent  under the Korea FTA’s first two years, compared to the two years before FTA implementation, in contrast to the Obama administration’s promise that the Korea FTA would mean “more exports, more jobs” and recent claims that the agreement has shown “strong results.” Imports into the United States from Korea have climbed 8 percent under the FTA (an increase of $4.7 billion per year).

From the year before the FTA took effect to its second year of implementation, the U.S. goods trade deficit with Korea swelled 50 percent (a $7.6 billion increase). In 23 out of 24 months since the Korea FTA took effect, the U.S. goods trade deficit with Korea has exceeded the average monthly level seen in the two years before the deal. The trade deficit increase under the FTA indicates the loss of more than 50,000 U.S. jobs, according the trade-jobs ratio that the Obama administration used to project gains from the deal. 

“The fact that the Korea deal has resulted in a worse trade deficit and more lost jobs has had a very chilling effect on public and congressional support for the TPP and Fast Track, and the Obama administration’s dishonest claims that the pact has expanded exports has only hardened that opposition,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “While most Democrats and a sizeable bloc of Republicans in Congress have already voiced opposition to Fast Tracking the TPP, both the negative outcomes of the Korea FTA and the administration’s dishonest claim that the pact is a success are adding more converts daily.” 

Rather than acknowledge that the Korea pact has resulted in declining U.S. exports and a larger trade deficit, the administration’s Office of the U.S. Trade Representative (USTR) has relied on data omissions and distortions in press materials that attempt to paint failure as success. For a full response to the USTR’s litany of data errors, visit http://www.citizen.org/documents/Korea-FTA-USTR-data-debunk.pdf. 

The USTR’s biggest distortion is counting foreign-made products that are simply shipped through the United States en route to Korea as “U.S. exports” to Korea. Rather than use the official U.S. government trade data provided by the USITC that counts only U.S.-made exports, USTR cites data that treat the 14 percent rise in foreign-made exports to Korea under the FTA as a boost to U.S. exports, artificially diminishing the dramatic U.S. export downfall.

The USTR relies on a series of other data errors in attempt to hide the dismal Korea FTA record, including:

• Failing to account for inflation: By treating a rise in prices as a rise in exports, the USTR mistakenly claims that the observed decrease in U.S. exports to Korea in manufactured goods under the FTA is an increase.

• Ignoring aggregate losses to cherry-pick tiny winning sectors: TheUSTR does not mention the overall 34 percent downfall in U.S. agricultural exports to Korea under the FTA’s first two years. Instead, the USTR boasts export increases in products like fruit and wine. The combined annual export gains in fruit and wine amount to $69 million, less than 6 percent of the more than $1.2 billion aggregate annual export loss in agricultural products.

• Using a selective timeframe: The USTR’s assessment of the Korea FTA record ignores 12 months of available data under the FTA and fails to include in the pre-FTA baseline of comparison the three months of data immediately prior to the deal’s implementation. This selective timeframe, combined with the decision to incorporate foreign-made exports, allows the USTR to claim that the U.S. export downfall under the FTA is entirely because of diminished exports in corn and fossil fuels. But even after discounting both corn and fossil fuels, the full set of data shows that U.S. exports to Korea have still fallen under the FTA, and the U.S. trade deficit with Korea has still ballooned.

“The USTR’s resort to major data deceptions to try to play down the debacle of the Korea FTA indicates just how desperate the administration is to shake the mounting evidence that the FTA model it now seeks to expand with the TPP costs U.S. jobs,” said Wallach. “But using data tricks to try to cover up the failure of the largest Obama trade deal, like treating foreign-made products as U.S. exports, is likely to backfire, and members of Congress do not take kindly to deception.”

The decline in U.S. exports to Korea under the FTA’s first two years was broad-based; of the 15 U.S. sectors that export the most to Korea, nine of them have experienced export declines under the FTA. Export shifts under the FTA have been larger for losing sectors than for winning sectors. Of the 15 top export sectors, eight have seen declines in exports to Korea of greater than 5 percent while only three have seen growth of exports to Korea of greater than 5 percent.

Many of the sectors that the administration promised would be the biggest beneficiaries of the FTA have been among the largest losers, including U.S. meat producers. U.S. poultry exports to Korea have plummeted 31 percent under the FTA, while U.S. beef and pork exports have fallen 10 and 19 percent respectively. 

The U.S. automotive industry, another promised winner under the deal, has endured a surge in automotive imports from Korea that has swamped a marginal increase in U.S. automotive exports to Korea since the FTA took effect. While U.S. average annual automotive exports to Korea under the pact have been $294 million higher than before the deal, average annual automotive imports from Korea have soared by $4.9 billion under the deal, spurring a 32 percent increase in the U.S. automotive trade deficit with Korea.

Overall, U.S. export growth to countries with pacts like the Korea FTA has been particularly lackluster. Growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to FTA partners by 30 percent over the past decade.

For further analysis of the outcomes of the Korea FTA’s first two years, visit http://www.citizen.org/documents/Korea-FTA-USTR-data-debunk.pdf.  

Data Debunk for USTR Froman’s Thursday Committee Hearing

In recent weeks, U.S. Trade Representative Michael Froman has begun making outlandish claims about past U.S. trade agreements. These claims are not supported by the official  U.S. government trade data. The Office of the U.S. Trade Representative’s (USTR) recent assertions that the North American Free Trade Agreement (NAFTA) has led to a U.S. trade surplus with Mexico and Canada and that the U.S.-Korea Free Trade Agreement (FTA) has increased U.S. manufacturing exports to Korea have been met with incredulity. These pacts’ recent anniversaries have spotlighted how the trade pact model on which the Trans-Pacific Partnership (TPP) is premised has led to massive trade deficits.

The premise that NAFTA would improve our trade balance was the basis for NAFTA proponents’ promises that the pact would create U.S. jobs. Many of the same government and industry sources made the same claims to sell the 2011 U.S.-Korea FTA. These pacts’ dismal outcomes – slow or even negative export growth, rising imports and burgeoning trade deficits – are intensifying congressional opposition to Fast Track authority for the TPP.

Rather than altering the trade agreement model to avoid repeating these outcomes, USTR appears intent on trying to change the data. To generate the outlandish claims about NAFTA and the Korea FTA, USTR employs a smorgasbord of data tricks to look out for in Froman’s testimony Thursday before the House Ways and Means Committee:

USTR’s Biggest Distortion: Counting Foreign-Made “Transshipped” Products as U.S. Exports

USTR’s primary data distortion is the decision not to use the official U.S. government trade data provided by the U.S. International Trade Commission (USITC).^[i] Instead, USTR cites data that include what are called “re-exports.” These are goods made abroad that are simply shipped through the United States en route to a final destination. (The USTR figures would include as U.S. exports goods taken off a truck from Canada in California’s Port of Long Beach then shipped to their final destination in Korea, or goods shipped from China, unloaded in a California port and trucked to Mexico.) Each month, USITC removes re-exports, which do not support U.S. production jobs, from the raw data gathered by the Census Bureau.^[ii] But USTR uses the uncorrected data, inflating the actual U.S. export figures.

• Using the official USITC data, U.S. export growth to countries with which we do not have FTAs has been 30 percent faster than to our FTA partners over the past decade.^[iii]

• The USITC data show U.S. average monthly goods exports to Korea are down 11 percent, imports from Korea have increased and the U.S. average monthly trade deficit with Korea has swelled 47 percent since the enactment of the Korea FTA.^[iv] The total U.S. trade deficit with Korea under the FTA’s second year is projected to be $8.6 billion higher than in the year before the deal.^[v]  Using the administration’s current export-to-job ratio, this drop in net exports represents the loss of more than 46,000 U.S. jobs.^[vi] However since the FTA, foreign-made re-exports passing through the United States en route to Korea are up 13 percent on a monthly average basis.^[vii] By counting these foreign goods as U.S. exports, USTR artificially diminishes the dramatic drop in actual U.S. exports to Korea, and errantly claims gains in some sectors.

• Using the USITC data, the 2013 U.S. goods trade balance with NAFTA nations was a deficit of $177 billion. The combined U.S. goods and services deficit with Mexico and Canada rose (in real, inflation-adjusted terms) from $9.7 billion in 1993 to $139.3 billion in 2012 (the year of comparison used by USTR).^[viii] This NAFTA deficit increase of $129.5 billion, or 1,330 percent, represents hundreds of thousands of lost U.S. jobs.^[ix]  But adding re-exports has had an increasingly distortionary effect on the true NAFTA deficit, allowing NAFTA proponents to make the 2013 NAFTA goods deficit of $177 billion look less than half as large. By incorporating re-exports, USTR claims in recent press materials: “U.S. total goods and private services trade balance with Canada countries (sic) shifted from a deficit of $2.9 billion in 1993 to roughly balance in 2012 (surplus of $37 million).” But after removing re-exports and adjusting for inflation, the actual total U.S. goods and services trade deficit with Canada increased from $16.9 billion in 1993 to $49.1 billion in 2012. That’s a deficit increase of $32.2 billion, or 191 percent. Similarly, USTR claims: “U.S. total goods and private services trade balance with Mexico countries shifted from a surplus of $4.6 billion in 1993 to a deficit of $49.4 billion in 2012.” But after removing re-exports and adjusting for inflation, the actual total U.S. goods and services trade deficit with Mexico changed from a $7.2 billion surplus in 1993 to a $90.1 billion deficit in 2012. That’s a $97.3 billion decline in the U.S. goods and services trade balance with Mexico.

We Still Have Big Deficits Without Fossil Fuels (And Corn Doesn’t Explain Korea Export Crash)

Despite USTR’s claim that our NAFTA deficit is all about fuel imports, the share of the U.S. NAFTA goods trade deficit that is comprised of petroleum, petroleum products and natural gas has declined under NAFTA, from 77 percent in 1993 to 53 percent in 2013, as we have faced a surge of imported manufactured and agricultural goods.^[x] Even if one removes all of these “oil” categories from the balance, the remaining 2013 NAFTA goods trade deficit was $82.9 billion. The combined NAFTA goods and services deficit in 2012 minus oil was $38.3 billion. 

Similarly, with respect to the Korea FTA, USTR claims“[O]ur trade balance has been affected by decreases in corn and fossil fuel exports, changes that are due to the U.S. drought in 2012 and change in Korea’s energy mix.”^[xi] But even discounting both corn and fossil fuels, U.S. monthly exports to Korea still fell under the FTA, and the monthly trade deficit with Korea still ballooned.^[xii] USTR claims that corn and fossil fuels explain the entirety of the export downfall largely by using an ill-suited 2011 versus 2013 timeframe that omits 10 months of available data and relies on a less relevant pre-FTA baseline. Usage of this less accurate timeframe produces a greater drop in corn and fossil fuel exports, and a smaller decline in exports of all other goods, than has actually occurred under the FTA when comparing the year immediately preceding the FTA with the full set of available post-FTA data. It is not surprising that the dismal FTA record remains without these products, given that of the 15 U.S. sectors that export the most to Korea, 11 of them have experienced export declines under the FTA.^[xiii] No product-specific anomalies can explain away what has been a broad-based downfall of U.S. exports to Korea since the pact went into effect.

Not Adjusting for Inflation Counts Increased Prices as an Increase in U.S. Exports

USTR also inflates U.S. exports to Korea by failing to adjust for price inflation. For instance, in its recent Korea FTA news release, USTR claims: “In the two years that this landmark agreement has been in effect … exports of U.S. manufactured goods to Korea have increased … Made-in-America manufactured goods still grew their sales in Korea by 3 percent.”^[xiv] Simply adjusting for inflation alone completely erases USTR’s claim of growth in exports of U.S. manufactured goods to Korea under the FTA. That is, even if one includes the distortion of re-exports and uses USTR’s timeframe, U.S. exports to Korea of manufactured goods fell slightly under the FTA after properly accounting for price increases.^[xv] If one removes the re-exports (i.e., uses the official USITC data) and looks at the actual months that the FTA has been in effect, U.S. monthly exports to Korea of manufactured goods have fallen 5 percent on average relative to the year before the deal took effect. The United States has lost an average of more than $150 million each month in manufactured goods exports to Korea under the FTA. Manufacturing sectors that provide critical shares of U.S. exports to Korea, such as machinery and computers/electronics, have experienced steep export declines under the FTA (11 percent and 12 percent respectively). In contrast, of the four critical manufacturing sectors that have seen increases in average monthly exports to Korea under the FTA, none has experienced an increase of greater than 2 percent.^[xvi]

Cherry-Picking Small-Dollar Winning Sectors, Omitting Major Losers to Distract from Net Losses

In its Korea FTA press release, USTR claims: “U.S. exports of a wide range of agricultural products have seen significant gains. … There were also dramatic increases in U.S. exports of key agricultural products that benefit from reduced tariffs under KORUS, including dairy, wine, beer, soybean oil, fruits and nuts, among many others.”^[xvii] But the losses in U.S. meat exports to Korea under the pact alone nearly cancel out the combined export gains for all agricultural sectors that USTR touts as winners (a monthly average loss of $20.1 million in meat exports versus a combined $24.7 million monthly average gain in exports of dairy, wine, beer, soybean oil, fruits and nuts).^[xviii]Average monthly exports of all U.S. agricultural products to Korea have fallen 41 percent under the FTA in comparison to the year before the deal. Ignoring this overall result, USTR singles out fruit as a winning agricultural sector under the FTA. But U.S. monthly average exports to Korea of all fruits have increased by just $312,120 under the FTA. This 1 percent increase could hardly be described as “dramatic.” USTR also highlights wine, but U.S. monthly average exports of wine to Korea have increased by just $370,378 under the FTA.^[xix] The amount of wine sold in an average six minutes in the United States is worth more ($402,415) than the gain in U.S. wine exports to Korea in an average month under the Korea FTA.^[xx]

Such paltry gains pale in comparison to the more than $20 million lost on average under each month of the FTA in U.S. exports to Korea of meat – one of the sectors that the administration promised would be among the biggest beneficiaries of the Korea deal.^[xxi] Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the FTA.^[xxii]Since the FTA, U.S. average monthly exports of poultry to Korea have fallen 39 percent below the pre-FTA monthly average. U.S. poultry exports to Korea have been lower than the pre-FTA monthly level in every single month since the FTA’s implementation. U.S. average monthly exports of pork to Korea since the FTA have fallen 34 percent below the pre-FTA monthly average, and U.S. average monthly exports of beef to Korea have fallen 6 percent below the pre-FTA monthly average.^[xxiii]

Omissions and Data Tricks to Hide Massive Auto Sector Deficit Growth Under the Korea FTA

The USTR data on U.S. automotive trade with Korea under the FTA is based on a series of tricks. USTR claims: “Since the Korea agreement went into effect, U.S. exports to Korea are up for our manufactured goods, including autos … overall U.S. passenger vehicle exports to Korea increased 80 percent compared to 2011, and sales of ‘Detroit 3’ vehicles are up 40 percent.”^[xxiv] In fact, exports to Korea of U.S.-produced Fords, Chryslers and General Motors vehicles increased by just 3,400 vehicles from 2011 to 2013.^[xxv]  But given that pre-FTA exports of “Detroit 3” vehicles was also tiny – 8,252 vehicles – USTR can express the small increase of 3,400 cars as a “40 percent” gain. Meanwhile, 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA), when Hyundai and Kia imports already topped 1.1 million vehicles.^[xxvi]

And USTR’s claim of an “80 percent” rise in passenger vehicle exports, in addition to being inflated by increases in re-exports and prices, omits the export of auto parts, which constitute the majority of the value of U.S. automotive exports to Korea. U.S. average monthly exports of auto parts to Korea have fallen 12 percent under the FTA, offsetting much of the rise in passenger vehicle exports.^[xxvii] After including auto parts, excluding foreign-made re-exports, using the more FTA-relevant timeframe and adjusting for inflation, U.S. average monthly automotive exports to Korea have increased by only 12 percent under the FTA, while average monthly automotive imports from Korea have risen by 19 percent.

The disparity is even starker in dollar terms: While U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, average monthly automotive imports from Korea have soared by $263 million under the deal. The tiny gains in U.S. exports have been swamped by a surge in auto imports from Korea that the administration promised would not occur because of its additional FTA auto sector measure negotiated in 2011. In January 2014, monthly automotive imports from Korea topped $2 billion for the first time on record. The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea.^[xxviii]

Using a Selective Time Frame to Measure the Outcomes of the Korea FTA

Rather than compare the post-Korea-FTA period to the 12 months prior to the FTA’s implementation (i.e., April 2011 through March 2012), USTR uses calendar year 2011 as a baseline. This means that USTR omits data from the three months immediately prior to the FTA’s 2012 implementation (January through March 2012) and replaces it with data from the same three months in 2011. This difference matters, since U.S. exports to Korea in the first three months of 2011 were 9 percent lower than in the first three months of 2012, giving USTR a lower baseline of comparison that makes the downfall in U.S. exports look less severe than if using the three most recent pre-FTA months.^[xxix] In addition, USTR uses only calendar year 2013 to assess the FTA’s record, omitting 10 months of available post-FTA data (April through December 2012 and January 2014). While a comparison between 2011 and 2013 could serve as a second-best approximation in the absence of more precise data, the more FTA-relevant monthly data is readily available.

 

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[i] USITC data can be found at U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb.” Available at: http://dataweb.usitc.gov/.

[ii] Census Bureau data can be found at U.S. Census Bureau, “U.S. International Trade Data,” U.S. Department of Commerce. Available at: http://www.census.gov/foreign-trade/data/.

[iii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed February 11, 2014. Available at: http://dataweb.usitc.gov/. The statistic is a comparison of the average annual growth rate of the combined inflation-adjusted exports of all non-FTA partner countries versus that of all FTA partner countries from 2004 through 2013 (adjustments have been made to account for the changes in these two categories as  non-FTA partners have become FTA partners). All data in this memo is inflation-adjusted according to the CPI-U-RS index of the U.S. Bureau of Labor Statistics (which provides indices up through 2012) and the online inflation calculator of the U.S. Bureau of Labor of Statistics (which provides an approximate index for 2013). U.S. Bureau of Labor Statistics, “Consumer Price Index Research Series Using Current Methods (CPI-U-RS),” U.S. Department of Labor, updated March 29, 2013. Available at: http://www.bls.gov/cpi/cpiursai1978_2012.pdf.  U.S. Bureau of Labor Statistics, “CPI Inflation Calculator,” U.S. Department of Labor, accessed March 10, 2014. Available at: http://www.bls.gov/data/inflation_calculator.htm.

[iv] In this paragraph and throughout, figures concerning average monthly trade levels with Korea compare data from the year before the FTA’s implementation and from the 22 post-implementation months for which data are available. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[v] The projection for export losses under the FTA’s first two years assumes that trends during the FTA’s first 22 months continue for the remaining two months for which data are not yet available. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[vi] Michael Froman, “2014 Trade Policy Agenda and 2013 Annual Report of the President of the United States on the Trade Agreements Program,” Office of the U.S. Trade Representative, March 2014, at 2. Available at: http://www.ustr.gov/sites/default/files/2014%20Trade%20Policy%20Agenda%20and%202013%20Annual%20Report.pdf.    

[vii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[viii] Goods trade data in this bullet point come from U.S. International Trade Commission, “Interactive Tariff and Trade Dataweb,” accessed February 20, 2014. Available at: http://dataweb.usitc.gov. Services trade data in this bullet point come from U.S. Bureau of Economic Analysis, “International Data: Table 12: U.S. International Transactions, by Area,” accessed February 20, 2014. Available at: http://www.bea.gov/iTable/iTable.cfm?ReqID=6&step=1#reqid=6&step=1&isuri=1.

[ix] See Robert Scott, “Heading South: U.S.-Mexico trade and job displacement after NAFTA,” Economic Policy Institute, May 3, 2011. Available at: http://www.epi.org/publication/heading_south_u-s-mexico_trade_and_job_displacement_after_nafta1/.

[x] Trade in petroleum, petroleum products and natural gas is defined as NAICS 2111 and 3241 for data since 1997 – when NAICS replaced the SIC classification system – and SIC 131, 291, 295, and 299 for data before 1997.

[xi] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xii] Corn is defined as NAICS 111150 and fossil fuels are defined as NAICS 211111, 211112, 212112 and 212113. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xiii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xiv] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xv] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xvi] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xvii] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xviii] “Meat” includes beef (defined as SITC 011), pork (defined as SITC 0122, 0161 and 0175) and poultry (defined as SITC 0123 and 0174). Dairy is defined as NAICS 2111511, 311512, 311513, 311514 and 311520. Wine is defined as NAICS 312130. Beer is defined as NAICS 312120. Soybean oil is defined as NAICS 311222 and 311224. Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Nuts are defined as NAICS 111335 and 111992. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 21, 2014.  Available at: http://dataweb.usitc.gov/.

[xix] Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Wine is defined as NAICS 312130. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xx] The statistic is based on an estimated $34.6 billion in wine sales in the United States in 2012, adjusted for inflation. The Wine Institute, “2012 California and U.S. Wine Sales,” 2013, accessed March 21, 2014. Available at: https://www.wineinstitute.org/resources/statistics/article697.

[xxi] “Meat” includes beef (defined as SITC 011), pork (defined as SITC 0122, 0161 and 0175) and poultry (defined as SITC 0123 and 0174). Dairy is defined as NAICS 2111511, 311512, 311513, 311514 and 311520. Wine is defined as NAICS 312130. Beer is defined as NAICS 312120. Soybean oil is defined as NAICS 311222 and 311224. Fruits are defined as NAICS 11310, 11320, 111331, 111332, 111333, 111334 and 111339. Nuts are defined as NAICS 111335 and 111992. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 21, 2014.  Available at: http://dataweb.usitc.gov/.

[xxii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxiii] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxiv] Office of the U.S. Trade Representative, “U.S.-Korea Free Trade Agreement Shows Strong Results on Second Anniversary,” USTR press release, March 12, 2014. Available at: http://www.ustr.gov/about-us/press-office/press-releases/2014/March/US-Korea-Free-Trade-Agreement-Shows-Strong-Results-on-Second-Anniversary.

[xxv] Korea Automobile Importers & Distributors Association, “New Registration,” 2014, accessed March 10, 2014. Available at: http://www.kaida.co.kr/en/statistics/NewRegistList.do.

[xxvi] Timothy Cain, “Hyundai-Kia Sales Figures,” GoodCarBadCar.net, 2014, accessed March 10, 2014. Available at: http://www.goodcarbadcar.net/2012/10/hyundai-kia-group-sales-figures.html.

[xxvii] Passenger vehicles are defined as code 300 and 301 in the one-digit End Use classification system, while auto parts are defined as 302. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxviii] Total automotive exports and imports are defined as code 3 in the one-digit End Use classification system. U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

[xxix] U.S. International Trade Commission, “Interactive Tariff and Trade DataWeb,” accessed March 10, 2014.  Available at: http://dataweb.usitc.gov/.

U.S. Trade Deficits Have Grown More Than 440% with FTA Countries, but Declined 16% with Non-FTA Countries

The aggregate U.S. goods trade deficit with Free Trade Agreement (FTA) partners is more than five times as high as before the deals went into effect, while the aggregate deficit with non-FTA countries has actually fallen. The key differences are soaring imports into the United States from FTA partners and lower growth in U.S. exports to those nations than to non-FTA nations. Incredibly, the U.S. Chamber of Commerce website states, “For those worried about the U.S. trade deficit, trade agreements are clearly the solution – not the problem.” Their pitch ignores the import surges contributing to growing deficits and job loss, while their export “data” is inflated, using tricks described below.

The aggregate U.S. trade deficit with FTA partners has increased by more than $147 billion (inflation-adjusted) since the FTAs were implemented. In contrast, the aggregate deficit with all non-FTA countries has decreased by more than $130 billion since 2006 (the median entry date of existing FTAs). Two reasons: a sharp increase in imports from FTA partners and significantly lower export growth to FTA partners than to non-FTA nations over the last decade. Using the Obama administration’s net exports-to-jobs ratio, the FTA trade deficit surge implies the loss of about 800,000 U.S. jobs. Trade with Canada and Mexico (our first and third largest trade partners, respectively) contributed the most to the widening FTA deficit. Under the North American Free Trade Agreement (NAFTA), the U.S. deficit with Canada ballooned and the small U.S. surplus with Mexico turned into a nearly $100 billion deficit. The trend persists under new FTAs – two years into the Korea FTA, the U.S. trade deficit with Korea has jumped more than 51 percent. Reducing the massive trade deficit requires a new trade agreement model, not more of the same.

U.S. Export Growth Falters under FTAs

Growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 30 percent over the last decade. Between 2003 and 2013, U.S. goods exports to FTA partner countries grew by an annual average rate of only 4.9 percent. Goods exports to non-FTA partner countries, by contrast, grew by 6.3 percent per year on average. Since 2006, when the number of FTA partner countries nearly doubled with the implementation of the Central America Free Trade Agreement (CAFTA), the FTA export growth “penalty” has only increased. Since then, average U.S. export growth to non-FTA partner countries has topped average export growth to FTA partners by 47 percent.

Corporate FTA Boosters Use Errant Methods to Claim Higher Exports under FTAs

Members of Congress will invariably be shown data by defenders of our status quo trade policy that appear to indicate that FTAs have generated an export boom. Indeed, to promote congressional support for new NAFTA-style FTAs, the U.S. Chamber of Commerce and the National Association of Manufacturers (NAM) have funded an entire body of research designed to create the appearance that the existing pacts have both boosted exports and reversed trade deficits with FTA partner countries. This work relies on several methodological tricks that fail basic standards of accuracy:

• Ignoring imports: U.S. Chamber of Commerce studies regularly omit mention of soaring imports under FTAs, instead focusing only on exports. But any study claiming to evaluate the net impact of trade deals must deal with both sides of the trade equation. In the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under FTAs.

• Counting “re-exports:” NAM has misleadingly claimed that the United States has a manufacturing surplus with FTA nations by counting as U.S. exports goods that actually are made overseas – not by U.S. workers. NAM’s data include “re-exports” – goods made elsewhere that are shipped through the United States en route to a final destination. Determining FTAs’ impact on U.S. jobs requires counting only U.S.-made exports.

• Omitting major FTAs: The U.S. Chamber of Commerce has repeatedly claimed that U.S. export growth is higher to FTA nations that to non-FTA nations by simply omitting FTAs that do not support their claim. One U.S. Chamber of Commerce study omitted all FTAs implemented before 2003 to estimate export growth. This excluded major FTAs like NAFTA that comprised more than 83 percent of all U.S. FTA exports. Given NAFTA’s leading role in the 443 percent aggregate FTA deficit surge, its omission vastly skews the findings.

• Failing to correct for inflation: U.S. Chamber of Commerce studies that have claimed high FTA export growth have not adjusted the data for inflation, thus errantly counting price increases as export gains.

• Comparing apples and oranges: The U.S. Chamber of Commerce has claimed higher U.S. exports under FTAs by using two completely different methods to calculate the growth of U.S. exports to FTA partners (an unweighted average) versus non-FTA partners (a weighted average). This inconsistency creates the false impression of higher export growth to FTA partners by giving equal weight to FTA countries that are vastly different in importance to U.S. exports (e.g. Canada, where U.S. exports exceed $251 billion, and Bahrain, where they do not reach $1 billion), despite accounting for such critical differences for non-FTA countries.

Chart: U.S. Trade Deficit Rises by $147 Billion with FTA Partners, Falls by $131 Billion with Rest of the World

Administration Uses Data Omissions and Distortions to Try to Hide Dismal Korea FTA Realities

The Office of the U.S. Trade Representative (USTR) disseminated a press release yesterday riddled with false claims about the record of the U.S. “free trade” agreement (FTA) with Korea, which turns two years old this week. The release attempts to obscure the fact that two years after the pact went into effect, the actual outcomes are exactly the opposite of the “more exports, more jobs” that the administration promised: U.S. monthly goods exports to Korea are down 11 percent, imports from Korea have increased and the U.S. monthly trade deficit with Korea has swelled 47 percent.

To set the record straight, here are USTR’s claims, followed by the Korea FTA’s inconvenient realities according to the official U.S. government trade data provided by the U.S. International Trade Commission. For a detailed, data-driven review of the Korea FTA’s two-year record, click here for Public Citizen’s new report: “Korea FTA Outcomes on the Pact’s Second Anniversary.”

USTR Claim: “In the two years that this landmark agreement has been in effect…exports of U.S. manufactured goods to Korea have increased” … “Made-in-America manufactured goods still grew their sales in Korea by 3 percent”

Reality: U.S. monthly exports to Korea of manufactured goods have fallen 5 percent on average relative to the year before the deal took effect. The United States has lost an average of more than $150 million each month in manufactured exports to Korea under the FTA. Manufacturing sectors that provide critical shares of U.S. exports to Korea, such as machinery and computers/electronics, have experienced steep export declines under the FTA (11 percent and 12 percent respectively). In contrast, of the four critical manufacturing sectors that have seen increases in average monthly exports to Korea under the FTA, none has experienced an increase of greater than 2 percent.

USTR Claim: “Since the Korea agreement went into effect, U.S. exports to Korea are up for our manufactured goods, including autos” (Ambassador Froman) … “overall U.S. passenger vehicle exports to Korea increased 80 percent compared to 2011, and sales of “Detroit 3” vehicles are up 40 percent.”

Reality:  Exports to Korea of U.S.-produced Fords, Chryslers and Cadillacs increased by just 3,400 vehicles from 2011 to 2013.  But given that pre-FTA exports of “Detroit 3” vehicles was also tiny – 8,252 vehicles – USTR can express the small increase of 3,400 cars as a “40 percent” gain. Meanwhile, 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA), when Hyundai and Kia imports already topped 1.1 million vehicles. Overall, while U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, average monthly automotive imports from Korea have soared by $263 million under the deal – a 19 percent increase. The tiny gains in U.S. exports have been swamped by a surge in auto imports from Korea that the administration promised would not occur because of its additional FTA auto sector measure negotiated in 2011. In January 2014, monthly automotive imports from Korea topped $2 billion for the first time on record. The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea.

USTR Claim: “…U.S. exports of a wide range of agricultural products have seen significant gains.”…  “There were also dramatic increases in U.S. exports of key agricultural products that benefit from reduced tariffs under KORUS, including dairy, wine, beer, soybean oil, fruits and nuts, among many others.”

Reality: Average monthly exports of all U.S. agricultural products to Korea have fallen 41 percent under the FTA in comparison to the year before the deal – a decline of $125 million per month. USTR omits the overall U.S. agricultural export record in its release, apparently hoping to distract from the net decline in agricultural exports by cherry picking a few products that have seen export gains. Meanwhile, some of the agricultural sectors that the administration promised would be the biggest beneficiaries of the Korea FTA – such as the meat industry – have been among the largest losers. Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the FTA – a loss of more than $20 million in meat exports every month. Since the FTA, U.S. average monthly exports of poultry to Korea have fallen 39 percent below the pre-FTA monthly average. U.S. poultry exports to Korea have been lower than the pre-FTA monthly level in every single month since the FTA’s implementation. U.S. average monthly exports of pork to Korea since the FTA have fallen 34 percent below the pre-FTA monthly average, and U.S. average monthly exports of beef to Korea have fallen 6 percent below the pre-FTA monthly average.

USTR Claim: “…Koreans are buying more U.S. services than ever…”…  “Exports of services to Korea increased an estimated 18.5 percent between 2011 and 2013, to an estimated $19.4 billion.”

Reality: Growth in U.S. services exports to Korea has actually slowed under the FTA. While U.S. services exports to Korea increased at an average quarterly rate of 3.0 percent in the year before the FTA took effect, the average quarterly growth rate has fallen to 2.3 percent since the deal’s enactment – a 24 percent drop. The pre-FTA year used as a baseline was not an anomaly – taking into account the full 13 pre-FTA years for which data are available, the long-term average pre-FTA quarterly growth rate for U.S. services exports to Korea was 2.9 percent, 21 percent higher than the post-FTA rate.

USTR Claim: “While our trade balance has been affected by decreases in corn and fossil fuel exports, changes that are due to the U.S. drought in 2012 and change in Korea’s energy mix, both of which were unrelated to the agreement” (Ambassador Froman) 

Reality: Corn and fossil fuels do not account for most of the crash in U.S. exports to Korea since the FTA. After removing corn, average monthly U.S. agricultural exports to Korea still declined under the deal. And after removing all fossil fuels (oil, natural gas and coal), the overall post-FTA decrease in U.S. average monthly exports to Korea barely budges, shifting from an 11 percent downfall to a 10 percent downfall. Even if discounting both corn and fossil fuels, U.S. monthly exports to Korea still fell under the FTA, and the monthly trade deficit with Korea still ballooned. It is not surprising that the dismal FTA record remains without these products, given that of the 15 U.S. sectors that export the most to Korea, 11 of them have experienced export declines under the FTA. No product-specific anomalies can explain away what has been a broad-based downfall of U.S. exports to Korea since the pact went into effect. Those losses amount to an 11 percent decline in average monthly exports to Korea that, combined with a 4 percent increase in average monthly imports, have caused the average monthly U.S. trade deficit with Korea to swell 47 percent under the FTA. The total U.S. trade deficit with Korea under the FTA’s second year is projected to be $8.6 billion higher than in the year before the deal. Using the administration’s current export-to-job ratio, this drop in net U.S. exports to Korea in the FTA’s first two years represents the loss of more than 46,600 U.S. jobs.

USTR Claim: “Slow economic growth in Korea between 2012 and2013 dampened demand for imports”

Reality: Korea’s GDP growth rate for 2013 is estimated to be higher than in both 2012 and 2011. And in 2012 (the first year of the FTA), Korea’s gross national income grew 2.3 percent and final consumption expenditures grew 2.2 percent. Since enactment of the Korea FTA, Koreans have been purchasing more goods overall, while purchasing fewer U.S. goods.

USTR Claim: “KORUS has also improved Korea’s investment environment through strong provisions on intellectual property rights, services, and investment, supporting U.S. exports.”

Reality: The Korea FTA included extraordinary foreign investor privileges that incentivize the export of U.S. investment, not the export of U.S. products, thereby promoting the offshoring of U.S. jobs. The deal’s “investor-state” terms provide special benefits to firms that relocate abroad and eliminate many of the usual risks that make firms think twice about moving out of the United States. New incentives for U.S. firms to relocate to Korea under the pact include a guaranteed minimum standard of treatment in Korea and compensation for regulatory costs, including the right to obtain government compensation simply because a regulation is altered after a foreign investment is established. U.S. firms that offshore production to Korea are also empowered to skirt Korea’s domestic legal system and directly “sue” the government in World Bank and U.N. tribunals comprised of three private attorneys. Such extraordinary privileges have already incentivized widespread offshoring under existing U.S. FTAs.

On 2nd Anniversary of Korea FTA, U.S. Exports Down, Imports Up and Trade Deficit Balloons, Fueling Congressional TPP Skepticism

Export Decline Hits U.S. Farmers and Auto Workers Particularly Hard, Dismal Outcomes of Pact Used as TPP Template Will Bolster Opposition to Obama Bid for Fast Track Authority

Two years after the implementation of the U.S.-Korea Free Trade Agreement (FTA), government data reveal that the Obama administration’s promises that the pact would expand U.S. exports and create U.S. jobs are exactly opposite of the actual outcomes: a downfall in U.S. exports to Korea, rising imports and a surge in the U.S. trade deficit with Korea. Using the administration’s export-to-job ratio, the estimated drop in net U.S. exports to Korea in the FTA’s first two years represents the loss of more than 46,600 U.S. jobs.

The damaging Korea FTA record, detailed in a new Public Citizen report, undermines the administration’s attempt to use the same failed export growth promises to sell an already skeptical Congress on Fast Track authority for the Trans-Pacific Partnership (TPP), a sweeping deal for which the Korea FTA was the template.

Contrary to the administration’s promise that the Korea FTA would mean “more exports, more jobs”:

• U.S. goods exports to Korea have fallen below the pre-FTA average monthly level for 21 out of 22 months since the deal took effect.  See graph below.

• The United States has lost an average of $385 million each month in exports to Korea, given an 11 percent decline in the average monthly export level in comparison to the year before the deal.

• The United States lost an estimated, cumulative $9.2 billion in exports to Korea under the FTA’s first two years, compared with the exports that would have been achieved at the pre-FTA level.

• Average monthly exports of U.S. agricultural products to Korea have fallen 41 percent.

• The average monthly U.S. automotive trade deficit with Korea has grown 19 percent.

The U.S. exports downfall is particularly concerning given that Korea’s overall imports from all countries increased by 2 percent over the past two years (from 2011 to 2013).

The average monthly trade deficit with Korea has ballooned 47 percent in comparison to the year before the deal. As U.S. exports to Korea have declined under the FTA, average monthly imports from Korea have risen four percent. The total U.S. trade deficit with Korea under the FTA’s just-completed second year is projected to be $8.6 billion higher than in the year before the deal, assuming that trends during the FTA’s first 22 months continue for the remaining two months for which data is not yet available.

Meanwhile, U.S. services exports to Korea have slowed under the FTA. While U.S. services exports to Korea increased at an average quarterly rate of 3 percent in the year before the FTA took effect, the average quarterly growth rate has fallen to 2.3 percent since the deal’s enactment – a 24 percent drop.

“Most Americans won’t be surprised that another NAFTA-style deal is causing damage, but it’s stunning that the administration thinks the public and Congress won’t notice if it recycles the promises used to sell the Korea pact – now proven empty – to push a Trans-Pacific deal that is literally based on the Korea FTA text,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The new evidence of the Korea FTA’s damaging record is certain to make it even more difficult for the Obama administration to get Congress to delegate its constitutional trade authority via Fast Track for the TPP.”

The decline in U.S. exports under the Korea FTA contributed to an overall zero percent growth in U.S. exports in 2013, rendering virtually impossible Obama’s stated goal to double exports by the end of 2014. At the export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054. While the Korea pact is the only U.S. FTA that has led to an actual decline in U.S exports, the overall growth of U.S. exports to nations that are not FTA partners has exceeded combined U.S. export growth to U.S. FTA partners by 30 percent over the past decade.

“The data simply do not support the Obama administration’s tired pitch that more FTAs will bring more exports,” said Wallach. “Faced with falling exports and rising, job-displacing deficits under existing FTAs, the administration needs to find a new model, not to repackage an old one that patently failed.”

The Korea FTA has produced very few winners; since the FTA took effect, U.S. average monthly exports to Korea have fallen in 11 of the 15 sectors that export the most to Korea, relative to the year before the FTA (see graph below). And while losing sectors have faced relatively steep export declines (e.g. a 12 percent drop in computer and electronics exports, a 30 percent drop in mineral and ore exports), none of the winning sectors has experienced an average monthly export increase of greater than two percent. Ironically, many sectors that the administration promised would be the biggest beneficiaries of the Korea FTA have been some of the deal’s largest losers.

AGRICULTURE: While the administration argued for passage of the FTA in 2011 by claiming, “The U.S.-Korea trade agreement creates new opportunities for U.S. farmers, ranchers and food processors seeking to export to Korea’s 49 million consumers,” average monthly exports of U.S. agricultural products to Korea have fallen 41 percent under the FTA.

• U.S. average monthly poultry exports to Korea have fallen 39 percent.

• U.S. average monthly pork exports to Korea have fallen 34 percent.

• U.S. average monthly beef exports to Korea have fallen 6 percent.

Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the Korea deal – a loss of more than $20 million in meat exports every month.

AUTOS AND AUTO PARTS: The administration also promised the Korea FTA would bring “more job-creating export opportunities in a more open and fair Korean market for America’s auto companies and auto workers,” while a special safeguard would “ensure… that the American industry does not suffer from harmful surges in Korean auto imports due to this agreement.” The U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, but the average monthly automotive imports from Korea have soared by $263 million under the deal – a 19 percent increase. So while U.S. auto exports have risen very modestly under the FTA, those tiny gains have been swamped by a surge in auto imports from Korea that the administration promised would not occur under the FTA.

• In January 2014, monthly auto imports from Korea topped $2 billion for the first time on record.

• About 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA).

• Sales of U.S.-produced Fords, Chryslers and Cadillacs in Korea increased by just 3,400 vehicles.

The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea. The Obama administration has sought to distract from this dismal result by touting the percentage increase in U.S. auto sales to Korea. This allows the sale of a small number of cars beyond the small pre-FTA base of sales to appear to be a significant gain when in fact it is not.

Read the new Public Citizen report on the Korea FTA record.

Falling Exports under Korea FTA Likely to Bolster Fast Track Opposition

This week's government release of trade data highlights a stunning decline in U.S. exports to Korea, a rise in imports, and a ballooning of the U.S. trade deficit under the Korea Free Trade Agreement (FTA).  With such sorry results emerging from the Korea deal, it's little wonder that 178 Democrats and Republicans this week rejected Obama's bid to Fast Track through Congress another FTA -- the sweeping Trans-Pacific Partnership (TPP).  

U.S. goods exports to Korea fell 8 percent and imports from Korea grew 8 percent under the first 18 months of the Korea deal, relative to the 18 months before the deal took effect. The shift provoked an incredible 56 percent growth in the U.S. trade deficit with Korea in the FTA’s first year and a half.

The Korea FTA’s abysmal record for U.S. jobs has been consistent: in 18 out of the 18 months since the deal took effect, U.S. exports to Korea have fallen below the average level seen in the year before the deal.  And in every single one of the 18 months since the FTA, the U.S. deficit with Korea has exceeded the average monthly deficit before the deal took effect (see graphs below). These losses amount to tens of thousands of lost U.S. jobs.

The disappointing data from the Korea FTA, a template for the TPP, is poised to generate even more congressional opposition to Obama’s request for Fast Track’s extraordinary authority to railroad the TPP through Congress on an expedited timeline with limited debate and no amendments.

Exports Fall Short under Korea FTA for 16 out of 16 months

At this week's G20 summit in Russia, President Obama has been trying once again to sell two enormous "trade" pacts -- the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Free Trade Agreement (TAFTA) -- using the beleaguered pitch that such deals will deliver jobs by boosting exports.  

But government trade data released this week douses Obama's export promise with another bucket of cold reality.  Under the Korea "free trade" agreement (FTA), a model for the TPP, U.S. exports have been steadily falling, imports have been rising, and job-displacing trade deficits have surged.    

In fact, in every single month since the Korea FTA took effect in March 2012, U.S. goods exports to Korea have fallen below the average export level seen the year before the deal took effect.  Average monthly exports to Korea since the FTA have sunk 11% below the average monthly level before the FTA. 

The U.S. monthly trade deficits with Korea, meanwhile, have soared about 50% higher than the pre-FTA level.  In 16 out of 16 months since the FTA took effect, the U.S. trade deficit with Korea has exceeded the average monthly deficit seen the year before the deal.  

The dismal record of the Korea FTA for U.S. exports and jobs does not bode well for the administration’s attempt to push the controversial TPP through Congress on a democracy-defying Fast Track under the tired and counterfactual promise of export promotion.  Members of Congress are not likely to be persuaded to revoke their constitutional authority over trade and allow the TPP to be railroaded through Congress after seeing the disappointing data for a deal upon which the TPP is modeled.  

Obama's Top Trade Official Nominee: The Good, The Bad, and The Ugly

Yesterday was the Senate Finance Committee's confirmation hearing for Michael Froman, Obama's pick to be the next U.S. Trade Representative (USTR).  

If confirmed, Froman would replace Ron Kirk, who left his post as the top U.S. trade official in March to take a job at a corporate law firm that specializes in defending multinational corporations against claims of vast environmental damage, including helping Chevron evade payment of $18 billion in damages for decades of pollution in Ecuador's Amazon.  

We've been a tad skeptical of Obama's pick of Froman, given his Wall Street roots and his role in crafting the much-maligned North American Free Trade Agreement (NAFTA) and the deficit-plagued Korea FTA.  

Here's what went down at yesterday's hearing, divided by the time-honored categories of good, bad, and ugly: 

The Good (maybe)

• Sen. Sherrod Brown (D-Ohio) raised the fact that "Wall Street and industry-friendly European regulators are now seeking to use any means they can to roll back some of the reforms" enacted since the 2008 financial crisis to rein in banks' excessive risk-taking.  Specifically, he mentioned that big banks on both sides of the Atlantic are trying to use the newly-hatched Trans-Atlantic Free Trade Agreement (TAFTA) as a backdoor means of attacking controls on risky derivatives, too-big-to-fail regulations and other Wall Street reforms included in the Dodd-Frank reregulatory law.  Froman responded by promising, "There is nothing that we are going to do through a trade agreement to weaken our financial regulation, to roll back Dodd-Frank, or to roll back the efforts that the administration and Congress have worked on for the last four years to reform our financial regulatory system here."  Really?  If honored, Froman's promise would represent an about-face in U.S. trade policy.  USTR is currently pushing provisions in the Trans-Pacific Partnership (TPP) that would prohibit bans on risky derivatives, counteract too-big-to-fail regulations, and bar capital controls -- the very deregulatory moves that Froman says are now off the table.  Will Froman halt USTR's legacy of helping banks use "trade" deals to water down financial regulation?  Given Froman's Citigroup stomping grounds, we're skeptical.  But so long as Froman's in the business of promising change, we're in the business of holding him to that promise.   

The Bad

• Sen. Brown also highlighted the incredible proposal to include the extreme investor privileges of past NAFTA-style deals in the U.S.-EU deal (TAFTA). The proposal -- to empower foreign corporations to circumvent domestic courts and directly challenge health and environmental policies before extrajudicial tribunals authorized to order taxpayer compensation -- sparked a flood of critical comments from the public to USTR last month.  Brown asked, "Do we need an extrajudicial and private enforcement system when U.S. and European property rights are...advanced and protected already?"  Froman dodged the question, saying the matter was a "topic worthy of discussion."  More aptly, it's a topic worthy of an answer.  The appropriate response to Brown's yes-or-no question would have been, "No. Empowering foreign corporations to completely circumvent our courts is unnecessary for investor protection, insults basic democratic tenets, and threatens consumers' health and taxpayers' wallets."  

• Sen. Ron Wyden (D-Ore.) raised the extraordinary secrecy shrouding the Obama administration's trade negotiations to date.  Wyden has blasted USTR's incredible decision to keep the negotiating text of the sweeping TPP pact, affecting everything from food safety to Internet freedom, hidden from the U.S. public and even from members of Congress.  Not even the Bush administration attempted that degree of secrecy.  Wyden asked, "If confirmed, will you make sure that the public...gets a clear and updated description of what trade negotiators are seeking to obtain in the negotiations so that we can make this process more transparent in the future?" Wyden further asked that negotiating texts be placed online.  Froman responded by saying he agrees with the principle of transparency.  But instead of committing to a meaningful fulfillment of that principle by releasing the TPP text online (as done under Bush), he reiterated USTR's general desire to seek input from "stakeholders."  It is of course difficult for stakeholders to provide meaningful input if they cannot see the thing in which they have a stake.   

The Ugly

• Froman (and Obama) plan to pursue Fast Track: "If confirmed, I will engage with you to renew Trade Promotion Authority. TPA is a critical tool."  Fast Track, cynically rebranded "Trade Promotion Authority," is indeed a tool.  A battering ram sort of tool.  A tool that, before allowed to expire, was used to shove unpopular "trade" deals like NAFTA through Congress by empowering the executive branch to negotiate and sign the sweeping pacts before sending them to Congress for a no-amendments, limited-debate, expedited, post-facto vote.  Click here for a full analysis of Fast Track's democracy-curtailing, NAFTA-enabling track record.  If past is precedent, any attempt from Froman to refurbish this antiquated legislative ramrod would prove vastly unpopular among the U.S. public and Congress.  We'll see if Froman, despite the political liability, makes good on his threat to, as one of his first acts, pick a Fast Track fight.  

Under Korea FTA, U.S. Trade Deficit Surges to Highest Point in History (Again)

April was another record-breaking month for U.S. trade with Korea under the U.S.-Korea Free Trade Agreement (FTA).  The monthly U.S. trade deficit with Korea soared to its highest point in history, topping $2.5 billion for the month of April alone.  

According to a ratio used by the Obama administration, the unprecedented deficit surge implies 13,500 U.S. jobs lost to trade with Korea in just thirty days.  April's trade deficit with Korea was 30% higher than in April 2012 -- the first full month of FTA implementation -- and 90% higher than in April 2011, before the FTA took effect.  

The deficit increase owes largely to a dramatic drop in U.S. exports to Korea since enactment of the FTA.  U.S. exports to Korea in April once again fell below the levels seen in any given month in the year before the FTA took effect.  The sorry track record defies the promise (FTA = more exports) that the Obama administration used to pass the FTA.  Undeterred by the facts, today the administration is using the same worn-out promise to sell the Trans-Pacific Partnership. 

The downfall in U.S. exports to Korea under the FTA has particularly afflicted sectors that, ironically, the administration had singled out as projected winners under the deal -- namely U.S. meat producers.  In April of this year, U.S. beef exports to Korea fell to 43% below the pre-FTA level seen in April 2011, while U.S. pork exports plummeted 66% below the April 2011 level.  In the first full year of FTA implementation, beef exports fell 8%, pork exports dropped 24%, and poultry exports plunged 41% in comparison to the year before the FTA took effect.  

For more on how U.S. food exports (and imports) have fared under deals like the Korea FTA, check out our brand new briefing paper: Let them Eat Imports.  The exposé presents new evidence, arguments, and a smorgasbord of graphs to show how lackluster agricultural exports and soaring food imports under FTAs have jeopardized farmers' livelihoods and consumers' safety. 

As Korean President Addresses Congress Today, First Year of Korea Free Trade Agreement Data Shows U.S. Exports Down, Trade Deficit with Korea Up

After First Year of U.S.-Korea FTA, U.S. Exports to Korea Down 10 Percent, Imports from Korea Up and Deficit With Korea Swells 37 Percent, Contradicting Obama Promises of U.S. Export and Job Growth

Just-released government trade data, covering the first year of implementation of the U.S.-Korea Free Trade Agreement (FTA), shows a remarkable decline in U.S. exports to Korea and a rise in imports from Korea, provoking a dramatic trade deficit increase that defies the Obama administration’s promises that the pact would expand U.S. exports and create U.S. jobs, Public Citizen said today.

The coincidence of the dismal trade data coming out just before the Korean president’s Wednesday address to a joint session of Congress can only heighten attention to the gap between the administration’s promises and the outcomes of its trade agreements.

“The Korea pact’s damaging outcomes being the opposite of the administration’s promises will certainly complicate the administration’s current efforts to use the same claims about export expansion to persuade Congress to delegate away its constitutional trade authority or to build support for the administration’s next trade deal, a massive 11-nation Trans-Pacific Partnership (TPP) based on the same model,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

U.S. export growth to countries with NAFTA-style pacts like the U.S.-Korea FTA has been particularly lackluster; growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 38 percent over the past decade.

In contrast to the Obama administration’s promise that the U.S.-Korea FTA would mean “more exports, more jobs,” U.S. goods exports to Korea have dropped 10 percent (a $4.2 billion decrease) under the Korea FTA’s first year, in comparison to the year before FTA implementation. U.S. imports from Korea have climbed 2 percent (a $1.3 billion increase). The U.S. trade deficit with Korea has swelled 37 percent (a $5.5 billion increase). The ballooning trade deficit indicates the loss of tens of thousands of U.S. jobs.

“Most Americans will not be shocked that another trade agreement has increased our trade deficit, because they know that these NAFTA-style deals are losers, but anger toward the politicians who keep supporting these deals is soaring,” said Wallach. “The question is why any member of Congress would buy the same tired promises that once again have proven false and cede to the administration’s demands that Congress give away its constitutional authority over trade to allow the administration to Fast Track into effect yet another deal, TPP, that will increase our trade deficit and cost U.S. jobs.”

The decline in U.S. exports under the Korea FTA contributed to an overall disappointing U.S. export performance in 2012, placing the United States far behind Obama’s stated goal to double U.S. exports by the end of 2014. At the sluggish 2012 export growth rate of 2 percent, the United States will not achieve the president’s goal until 2032, 18 years behind schedule.

“The sorry Korea FTA numbers beg the question: How can the administration call for a rebirth of American manufacturing and job growth while pushing the TPP, a sweeping deal that would expand the failed Korea FTA model to low-wage countries like Vietnam, ban Buy American provisions and offshore tens of thousands more U.S. jobs,” said Wallach.

Many of the sectors that the Obama administration promised would be the biggest beneficiaries of the Korea FTA have actually been some of the deal’s largest losers:

• U.S. pork exports to Korea have declined 24 percent under the first year of the FTA relative to the year before FTA implementation.
• U.S. beef exports have fallen 8 percent.
• U.S. poultry exports have plunged 41 percent.

The U.S. deficit with Korea in autos and auto parts increased 16 percent in the first year of the FTA. U.S. auto imports from Korea have surged by more than $2.5 billion under the FTA’s first year. FTA proponents have shamelessly touted “gains” in U.S. auto exports without revealing that this increase totaled just $130 million, with fewer than 1,000 additional U.S. automobiles sold in Korea relative to the 1.3 million Korean cars sold here in 2012.

Read additional analysis of the government data on U.S. trade with Korea under the U.S.-Korea FTA.

Don't Be Fooled by Data Tricks: The Case of the Dueling Korea FTA Press Releases

On Friday we sent out a press release exposing the export-chilling, deficit-expanding, job-eroding track record of the Korea Free Trade Agreement (FTA) on the first anniversary of its implementation.  That same day, the U.S. Trade Representative (USTR) sent out a press release singing the export-boosting praises of the Korea FTA.  What could explain this riddle of dueling press releases?   

Some basic data tricks.  USTR’s press release relied on five sleights of hand to gussy up the unsightly Korea FTA data and generate some misleading, albeit rose-colored, conclusions:

• Cherry-picking.  Overall U.S. exports to Korea have fallen 9 percent under the FTA.  USTR first tries to get around this inconvenient fact by simply “disregarding” particularly large exports that declined (e.g. corn) so as to produce a sanitized illusion of an increase in “total U.S. exports.” (By “total U.S. exports” they mean “some U.S. exports, excluding particularly important export sectors that would contradict our argument of a total export increase.”)  USTR saves most of its FTA-touting words for some narrow sectors that were export-increasing exceptions to the export-falling rule of the Korea FTA.  For example, while total U.S. agricultural exports to Korea have plunged 29% under the FTA, USTR spotlighted export rises in specific agricultural products like soybeans and grape juice.  Such “soybean-picking” avoids the essential question: what has been the total effect of the Korea FTA on U.S. exports and jobs?  The inconvenient answer: a loss. 

• Using the wrong timeframe.  The USTR press release acted as if the Korea FTA was in effect for the full 2012 calendar year, though it only took effect on March 15, 2012 (hence the timing of the press release).  The agency errantly compared the full year of data for 2011 with the full year from 2012, claiming the results to be due to the Korea FTA.  This timeframe starts and ends too soon.  An accurate assessment of the Korea FTA’s legacy would begin the data comparison with the first full month in which the FTA was actually in effect: April 2012 (vs. April 2011).  Also, the timeframe would not stop with the end of 2012, but with the most recent month for which we have data: January 2013.  Perhaps USTR decided to omit January because it marked the highest monthly U.S.-Korea trade deficit on record.  Whatever their reasons, the timeframe mistake skews each starry-eyed data point that USTR presents in its release. 

• Ignoring imports.  As per usual, USTR has examined only one side of the trade equation.  The word “imports” doesn’t appear once in their press release.  But in the same way that exports are associated with job opportunities, imports are associated with lost job opportunities when they outstrip exports, as dramatically seen under the Korea FTA.  Under the deal, the U.S. trade deficit with Korea has swelled 30 percent, costing tens of thousands of U.S. jobs.  By ignoring rising imports, USTR claims a gain for auto manufacturers under the FTA.  But while U.S. auto exports to Korea have increased by $65 million under the deal, U.S. auto imports from Korea have ballooned by $2.3 billion.  The resulting 18 percent increase in the U.S. auto trade deficit with Korea is a net loss for U.S. automakers, not a net gain. 

• Counting foreign-made “exports.”  USTR once again inflates the value of U.S. exports by counting goods that actually are made overseas – not by U.S. workers.  These “re-exports” are goods made elsewhere that are shipped through the United States en route to a final destination.  To assess what the Korea FTA has actually meant for U.S. jobs, our release eliminated re-exports in calculating the 9 percent drop in U.S.-made exports to Korea under the deal. 

• Forgetting about inflation.  It appears that USTR forgot to adjust its numbers for inflation, an omission that artificially magnifies the value of U.S. exports in 2012 relative to 2011.  All of the data contained in our press release is properly inflation-adjusted to show a truer picture of U.S. exports under the Korea FTA – a picture that unfortunately does not look too pretty without all of USTR’s cropping and airbrushing.    

If we want trade policy that behooves the majority, rather than an expansion of the damaging Korea FTA model, then we have to look honestly at the Korea FTA track record.  If instead we twist the data to make mistakes look like successes, we are binding ourselves to the replication of failure.  

On Anniversary of U.S.-Korea FTA Implementation, U.S. Exports Down 9 Percent, Imports from Korea Up and Deficit With Korea Swells 30 Percent, Undermining Obama Export and Job Growth Goals

Though U.S.-Korea Free Trade Agreement Outcomes Are Abysmal, Obama Pushes for Trans-Pacific and European Agreements Based on Same Model

WASHINGTON, D.C. – The actual outcomes of the U.S.-Korea Free Trade Agreement (FTA) that took effect one year ago, March 15, have been exactly the opposite of what the Obama administration promised, Public Citizen said today. Despite government data once again demonstrating the damage caused by yet another “trade” agreement based on the model of the North American Free Trade Agreement (NAFTA), the Obama administration is trying to sell massive Trans-Pacific and European agreements based on the same model with the same false promises.

U.S. export growth to countries with pacts like the U.S.-Korea FTA has been particularly lackluster; growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 38 percent over the past decade. In contrast to the Obama administration’s promise that the U.S.-Korea FTA would mean “more exports, more jobs,” U.S. goods exports to Korea have dropped 9 percent (a $3.2 billion decrease) since the Korea FTA took effect, in comparison to the same months in the year before FTA implementation. U.S. imports from Korea have climbed 2 percent (an $800 million increase). The U.S. trade deficit with Korea has swelled 30 percent (a $4 billion increase). The January data from the U.S. International Trade Commission show that the U.S. trade deficit with Korea skyrocketed 81 percent above December’s level, topping $2.4 billion – the largest monthly U.S. trade deficit with Korea on record. The ballooning trade deficit indicates the loss of tens of thousands of U.S. jobs.

“I suspect that most Americans are likely to be angry with the politicians who got us into another one of these NAFTA-style deals, rather than surprised at the damaging outcome. Polls show that majorities of U.S. independent, Democratic and GOP voters consistently oppose these deals because they think they are bad for their families and the American economy,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “The Obama administration is inviting the public to focus on the debacle of its Korea Free Trade Agreement by using the same failed claims to push a Trans-Pacific FTA with 10 Asian and Latin American nations that is literally based on the Korea FTA text.”

The decline in U.S. exports under the Korea FTA contributed to an overall disappointing U.S. export performance in 2012, placing the United States far behind Obama’s stated goal to double U.S. exports by the end of 2014. At the sluggish 2012 export growth rate of 2 percent, the United States will not achieve the president’s goal until 2032, 18 years behind schedule.

“The data show that these Obama administration-supported FTAs are undermining the national goals set by the president of boosting our exports, reviving U.S. manufacturing and creating American jobs,” said Wallach. “This kind of data makes everyone wonder just why the administration keeps pushing so-called ‘trade’ agreements like the Korea FTA, and now the Trans-Pacific Partnership, that facilitate offshoring, ban Buy American provisions and erode manufacturing jobs, utterly contradicting the president’s domestic agenda.”

Many of the sectors that the Obama administration promised would be the biggest beneficiaries of the Korea FTA have actually been some of the deal’s largest losers. U.S. pork exports to Korea have declined 18 percent under the FTA relative to the same months in the year before FTA implementation, while beef exports have fallen 9 percent and poultry exports have plunged 41 percent. While U.S. auto exports to Korea have increased 7 percent under the FTA, U.S. auto imports from Korea have surged 17 percent, causing an 18 percent rise in the U.S. auto trade deficit with Korea.

Read additional analysis of the government data on U.S. trade with Korea under the U.S.-Korea FTA.

U.S. Trade Deficit with Korea Soars to Highest Point on Record under FTA

The just-released monthly trade data from the U.S. International Trade Commission reveals an expanding U.S. trade deficit with the world as U.S. exports dropped and imports rose in January, relative to December of last year.  But the deficit picture is even starker for U.S. trade with Korea under the tenth month of the Korea Free Trade Agreement (FTA).  While U.S. goods imports from all countries rose 3% in January, U.S. imports from Korea soared 18%.  While U.S. goods exports to the world slipped 6%, exports to Korea fell 8%.  And while the U.S. trade deficit with the world climbed 21% in January, the deficit with Korea jumped 81%.  January's U.S. trade deficit with Korea topped $2.4 billion -- the largest monthly deficit with Korea on record.  In short, another month of trade with Korea under the Korea FTA has produced another month of remarkably large job-displacing trade imbalances. 

The U.S.-Korea trade imbalances of recent months are remarkable not just in comparison with most other U.S. trade partners, but in comparison to how U.S. trade with Korea looked before the Korea FTA took effect in March of last year.  In nine of the ten first months of the FTA's implementation, including the most recent month, U.S. exports to Korea fell below pre-FTA levels (relative to the same months in the prior year), spelling an overall 9% fall in exports under the FTA.  In six of those ten months, including the most recent month, U.S. imports from Korea exceeded pre-FTA levels, yielding a 2% increase in imports under the FTA.  As a result, the U.S. trade deficit with Korea under the FTA's first ten months is 30% -- or $4 billion -- larger than in the same months before the deal took effect.  The graph below summarizes this none-too-pretty picture for U.S. jobs, depicting the difference between Korea trade levels under the FTA (April 2012-January 2013) and those occurring in the same months one year earlier, before the FTA took effect.  

As Obama administration trade negotiators meet in Singapore this week to hash out the details of the Trans-Pacific Partnership, a massive expansion of the Korea FTA model, they should take a gander at this data. If the Obama administration hopes to fulfill its promise of a rebirth in U.S. manufacturing, a restoration of middle-class wages, and a recovery of decent jobs, it cannot afford to sign another sweeping FTA that expands upon the Korea FTA's sorry track record.  

Obama's Export Promise Falls 18 Years Behind Schedule as Exports Decline under FTAs

USITC Trade Data Shows Obama Goal of Doubling Exports Is Even More Remote Relative to Census Bureau Data, Due in Part to Falling Exports under FTAs with Korea, Colombia and Panama

The Obama administration’s attempt to tout the decline in the overall U.S. trade deficit for 2012 as a trade policy success diverted from the three most critical trends that the annual data revealed:

• The drop in the overall trade deficit represented an increase in U.S. oil exports and a decrease in oil imports. However, the U.S. deficit in goods excluding oil actually rose six percent in 2012 to $628 billion, the largest non-oil U.S. trade deficit in the last five years. The U.S. trade deficit with China (even with oil included) broke all past records, topping $321 billion.

• Friday’s 2012 annual trade data from the U.S. Census Bureau, despite using inflated figures that count “re-exports” – goods not produced by U.S. workers, showed that President Obama’s goal of doubling U.S. exports is seriously lagging. Data released over the weekend by the U.S. International Trade Commission (USITC) reveals that Obama’s export growth goal is even more remote - at the sluggish 2012 export growth rate, we will not achieve the president’s goal until 2032, 18 years behind schedule. After removing foreign-made “re-exports” from the Census figures, the USITC data shows that U.S.-made goods exports in 2012 were $210 billion (more than 13 percent) below what Census reported.

• U.S. exports were particularly disappointing to the three countries with “free trade” agreements (FTAs) that the Obama administration pushed to passage in 2011. Under the Korea, Colombia and Panama FTAs, which took effect in 2012, combined U.S. exports to the three countries fell four percent relative to the same months of 2011. Despite this, the Obama administration is pushing an 11-nation Trans-Pacific Partnership (TPP) FTA based on the same model of the North American Free Trade Agreement (NAFTA). The TPP pact includes Vietnam, the low-wage alternative to China for manufacturing outsourcing.

Goal of Doubling Exports off Track

In his 2010 State of the Union address, President Obama set a goal to double exports over the following five years. With two years left, the United States should be 60 percent of the way toward achieving this goal. Instead, the 2012 Census data, despite being inflated by the inclusion of foreign-made re-exports, showed that we are just 37 percent of the way toward Obama's export growth goal, with U.S. goods exports growing at less than one-sixth of the promised pace in 2012. The USITC data, reporting only U.S.-made exports, shows that we are even farther from doubling exports and, under the sluggish 2012 export growth rate of two percent, will not achieve the president’s goal until 2032, 18 years behind schedule. The picture would be worse were it not for the 2010 export growth spurt – an anomalous and predictable rebound after U.S. exports plunged in 2009 amid the global recession.

 

U.S. Exports to Korea Plummet 10 Percent under Obama-Backed FTA

The new USITC data shows that under the FTAs that took effect in 2012 with Korea, Colombia and Panama, combined U.S. exports to the three countries have actually fallen four percent relative to the same months of 2011. U.S. goods exports to Korea declined by 10 percent (more than $3.1 billion) in comparison to 2011 levels for the same months. The U.S. trade deficit with Korea grew 26 percent during this period.

Driving the combined FTA export downfall was the decline in U.S. exports to Korea, by far the largest of the three economies, under the first nine months of the Korea FTA. Despite Obama administration promises that the pact would boost exports, U.S. exports to Korea took a dramatic plunge after the deal took effect in March 2012, and have continued the downward trajectory since. Some of the worst declines were in the sectors the administration touted as prospective “winners” under the agreement. U.S. pork exports to Korea declined 17 percent under the FTA in 2012 relative to the same months in 2011, while beef exports fell 11 percent and poultry exports plunged 40 percent. While U.S. auto exports to Korea have increased four percent under the FTA, U.S. auto imports from Korea have surged 17 percent, causing an 18 percent rise in the U.S. auto trade deficit with Korea.

Overall, growth of U.S. exports to countries that are not FTA partners has exceeded U.S. export growth to countries that are FTA partners by 38 percent over the last decade. Between 2002 and 2012, U.S. goods exports to FTA partner countries grew by an annual average rate of only 4.8 percent.  Goods exports to non-FTA partner countries, by contrast, grew by 6.6 percent per year on average.

 

Beware the Re-Export Data Trap…

As the chart below shows, the U.S. Census Bureau methodology inflates the value of U.S. exports by counting goods that actually are made overseas – not by U.S. workers. These “re-exports” are goods made elsewhere that are shipped through the United States en route to a final destination. Since passage of NAFTA and similar FTAs, re-exports have increased dramatically, causing a growing gap between U.S.-made exports and the inflated export numbers reported by the U.S. Census Bureau.

As a result, the actual U.S. trade deficit in goods has exceeded the re-exports-skewed trade deficit data to an increasing degree, soaring more than 20 percent above the skewed number for the last four years. In 2012, the actual trade deficit exceeded the distorted trade deficit by $170 billion, a difference that implies an additional 1.1 million net U.S. jobs displaced by unbalanced trade, according to a ratio used by the Obama administration.  

More Bad News for U.S. Exports under Korea FTA

Newly-released government data reveals that U.S. exports to Korea continue to plummet after eight months of implementation of the U.S.-Korea "free trade" agreement (FTA).  Despite Obama administration promises that the NAFTA-style pact would boost U.S. exports (and thus jobs), U.S. exports took a dramatic plunge after the deal took effect in March 2012, and have continued the downward trajectory since (as we've reported here, here, and here).  Under the FTA, U.S. goods exports to Korea have declined by nine percent (a decrease of more than $2.5 billion) in comparison to 2011 levels for the same months.   The post-FTA export plunge is indicated by the blue line in this graph:

Ironically, some of the biggest downfalls in U.S. exports to Korea have occurred in the automotive and meat industries—the two sectors that the Obama administration promised would experience particularly strong export growth under the deal.  Compared with the pre-FTA levels of 2011, here's the FTA's legacy thus far in these key sectors:

• U.S. auto exports have declined by 1 percent ($11.7 million) while imports of cars and auto parts from Korea have soared 17 percent ($1.8 billion) resulting in a 19 percent increase in the U.S. automotive trade deficit with Korea.
• U.S. beef exports have fallen by 13 percent under the FTA, a $50 million loss.
• U.S. pork exports have dropped by 20 percent under the FTA, a $52 million loss.
• U.S. poultry exports have plummeted by 40 percent under the FTA, a $36 million loss. 

In just the first eight months of the FTA, the decisive fall in U.S. exports to Korea has contributed to a 21 percent increase in the U.S. trade deficit with Korea, in comparison to the same period in 2011 (indicated by the increased red area in the graph above).  Using the same ratio employed by the Obama administration, this trade deficit expansion implies the net loss of over 16,000 U.S. jobs under the pact's first several months.  

Amazingly, the administration is still trying to sell the Trans-Pacific Partnership, the NAFTA-esque successor to the Korea FTA, with the same tired shtick used for the Korea deal: FTA = exports = jobs.  How far will exports have to fall before this data-defying talking point can be put to rest?  

U.S. Exports to Korea Suffer under FTA

Today's release of new trade data for October revealed more of the same under the Korea FTA: lower exports, higher imports, and a deeper U.S. trade deficit with Korea.  We've reported similar trends in past months here, here, and here.

In comparison with the FTA-free month of October 2011 (after adjusting for inflation), this FTA-encumbered October saw 3% fewer exports to Korea, 3.4% more imports from Korea, and a 20.4% jump in the U.S.-Korea trade deficit.   For the full seven months since the FTA's implementation for which data is available, exports have fallen 7.5%, imports have risen 0.4%, and the deficit has widened 23.3% in comparison to 2011 levels.  That's bad news for U.S. job creation--the promise under which the Obama administration sold this NAFTA-style deal.  

The falling exports are particularly disconcerting.  While, the U.S. has yawning trade deficits with many countries, exports to those countries tend to still rise, though overshadowed by even larger increases in imports.  Under the Korea FTA, exports have actually been falling in real terms in comparison to 2011.  Indeed, most of the deepening deficit under the FTA can be explained by reduced exports rather than increased imports.  

For a depiction of this job-erasing reality, see the graph below, which portrays the difference in inflation-adjusted export levels, import levels, and overall trade balance when comparing the FTA months of 2012 with the same FTA-less months of 2011.  This year's overall more negative trade balance (i.e. deeper deficit), represented by the green area, owes largely to the fact that exports, represented by the red line, have remained consistently lower (with the tiny exception of June) under the FTA.  

The US Trade Representative under Obama sold the Korea FTA with the slogan "More Exports. More Jobs."  I wonder how they'd sell this graph.  

Let Them Eat Steak: How Costco Totally Makes Up for NAFTA's Sordid Legacy

On Monday, the Washington Post published an article extolling NAFTA for bringing Costco to Mexico.  The article profiled the expansion of the bulk goods behemoth across the Rio Grande as an example of how NAFTA has allowed “Made in USA” products to sweep through Mexico, to the delight of U.S. workers and Mexican consumers.  It’s a happy, albeit misleading, narrative. 

The Post article missed nearly two-thirds of the NAFTA story.  It reported that “trade between the United States and Mexico is surging” thanks to NAFTA.  Indeed.  But 65% of the surge has been in Mexican products imported into the U.S., not U.S. products heading to Mexico.  While U.S. exports to Mexico have more than doubled since NAFTA, imports from Mexico have more than quadrupled (after controlling for inflation).  The net impact on U.S. workers has been the disappearance of hundreds of thousands of jobs as the small pre-NAFTA trade surplus with Mexico has crashed into 17 consecutive years of trade deficits.  Last year the U.S. trade deficit with Mexico topped $100 billion for the first time, accelerating the job atrophy.

Meanwhile, the article portrayed the comparably small rise in U.S. exports as a gift to Mexican consumers, who can now, according to the article, stroll Costco’s wide aisles for “marbled slabs of steak” and “sacks of russet potatoes.”  Really?  The populace that perfected a delectable, corn-based diet should thank NAFTA for steak and potatoes?  While Mexico's small upper-middle class may well enjoy the southward march of Costco, the 51% of Mexicans who now live below the national poverty line—a higher share than at any point in the last decade—are not loading carts with “Made in USA” steak. 

Indeed, for many Mexicans, Costco has meant fewer tamales sold, not more steak bought. The article notes that the NAFTA-encouraged proliferation of megastore chains is “challenging, for better or worse, the traditional mom-and-pop stores doling out soda, eggs and tortillas.”  Let’s see—is that “better” or “worse?”  NAFTA displaced approximately 28,000 small and medium-sized Mexican businesses in just its first four years.  Those who support small business as a means of creating jobs and overcoming poverty will find that NAFTA trend decidedly “worse.”

When newspapers perpetuate narratives that obscure NAFTA’s failures for the majority of workers at home and abroad, policymakers are more prone to replicate the failure.  And replicate they did with last year’s passage of the NAFTA-style deals with Korea, Colombia, and Panama.  With the Korea FTA now in effect since March, we are already starting to see results that all too closely resemble NAFTA’s legacy.  On Tuesday, the U.S. International Trade Commission released data for another month of FTA trade with Korea, revealing a whopping $1.9 billion trade deficit with the country in July alone, 30% above last year’s July deficit.  Overall, the U.S. trade deficit with Korea has risen to $6.8 billion under the first four months of the Korea FTA, as mounting imports have surpassed exports and eroded U.S. jobs. 

Even so, maybe the NAFTA-style deal has at least allowed Korean consumers to enjoy a new influx of Costco’s.  That is, assuming they’ve been willing to jettison small businesses in exchange for steak and potatoes.  

What Jobs? After NAFTA-Style Deal, an Unparalleled Surge in Korea Trade Deficit

Last year, President Obama and Congressional Republicans sold the U.S. public the promise that a NAFTA-style deal with Korea, passed last October, would bring jobs by boosting U.S. exports.  At the time, this claim contradicted even the government’s own projection that the trade deal would worsen the U.S.’s trade balance with South Korea.  Now, it appears to contradict the evidence. 

Since the March 15 implementation of the Korea trade deal, the U.S. trade deficit with South Korea has reached dramatic levels for the second consecutive month for which we have data.  While the U.S.’s goods deficit with South Korea in March was a mere $0.6 billion, in April the deficit trebled to $1.8 billion.  By contrast, the U.S. goods deficits with major trading partners like Japan, Mexico, and Germany all declined that month. 

In May, the goods deficit with South Korea hit the $2 billion mark, the ninth largest monthly deficit among the U.S.’s 230 trading partners.  (In May of last year, the deficit stood at only $1.3 billion and South Korea ranked 15th in deficit magnitude.)  Indeed, from March to May, while the overall U.S. trade deficit fell, the deficit with South Korea increased more (in dollar terms) than with any other country in the world, except for one: China. 

This worrisome data cripples the Obama Administration’s promise that more NAFTA-style deals will bring export-led job growth.  The post-FTA surge in the trade deficit with Korea was prompted in part by a $759 million downfall in U.S. exports to Korea from March to May.  Using a ratio employed by the International Trade Administration, the drop in exports over these two post-FTA months alone amounts to over 5,000 lost U.S. jobs. 

Last month, President Obama’s campaign ads named Presidential hopeful Mitt Romney as a would-be “Outsourcer-in-Chief,” accusing the Republican candidate of offshoring U.S. jobs during his time at Bain Capital.  Given the track record of the Korea trade deal thus far, perhaps the President should take some of his own medicine.  He could start by telling his Administration to stop pushing forward the Trans-Pacific Partnership, a NAFTA-on-steroids deal with even larger job-killing prospects than what we’ve seen from the deficit-fostering Korea deal.  

Can you say "Déjà vu" in Spanish?

Dear Neighbor:

Congratulations on your inclusion in the elite group of states that are currently negotiating the Trans-Pacific Partnership (TPP) Agreement! Your acceptance into this proposed “historic, 21^st century trade agreement” means that much of the “burden” of making laws and regulations for your nation will be taken off of you. No worries; lobbyists for Hollywood and American pharmaceutical companies and more than 600 official “corporate trade advisers” to the Office of United States Trade Representative (USTR) will help take care of the details.

Sorry to mention it, but we’re afraid many of your laws pertaining to intellectual property (IP), affecting issues from Internet privacy to access to affordable medications, might need a little “tweaking” to ensure they comply with the specifications of U.S. corporate “advisers.” The USTR’s demands at the TPP negotiations read like a wish list from the Pharmaceutical Research and Manufacturers of America (PhRMA) and the Recording Industry Association of America (RIAA), and YOU have the opportunity to grant all their wishes.

You see, the condition the U.S. imposed for Mexico to get a seat at this corporate banquet was that Mexico agree to accept everything that the other countries already have negotiated over the past three years. Sure, NAFTA required some nasty changes to your IP laws. Remember the millions your government wasted trying to lift the U.S. patent on common yellow beans that a bio-prospector filed after NAFTA? Well, wait until you get a look at the 21^st century NAFTA on steroids!

As a part of the “historic” TPP negotiations, it is time for your laws to truly reflect your new “21^st century” status. For instance, you need to expand pharmaceutical patent protection and create new pharmaceutical monopolies in Mexico. You also need to extend copyright protection to device memory buffers and criminalize circumvention of technological protection measures, limiting fair and educational uses of all kinds of literary and artistic content. Overall, you are expected to introduce new, draconian provisions into Mexican law to lengthen, strengthen and broaden IP monopolies in Mexico.

The strict IP enforcement in this scenario may seem very familiar to you. In fact, you fought off a very similar – although less extreme – attack on your privacy and rights on the Internet in 2011 in the form of the Anti-Counterfeiting Trade Agreement (ACTA). Some objections to ACTA expressed by Mexico Senator Carlos Sotelo Garcia in September 2010 included the opaque nature of the ACTA negotiations, stringent IP enforcement measures (championed by the U.S.), and the “erosion” of access to information technology for approximately thirty million Mexican citizens.

A look at any current media coverage of the TPP will reveal a scene that is eerily familiar and equally concerning. Sorry to break the news, but the opacity of the TPP negotiations makes the ACTA process look like a pinnacle of open government. The TPP has been negotiated entirely in secret, with the only glimpse of the text coming from leaks of the IP, investment and other chapters. Furthermore, each of the negotiating nations has agreed to keep all documents besides the finalized text a secret for four years following the conclusion of negotiations, whether it is ever finalized or not. So whereas the same report by Senator Garcia implemented a working group to review the provisions of ACTA, no such legislative oversight would be possible in the TPP. Apparently the only way to get a look at the “21^st century agreement” – even for legislators of the countries in the negotiations – is to introduce a resolution demanding they be allowed to see how trade negotiators are rewriting a nation’s laws. In the U.S, the chairman of the Senate committee with official jurisdiction over TPP, U.S. Sen. Ron Wyden (D-Ore.), has done just that. Yup, the chairman of the Senate Finance Subcommittee on International Trade, Customs, and Global Competitiveness and his staff were explicitly refused access to even the U.S. negotiators’ proposal to the TPP negotiations.

The legislature of Mexico has already expressed its opinion of trade agreements that restrict privacy and rights on the Internet. On June 21, 2011, the Mexican Congress passed a resolution that urged that the Federal Executive not become a signatory of ACTA:

The Standing Committee of the H. Congress, respectfully urges the Federal Executive Power to, within the framework of its powers, instruct the ministries and agencies involved in negotiating the Anti-Counterfeiting Trade Agreement (ACTA), not to sign the Treaty.

Reading this sort of language coming from the national legislature of a sovereign nation, one might draw the conclusion that ACTA is doomed in that country. But foreign corporate interests have found another foothold in the laws of Mexico – in the form of the TPP. You may have believed that ACTA was dead in Mexico, but, like el chupacabras, it is rising again and this time it is even stronger.

Welcome to the 21^st century, dear neighbor.

 

Follow Public Citizen's Global Access to Medicines on Twitter: https://twitter.com/#!/PCMedsAccess
Read more at our webpage: http://citizen.org/Page.aspx?pid=4955

Just Relax, Canada. U.S. Pharma Will Handle It

Dear Fellow Canadians:

Welcome to the Trans-Pacific Partnership (TPP) negotiations! Since you are fresh off a bruising fight getting provisions that protect Internet freedom and privacy into Canada’s copyright Bill C-11, I’m sure that you are exhausted with defending your rights. Take heart. With the TPP, you will not have much of a say on laws or policies threatening your privacy, rights on the Internet or access to affordable medicines. Instead, lobbyists from major American industries and some 600 “corporate trade advisers” have helped lay out some of what the Office of the United States Trade Representative (USTR) expects from you.

These are the same industries that forced major concessions on C-11’s approach to digital locks despite near-universal criticism. Hundreds of pages of new non-trade policy contained in the most sweeping “free trade agreement” could face a mere up or down vote in the House of Commons. And the USTR proposes intellectual property provisions that cover dramatically more than copyright law. They touch a wide range of IP issues.

You thought NAFTA was a pill? Sure, Big PhRMA used NAFTA to attack our drug formulary system and all of those compulsory licenses for affordable meds. But back then, our government drew a line. Despite some considerable hysteria from the U.S. drug industry giants, you did not give away all of our policy space. This time, however, the TPP gives Prime Minister Stephen Harper a way to write all of us a real prescription for high drug prices and cement his view of Canada as an extended playground for corporate America.

Here are some of the highlights of the U.S. proposed IP chapter:

• Expand patent evergreening and create new pharmaceutical monopolies, raising medicine costs;

• Dramatically increase the life of a copyright term from 50 years in most cases under C-11 to 95 years;

• Increase penalties for circumvention and reduce the exceptions for individuals; and

• Establish an American-style notice-and-take down system for online copyright infringement.

This seems like a lot. If you were worried, however, that we had some duty to at least read the proposals for the law and voice our democratic concern, fear not. Negotiators act in secret. The only glimpse of the actual agreement so far has come from leaked copies of the text from the IP, Investment and other chapters. Remember in the good old days of ACTA when the University of Ottawa filed an access-to-information request but received a blacked out document with only the title visible? Expect similar treatment during TPP negotiations. While lobbyists and corporate liaisons are granted electronic access to the agreement, your parliamentary representative might have to walk down to the Department of Foreign Affairs and International Trade to speak personally with The Honourable Ed Fast P.C. , M.P., Minister of International Trade.

Moreover, if you are distressed by the fact that our respectable Department of Trade will have lots of work reviewing all the work done so far once Canada’s negotiators get hold of these secret drafts, you will be relieved to hear that Canada has a lesser role in the negotiations. By coming late to the table, Canada has achieved a second-tier position. This status requires Canada to agree to all the settled chapters, which its officials have not even read, and Canada cannot veto current provisions. Thus, not even lobbyists or the trade minister need concern themselves with settled provisions. The TPP negotiations shut individual citizens and even members of parliament and ministers out of the process.

The public response to C-11 proved that civil engagement has made a difference on intellectual property issues in Canada. The people—frustrated, fearful and bedraggled—woke up to the oppressive measures of industry groups and fought hard. But this is far from the end. In upcoming years, we might still witness the implementation of a multinational corporations’ wish list, which seeks to criminalize copyright infringement, implement ACTA-plus provisions and restrict Canadians’ access to affordable medicines. Through the TPP, the USTR seeks to achieve all these goals and more—without too much of a voice from us. Will we allow American industry to dictate to the Canadian people our rights—or stand up and demand that Canada step down from these negotiations?

Follow Public Citizen's Global Access to Medicines Program: https://twitter.com/#!/PCMedsAccess

James Cormie is a legal intern at Global Access to Medicines Program.  Originally from Edmonton, Alberta, James blogs on issues of trade, IP, and international law.

Leaked TPP Chapter Sparks Outrage

The Trans-Pacific Partnership (TPP) Investment Chapter that leaked last week has been making waves. Trade scholars, talking heads, citizens and politicians are all discussing the ramifications of this chapter, which outlines the process that multinational corporations can use to sue governments that enact laws to protect public health, workers’ rights, and the environment.

The leak of this secretive chapter has amplified the voices of bipartisan congressmen and numerous civil society organizations who have long been demanding transparency in the TPP negotiations. Huffington Post ran an article which opened on the front page and has drawn a record number of reader comments- 29,959 to date. The text of the article cites the list of calamitous effects the TPP Investment Chapter could have, including raising the cost of vital medicines and effectively ending “Buy American” preferences for domestic manufacturers. Global Trade Watch Director Lori Wallach warned that "the outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of [trade] negotiations."

The progressive online magazine Salon ran a story warning its readers that TPP could grow “bigger than NAFTA.” Other articles have also appeared in a variety of domestic and international outlets, including RT (which also interviewed our own Todd Tucker), Inside US Trade, The New Zealand Herald, Law360, the Santiago Times and the International Economic Law and Policy Blog, among others.

Wallach has also discussed the leak on numerous radio and television programs. On the news show “Democracy Now,” Lori spoke with Amy Goodman and Juan González about the dangers of TPP as “a 'one-percenter' power tool that could rip up our basic needs and rights." She also appeared on numerous other TV and radio outlets, including the Viewpoint with Elliot Spitzer on CurrentTV, Let’s Talk About It Radio, Pacifica Radio, CounterSpin, the Dave Sirota Show, the Nicole Sandler Show, Stand UP! With Pete and Dominic, the Bill Press Show, and Sly in the Morning.

The leak has incited extremely significant dialogue, especially in Australia, which according to the leaked document would be the only TPP nation exempt from the Chapter’s provisions on investor-state tribunals.

Providing the public with access to the TPP Investment Chapter is a significant beginning step towards unearthing the secrets of the TPP negotiations and promoting awareness of the powers it bestows upon corporations at the expense of the citizens of America and the eight other TPP nations. (Or eleven, if you include this week's announcements that Canada and Mexico would join the talks.) The more exposure this document receives, the more pressure can be put upon negotiators to live up their promises of transparency.

Thanks to Jed Silver for contributing to this post.

Following Last Week’s Damaging Revelations About the Trans-Pacific Partnership (TPP), the Obama Administration Expands Controversial Trade Deal

Following Last Week’s Damaging Revelations About the Trans-Pacific Partnership (TPP), the Obama Administration Expands Controversial Trade Deal 

 WASHINGTON D.C. – That the Obama administration would invite an additional country to join the Trans-Pacific Partnership (TPP) after last week’s leak of secret negotiating documents revealing the proposed pact’s threats is outrageous, Public Citizen said today.

 Last week, after three years of closed-door negotiations, the text of the TPP Investment Chapter leaked, revealing that the Obama administration had agreed to submit the U.S. to the jurisdiction of foreign tribunals where foreign corporations would be empowered to challenge U.S. laws and demand unlimited compensation from the U.S. Treasury.

 The revelation was met with criticism from the political left and right.  However, the U.S. Trade Representative (USTR) refused to comment on the leaked chapter. Increasingly, members of Congress are raising concerns about the pact, including Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee’s Subcommittee on International Trade, Customs, and Global Competitiveness, who has been denied access even to the U.S. proposals to the TPP negotiations.

 Following the growing criticism of the administration’s lack of transparency and the newly revealed substance of the TPP, instead of the administration reconsidering the many TPP provisions that would vastly expand corporate rights and privileges, the administration’s response was to add yet another country into TPP talks: Mexico. Meanwhile, reports out of New Zealand indicate that China also is pursuing entry into this so-called trade deal.

 “The TPP model is fundamentally flawed: It’s hard to imagine who in this country would support it if they knew that it banned ‘Buy American’ procurements, limited Internet freedom a la SOPA (the controversial Stop Online Piracy Act) or created a two-track judicial system privileging corporations with a new ticket to raid our tax dollars,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Adding more countries just expands the potential threats of corporate attacks that the TPP poses to people here and now also poses to Mexicans.”

 “Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade, and in a move that will infuriate left and right alike, have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do,” Wallach said. “U.S. trade officials are secretly limiting Internet freedoms, restricting financial regulation, extending medicine patents and giving corporations a whole host of other powers.”

 Opposition to the TPP is growing. Last month, 69 members of Congress sent a letter to President Barack Obama in response to revelations that TPP actually bans “Buy American” procurement rules.                                                       

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Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org.

Korea trade deficit balloons under NAFTA-style deal

Last October, President Obama and House Republicans teamed up to pass a NAFTA-style deal with Korea, even though the government's own projections showed it would increase the U.S. trade deficit.

That deal ended up going into effect on March 15 of of this year (despite many Koreans' opposition to the rights given multinationals under the pact, not to mention the opposition of many here at home).

We now have the first full month of data on the deal, and it's not looking good.

The deal, sold as a way to increase job-creating U.S. exports, actually saw job-displacing imports rise much more quickly in its first full month. As Inside U.S. Trade reports,

The U.S. trade deficit in goods with South Korea tripled during the first full month the U.S.-Korea free trade agreement was in force, amid a slight decrease in the overall U.S. goods and services deficit that month, according to April trade data released last week by the Commerce Department. The bilateral FTA went into effect on March 15.

The U.S. goods trade deficit with South Korea grew to $1.8 billion in April, with imports totaling roughly $5.5 billion compared to exports of $3.7 billion. That was a larger bilateral deficit than the $0.6 billion recorded in March, where imports totaled $4.8 billion and exports were $4.2 billion. In April 2011, the U.S. goods deficit with Korea was $1 billion.

On auto trade, the bilateral deficit with South Korea climbed to $1.65 billion in April from $1.45 billion the previous month. While U.S. exports of autos and auto parts stayed the same over both months at roughly $100 million, imports from Korea rose to $1.76 billion in April from $1.56 billion the previous month. The data were released June 8.

While it's difficult to draw too many conclusions from a single month of data, rest assurred that workers concerned about offshoring of jobs and trade displacement are going to be watching these numbers closely for many months and years to come. If the trade deficit (in autos and more generally) continues to climb, it will be very difficult for policymakers to sell more NAFTAs (like the proposed TPP) to an already skeptical public.

TPP could undermine Medicare, Medicaid and Veterans’ Health - hurting seniors, military families and the poor

You've read about how the leaked chapter of the Trans-Pacific Partnership (TPP) that surfaced yesterday will outsource our judicial system and allow corporations to attack our laws.

But did you know that an earlier leaked text shows that the TPP could also undermine Medicare, Medicaid and Veterans' Health? This could hurt access to affordable medicines for our seniors, military families, and poor.

Indeed, it has been an open secret among trade negotiators that U.S. pharmaceutical companies have pushed to limit drug price containment measures, such as through the recent bilateral trade deals with Korea and Australia.

But, in our new public interest analysis, Public Citizen shows that Medicaid, Medicare, the Department of Defense’s TRICARE program for active military personnel, and the Veterans Health Administration and the 340B program are all threatened by the TPP.

We also show how proposed changes to Medicare championed by President Obama would clearly risk violating the TPP. Throughout, we show how trade tribunals are less likely to defer to national healthcare regulators than do national judges, including conservatives like Justices Scalia and Thomas. We conclude with suggested changes to the TPP to insulate smart drug price containment strategies.

Read the full memo here.

Controversial Trade Pact Text Leaked, Shows U.S. Trade Officials Have Agreed to Terms That Undermine Obama Domestic Agenda

PUBLIC CITIZEN PRESS RELEASE

After Two Years of Closed-Door Negotiations, Trans-Pacific Partnership Text Replicates Alarming Bush Trade Pact Terms That Obama Opposed as Candidate, and Worse

WASHINGTON, D.C.– A leak today of one of the most controversial chapters of the Trans-Pacific Partnership (TPP) reveals that extreme provisions have been agreed to by U.S. officials, providing a stark warning about the dangers of “trade” negotiations occurring under conditions of extreme secrecy without press, public or policymaker oversight, Public Citizen said.

 “The outrageous stuff in this leaked text may well be why U.S. trade officials have been so extremely secretive about these past two years of TPP negotiations,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “Via closed-door negotiations, U.S. officials are rewriting swaths of U.S. law that have nothing to do with trade and in a move that will infuriate left and right alike have agreed to submit the U.S. government to the jurisdiction of foreign tribunals that can order unlimited payments of our tax dollars to foreign corporations that don’t want to comply with the same laws our domestic firms do.”  

Although the TPP has been branded a “trade” agreement, the leaked text of the pact’s Investment Chapter shows that the TPP would:

• limit how U.S. federal and state officials could regulate foreign firms operating within U.S.  boundaries, with requirements to provide them greater rights than domestic firms;
• extend the incentives for U.S. firms to offshore investment and jobs to lower-wage countries;
• establish a two-track legal system that gives foreign firms new rights to skirt U.S. courts and laws, directly sue the U.S. government before foreign tribunals and demand compensation for financial, health, environmental, land use and other laws they claim undermine their TPP privileges; and
• allow foreign firms to demand compensation for the costs of complying with U.S. financial or environmental regulations that apply equally to domestic and foreign firms. 

While 600 official U.S. corporate advisors have access to TPP texts and have a special role in advising U.S. negotiators, for the public, press and policymakers, this leak provides the first access to one of the prospective TPP’s most controversial chapters. In May, U.S. Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee’s Subcommittee on International Trade, Customs and Global Competitiveness – the committee with jurisdiction over the TPP – filed legislation to open the process after he and his staff were denied access to even the U.S. proposals for the TPP negotiations. 

Last month, U.S. Trade Representative Ron Kirk defended the unprecedented secrecy of TPP negotiations by noting that when the draft of a major regional trade pact was released previously, it became impossible to finish the deal as then proposed. 

“The top U.S. trade official effectively has said that the administration must keep TPP secret because otherwise it won’t be able to shove this deal past the public and Congress,” said Wallach. “The airing of this one TPP chapter, which greatly favors foreign corporations over domestic businesses and the public interest and exposes us to significant financial liabilities, shows that the whole draft text must be released immediately so it can be reviewed and debated. Absent that, these negotiations must be ended now.” 

The TPP is the first trade pact the Obama administration is negotiating. Today’s leak further complicates the administration’s goal of completing TPP negotiations this fall. Already the TPP timeline was generating political headaches for the Obama re-election campaign, as repeated U.S polling shows that majorities of Democrats, Independents and GOP oppose more NAFTA-style trade deals. 

The TPP may well be the last trade agreement that the U.S. negotiates. This is because TPP, if completed, would have a new feature relative to past U.S. trade pacts: It would remain open for any other country to join later. Last month, USTR Kirk said that he "would love nothing more" than to have China join TPP.

The TPP offered an opportunity to develop a new model of trade agreement that could deliver the benefits of expanded trade without unduly undermining signatory nations’ domestic public interest policies or establishing special privileges for foreign corporations. President Barack Obama and countless members of Congress campaigned on fixing these investment rules to better protect the public interest. But Public Citizen’s analysis of this text shows that the U.S. positions do not reflect any of the changes that candidate Obama pledged when he recognized the threats posed by the NAFTA-style investment provisions in trade agreements. 

The leak also reveals that:

• Australia has refused to submit to the jurisdiction of the “investor-state” private corporate enforcement foreign tribunal system;
• U.S. negotiators are alone in seeking to expand this extra-judicial enforcement system to allow the use of foreign tribunals to enforce contracts that foreign investors may have with a government for government procurement or to operate utilities contracts and even related to concessions for natural resources on federal lands;
• Other countries are proposing safeguards for financial regulation and limits to the corporate tribunals that the U.S. has not supported.

 Public Citizen’s analysis of the leaked text and guided tour through its provisions can be found here.

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BREAKING: For an analysis of these developments by Zach Carter of The Huffington Post, click here.

TPP Chiefs Raise Doubts about USTR’s Corporate IP Wish List

At the May 13th stakeholder briefing of the Trans-Pacific Partnership (TPP) trade talks outside Dallas, at least six countries' Chief Negotiators began to openly distance themselves from the Office of the United States Trade Representative (USTR), particularly from USTR’s radical intellectual property (IP) proposals, which would expand the scope and duration of pharmaceutical monopolies and challenge internet freedom.

In the past, these stakeholder briefings have felt like exercises in the art of saying little. USTR has sought to keep all nine countries on a common, limited message. But perhaps USTR can only push other countries and the public so far.

Early in the session, I asked the Chiefs:

The past year has witnessed the rise of an internet freedom social movement, with more than 3 million people petitioning the US Congress to block SOPA [the Stop Online Piracy Act] and tens of thousands protesting in the streets across Europe to shut down ACTA [the Anti-Counterfeiting Trade Agreement]. I think in Poland, these may have been the largest demonstrations since the Solidarity movement. Even Germany’s ministry of economic development is recommending against developing countries signing ACTA. Given that you are not releasing the TPP text, how will you assure people that the TPP will not pose similar problems?

Chile kicked things off, answering:

We are nine countries with many different positions—we are not all the same.

This may sound tame, but for those listening to the evolution of TPP sound bites, it was a surprisingly public distancing from USTR and its copyright and enforcement demands. And it set the pace for the day.

TPP = Corporate Power Tool of The 1 Percent

DALLAS- Tuesday, the Trans-Pacific Partnership (TPP) twelfth round of negotiations will begin behind closed doors at the Intercontinental Hotel here. Branded as a "trade deal" by its corporate proponents, the TPP in reality would establish new corporate rights to ease job offshoring, attack environmental and health laws in foreign tribunals and extend medicine patents. Its expansive non-trade provisions would impose constraints on government regulation of financial firms, food safety and more. As the Huffington Post's Zach Carter reported, the TPP would even ban "Buy America" procurement policy.

The TPP also includes aspects of SOPA, the controversial Stop Online Piracy Act. The pact would even elevate corporations to equal status with signatory governments allowing them to privately enforce their new rights be suing government in foreign tribunals to demand taxpayer compensation for policies that undermine the companies' expected future profits. Intensive negotiations have been underway for two years under conditions of extreme secrecy. More than 600 hundred corporate "advisors" have access to the draft texts while the press, public and Congress are shut out. This comic video, set to a parody tune based of the Jackson Five's ABC, aims to pierce the dangerous lack of public awareness about this audacious corporate power grab. With funny animation and a sarcastic tone, it highlights that the TPP is "all about secrecy" and has "nothing to do with trade you see". You can learn more about the TPP at www.TPP2012.com

Members of Congress Urge Obama to Stop the TPP from Banning Buy American

Here is the text of the letter:

Dear President Obama,

 We write in strong support of Buy American procurement policies, including the various federal programs that have been in place since the enactment of the Buy American Act in 1933 and passage by many states of similar preference policies.  We are concerned about proposals we understand are under consideration in the Trans-Pacific Partnership (TPP) agreement negotiations that could significantly limit Buy American provisions and as a result adversely impact American jobs, workers, and manufacturers.

Under the proposed TPP framework, individual states and the federal government would be obligated to bring existing and future domestic policies into compliance with norms set forth in 26 proposed TPP chapters, including one covering government procurement policy.  Failure to conform our domestic policies to these terms would subject the United States (U.S.) government to lawsuits before international dispute resolution tribunals empowered to authorize trade sanctions against the U.S. until our policies are changed.

In the past, U.S. Free Trade Agreements (FTA) required that all firms operating in a signatory country be provided equal access as domestic firms to U.S. government procurement contracts over a certain dollar threshold.  To implement this “national treatment” requirement, the U.S. waived Buy American procurement policies for firms operating in FTA-signatory countries. Effectively, in exchange for opportunities for some U.S. firms to bid on contracts in smaller foreign procurement markets, we traded away an important policy tool that can ensure that billions in U.S. government expenditures are recycled into our economy to create jobs, strengthen our manufacturing sector, and foster our own new cutting-edge industries.

We do not believe this approach is in the best interest of U.S. manufacturers and U.S. workers. Of special concern is the prospect that firms established in TPP countries, such as the many Chinese firms in Vietnam, could obtain waivers from Buy American policies.  This could result in large sums of U.S. tax dollars being invested to strengthen other countries’ manufacturing sectors, rather than our own.  At a time when U.S. manufacturing only employs 11.71 million people, a 40% decline from its peak in 1979 and the lowest since 1941, we simply cannot allow this to happen. 

As you know, procurement policy established in trade agreements cannot be later modified without consent of all signatory countries.  This would deprive Congress and U.S. state legislatures of their authority to modify procurement policies despite fundamentally changed national or international circumstances.  Therefore, we are writing to inquire about U.S. negotiators’ procurement proposals for the TPP and to encourage your Administration not to provide “national treatment” for U.S. government procurement.  This matter is of considerable urgency given the stated goal of completing these talks this summer and the special TPP intercessional negotiations on procurement held early last month.

 While we may have different views on other aspects of the prospective TPP, we are united in our belief that American trade agreements should not limit the ability of Congress and U.S. state legislatures to determine what procurement policies are in our national interest.  Thank you for your consideration of our views, and we look forward to your response on this important matter.

 

Sincerely,

Donna F. Edwards                                                                Nick J. Rahall, II

Member of Congress                                                      Member of Congress

 

 cc: The Honorable Ron Kirk, United States Trade Representative

Korean Supreme Court urges renegotiation of investor-state clause; expresses concerns of “extreme legal chaos”

An English language Korean newspaper broke some startling news earlier this week. See the full story here.

In 2006, the Supreme Court in Korea submitted an opinion to the government recommending a renegotiation of the investor-state clause, citing concerns that the dispute system could lead to “extreme legal chaos” resulting from increased arbitration requests from U.S. investors.

Five years (and a negotiated trade deal) later, the court’s request has finally been disclosed.

The document warns against problems of sovereignty infringement, extreme investor rights, and legal instability. It also notes that “whether or not to introduce an investor-state dispute system is a decision to be made after the sufficient gathering of opinions from the South Korean public.”
(See here for more on that.) Apparently, one of the bases for their concern was a NAFTA case brought against the U.S., which we detail here.

And according to the article,

The South Korean government announced that it would be renegotiating investment-related provisions in the KORUS FTA with the US within 90 days of its effective date of Mar. 15. It has had a task force working since March on a negotiation draft.

U.S. Abandons Final Pretense of Transparency or Inclusion of Consumer, Health, Environmental, Labor Perspective in Trans-Pacific Partnership (TPP) Talks

WASHINGTON D.C. – U.S. trade officials have quietly cut stakeholder presentations from the next set of Trans-Pacific Partnership (TPP) agreement negotiations, eliminating the last pretense that the process of the talks is transparent and inclusive and sending a message that only the views of the 600 official corporate trade advisors provided special access to the talks will be reflected in the final deal, Public Citizen said today. At previous TPP negotiating rounds, a day was set aside for civil society groups and others with concerns about the TPP to make presentations to negotiators.

“The message is clear: From now on, not only will the talks remain behind closed doors, but all pretense of consideration of consumer safety, health, environmental or labor concerns has been thrown out in favor of ensuring that the damning record of past U.S. trade pacts use of the same terms being pushed by the U.S. for TPP are not brought into the discussion,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.

“The stakeholder presentations were the last vestige of transparency in these TPP talks,” Wallach said. “Many negotiators from other countries have told me that the stakeholder process was very valuable because it provided detailed information on the problems caused by past U.S. trade agreements (and on how they have actually worked) that was not generally available and certainly not being shared by U.S. negotiators, who generally have promoted positions promoted by industry interests.”

                Indeed, the U.S. Chamber of Commerce recently noted on its website that it had “led the business community’s advocacy for U.S. negotiators to include strong disciplines in the TPP trade agreement on intellectual property and path-breaking new rules on regulatory coherence, due process in antitrust enforcement and state-owned enterprises. In these and other areas, U.S. negotiators have proposed negotiating text that hews close to the chamber’s recommendations.”

Public Citizen earlier this month joined with other public interest groups from the nine TPP countries to demand that the draft TPP text be released. Negotiating texts for past deals have been released, such as for the Free Trade Area of the Americas in 2001. Currently, more than 600 official corporate trade advisors have access – to which the press and public are denied. Indeed, TPP countries signed an agreement in 2010 to not release negotiating texts until four years after a deal is completed or negotiations abandoned.

To date, U.S. Trade Representative (USTR) Ron Kirk has refused to release any draft TPP text, despite repeated calls from civil society groups for more than a year. U.S. Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee’s Subcommittee on Trade, has led congressional efforts to make the process more transparent. Wyden told Oregon Live, “When international accords, like ACTA, are conceived and constructed under a cloak of secrecy, it is hard to argue that they represent the broad interests of the general public.”

“USTR’s response to the request by civil society groups and Sen. Wyden to see draft texts of a massive agreement that will rewrite wide swaths of U.S. non-trade law has been to slam the door shut, instead of opening up the process and making it more transparent,” said Wallach.

The fallout from the U.S. decision already has begun. In response, New Zealand civil society groups have called on their government to “pull the plug” and walk away from the TPP talks. The TPP negotiations cover issues ranging from banning Buy America policies, to curbing Internet freedom, to providing offshoring incentives and special rights for corporations to attack U.S. laws in foreign tribunals.

“You can only assume that the TPP would not survive the light of day, and that is why the U.S. public is being denied access to details and now civil society groups are being sidelined,” Wallach said. “The Obama administration declares itself the most transparent administration ever, and President Barack Obama campaigned on transparency in government. It’s time he put those words into action.” The next round of TPP talks will take place May 8-18 at the InterContinental Dallas hotel in Addison, Texas.                                                               

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As Secretive Trade Negotiations Resume in LA, Public Interest Groups Demand Transparency

LOS ANGELES, Calif. — As trade negotiators from throughout the Pacific Rim meet in Los Angeles this week for talks aimed at moving the Trans-Pacific Partnership Free Trade Agreement (TPP) towards a rapid completion, labor, environmental and consumer advocates demanded that negotiating proposals be made available for public review and comment. 

“Americans deserve the right to know what U.S. negotiators have been proposing in our names,” said Tim Robertson, director of the California Fair Trade Coalition.  “This is the third year of serious negotiations on a pact that’s supposed set the standard for international trade and investment across the globe.  It’s outrageous that the public hasn’t been told what our representatives are negotiating for and what domestic policies they are giving away.”

The TPP is soon entering its twelfth major round of negotiations between the United States, Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore and Vietnam, and is explicitly intended as a “docking agreement” that other nations will join over time.  Canada, Japan and Mexico have already indicated their interest in doing so.  U.S. negotiators are pushing for the completion of the TPP negotiations this year. 

The U.S. has reportedly introduced text for most, if not all, of an estimated 26 separate TPP chapters covering everything from our environment to financial regulations, drug patents to public procurement.  While approximately 600 corporate lobbyists and a handful of others have been given “cleared advisor” status enabling them to review and comment on these proposals, the general public has not been allowed to do so.  This is a far less transparent negotiating process than many other international agreements, including those at the World Trade Organization, where draft negotiating texts are published online. 

“On the table in these talks are critical issues related to the rights of workers, climate change, biodiversity and our global economy.  It is crucially important that there is transparency around what is being negotiated and time for open debate and public participation,” said Ilana Solomon, trade representative with the Sierra Club.

TPP negotiations in Los Angeles are occurring from April 1 to 4 on labor, environmental and government procurement provisions.  What information is available on U.S. proposals comes primarily from a small handful of leaked documents and conversations with negotiators from other countries. 

“If U.S. negotiators get their way, the public will be barred from reviewing any proposals until the negotiations are over, at which point it will be virtually impossible to make any substantive changes,” said Lori Wallach, director of Public Citizen’s Global Trade Watch.  “That’s a bad way of making public policy, to say the least.  Frankly, it reinforces the worst public perceptions about government working behind-closed-doors with moneyed interests at the expense of the general public.” 

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Public Citizen Applauds President Obama's Decision to Finally Release Draft Trans-Pacific Partnership (TPP) Trade Agreement Text Over Objections Of U.S. Trade Representative Vlad von Dracula

 WASHINGTON:  Today President Obama removed a mortifying blot from his claim of having the most transparent administration ever by releasing the draft text of a massive regional trade agreement now in its third year of negotiations that will affect wide swaths of U.S. federal and state non-trade policy, said Public Citizen.

"We thought the secrecy could not get worse than when the previous U.S. Trade Representative (USTR) Ron Kirk actually admitted under Senate Finance Committee questioning in March that he would not release the TPP text because doing so would ensure he could never complete the deal," said Public Citizen's Sunshine Isthebest. “Then the new USTR, Vlad von Dracula, announced that not only would the text never be made public until the deal was set in stone and unchangeable, but that negotiations could no longer be conducted during daylight hours to minimize the chance that those who will live with the results could get a peek.”

Although draft trade agreements have been made public by negotiating governments in the past, including the last major regional trade deal the Free Trade Area of the Americas, and the World Trade Organization posts draft negotiating texts, the TPP text has been kept secret. Indeed, in a special TPP secrecy agreement signed in 2010, the Obama administration agreed for the first time in trade pact history to keep negotiating texts secret for four year after a deal was signed or abandoned. Only 600 corporate representatives serving as officials U.S. trade advisors and officials of the 8 other TPP governments have had access to the texts, which is to say everyone but the U.S. public, press and most in Congress.

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Despite free-trade pact, S. Koreans don’t fancy U.S. cars

Just days after the Korea FTA was implemented, the word on the streets of Seoul is that buying U.S. cars is NOT a priority.

Here's a clip from the Washington Times:

SEOUL — If President Obama wants to sell more American-made cars to South Korea, nobody has yet told the average South Korean.

In a Starbucks in downtown Seoul, Shin Yoon-chu, 38, was asked for his opinion of automobiles made in the U.S.A.

“Not that popular,” Mr. Shin said. “We have a feeling that they require a lot of fuel. And if you compare to the European cars, the design is not that great.”

The Korean-U.S. free-trade agreement went into effect March 15, just before Seoul played host to Mr. Obama and more than 50 other heads of state at this week’s nuclear security summit. Mr. Obama, hoping to energize his union base and boost the economy, is fond of saying the long-sought FTA will help the U.S. auto industry by increasing exports.

“Thanks to the bipartisan trade agreements I signed into law with you in mind, there will soon be new cars on the streets of South Korea imported from Detroit, Toledo and Chicago,” he told a United Auto Workers convention in Washington in February.

Read the rest from the Washington Times by clicking here.

Global Trade Watch's Director Lori Wallach in The American Prospect

PACIFIC ILLUSIONS: NEW REPORT EXPOSES TRANS-PACIFIC PARTNERSHIP SHORTCOMINGS, AS OBAMA PRESSES AHEAD

 Washington, DC -- Today, President Obama will announce plans to escalate the administration's trade offensive against China. This follows the administration's pattern of taking a hard line on narrow issues, while at the same time working to finalize a much more consequential grand-bargain with the region: the Trans-Pacific Partnership (TPP). As Obama’s main trade and diplomatic thrust in the Pacific, the TPP is meant to revive the U.S. export economy and counter Chinese influence. In reality, it does neither. 

Pacific Illusions, a new special report by The American Prospect, examines why the TPP appears doomed to repeat the failures of previous free-trade agreements. 

Read Pacific Illusions online: http://bit.ly/AxMS2R

Pacific Illusions shows how the TPP fails on trade because it doesn’t address the most important issues: currency manipulation, trade with state-owned companies, investment subsidies to induce off-shoring, and the asymmetry between the mercantilist policies and practices of much of Asia and the free trade regime of the United States. 

Contributors and issues covered include:

-- Clyde Prestowitz, President of the Economic Strategy Institute, explains why the TPP will undercut the U.S. strategic position in "The Pacific Pivot."

 

-- Jeff Faux, founder of the Economic Policy Institute and now its distinguished fellow, analyzes how the deal will accelerate offshoring and drive down wages, in "The Myth of the Level Playing Field."

-- Lori Wallach, director of Public Citizen’s Global Trade Watch, argues that the provisions of the proposed deal and its secretive negotiations amount to a covert attack on regulation, in "A Stealth Attack on Democratic Governance."

-- Kevin P. Gallagher, associate professor of international relations at Boston University and senior researcher at the Global Development and Environment Institute, Tufts University describes how the damage won't be limited to the U.S., as the economies of smaller Asian countries will also take a hit, in "Not A Great Deal For Asia."

-- Merrill Goozner, senior correspondent for The Fiscal Times, takes a look at how U.S.-based solar and microchip industries will be harmed the agreement; Harold Meyerson, editor-at-large at The American Prospect, addresses the negative impact on auto and steel manufacturing. 

 

Obama Ignores Korean Request for Changes to Trade Deal; Implementation Rushed to Beat Korean April Election

Korean Party Expected to Win Warns Obama It Will Revoke Pact Absent Changes

 WASHINGTON, D.C. – The Obama administration should accept Korean demands to remove controversial private corporate protections from the Korea Free Trade Agreement (FTA), rather than rush to implement the deal ahead of the April 11 Korean parliamentary elections (which recent polls indicate will elevate a political party that has vowed to terminate the pact unless the “investor-state” enforcement system is altered), Public Citizen said today. The mid-month implementation date being pushed for the Korea FTA is extremely rare for the United States. Generally, trade pacts are implemented on the first day of a month, since tariff cut phase-ins are determined from the date a pact goes into effect.

On Dec. 27, 2011, the Korean parliament passed a resolution calling for FTA renegotiations to remove the private investor enforcement system. On Feb. 8, nearly 100 parliamentarians – mainly from the opposition Democratic United Party (DUP), which is expected to gain control of the parliament in April – wrote President Barack Obama, vowing to terminate the FTA if it is implemented without changes. Shortly thereafter, the United States Trade Representative announced that the pact would be implemented on March 15.

Tens of thousands of anti-FTA protestors are again in the streets of Korea, while Korean polling shows 70 percent opposition to the pact. The FTA is one of the defining issues of the Korean election. The ruling party reorganized under a new name after polling predicted defeat by the DUP, which has made opposition to the current FTA one of its marquee issues.

“Just how damaging this deal is to the 99 percent in both countries has been repeatedly revealed from this latest disgrace of trying to outrun the democratic accountability of Korea’s election to the White House, notably canceling a public bill-signing ceremony after the FTA was passed here,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “By rushing the implementation, the Obama administration is trying to cement in the extreme NAFTA-style corporate investor privileges that candidate Obama pledged would not be included in his trade agreements and that a large majority of Korea’s parliament also opposes.”

 NAFTA-style foreign investor privileges and their private “investor-state” enforcement are among the most controversial aspects of past U.S. trade deals. In fact, this provision is now emerging as a point of major contention in the Trans-Pacific Partnership (TPP) negotiations, where Australia has indicated it will not accept “investor-state” enforcement. The terms of “investor-state” promote job offshoring by requiring host countries to guarantee privileged treatment for foreign investors, forbidding limits on investors’ capital transfers, and providing corporations with a private enforcement of these rights. The system allows corporations to sue governments directly for cash damages in tribunals of three private-sector lawyers who alternate between serving as “judges” and bringing cases against governments for corporations, and who operate under arbitration rules of the World Bank and United Nations.

 The “investor-state” regime eliminates many costs and risks normally associated with relocating production to low-wage developing countries. It also exposes a wide range of common government policies and actions to challenge outside domestic courts. Currently, Chevron is using an “investor-state” tribunal to try to avoid paying $18 billion in environmental cleanup and punitive damages ordered after 18 years of U.S. and Ecuadorian court rulings. Philip Morris is using the system to attack Australian and Uruguayan cigarette plain packaging laws. More than $675 million has been paid by governments to corporations under U.S. pacts’ “investor-state” provisions alone, 70 percent of which has been in attacks on environmental, health and other non-trade policies.

 A greater percentage of Democrats in the U.S. House of Representatives opposed Obama on the Korea FTA’s passage (and two other trade deals passed the same day) than on any other legislation during his presidency. A higher percentage of House Democrats voted against Obama on this deal than did House Democrats against former President Bill Clinton’s North American Free Trade Agreement (NAFTA) or China’s entry into the World Trade Organization.

 The official U.S. International Trade Commission study showed that the Korea FTA is projected to increase the overall U.S. trade deficit, with seven U.S. manufacturing sectors particularly hard hit. The Economic Policy Institute used government trade balance data to project that the pact would cost 159,000 American jobs in its first seven years.

 The pact, signed before the global financial crisis, also includes limits on financial regulation. The Obama administration did not remedy this problem in 2010 when it tweaked auto trade provisions of the pact that had been signed in 2007 by then-President George W. Bush. Citigroup called the Korea FTA “the best financial services chapter negotiated in a free trade agreement to date.”

“The Korea FTA has become the major campaign issue in Korea. And given the growing focus on American manufacturing in the U.S. election, I suspect many American politicians will rue the day that they supported a deal that even the official government studies show will increase our trade deficit and slam seven U.S. manufacturing sectors,” said Wallach.

 

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Public Citizen is a national, nonprofit consumer advocacy organization based in Washington, D.C. For more information, please visit www.citizen.org

USTR May Trade Away Internet Freedom, But We Won't Know Until It's Too Late

At Wednesday's Senate Finance Committee hearing on the Obama administration's 2012 trade agenda, Senator Ron Wyden grilled U.S. Trade Representative Ron Kirk about the intense secrecy surrounting the Trans-Pacific Partnership (TPP) negotiations. Since the TPP is set to include provisions similar to the Stop Online Piracy Act (SOPA) and the Anti-Counterfeiting Trade Agreement (ACTA) decried by internet freedom advocates, Americans deserve information about such a controversial policy. Sen. Wyden notes that the TPP negotiations are not a matter of national security, but are a matter of policy of broad public concern:

I’m not asking for everything to be published, and certainly, I respect your judgment with respect to, you know, issues that affect national security and classified matters.  But, issues that pertain to freedom and innovation on the net are policy questions, and the American people want the chance to participate.

The hearing heats up at minute 7:02:



Ron Kirk replies with the tired line that trade agreements could not be negotiated without this kind of secrecy, but provides no arguments or evidence to support this assertion. This claim is false on its face. The public is now provided access to negotiating documents of the WTO, arguable the most important venue for trade negotiations. There is no reason why the public should not have access to the same information for the TPP negotiations.

Not only is the text secret during the negotiations, but all TPP countries signed a secret agreement to calssify the negotiating texts for at least four years after the TPP goes into effect. After taking heat for this secret agreement that keeps everything secret, New Zealand was forced to release the text of the secrecy pact. Though neither the public nor members of Congress are permitted to view the negotiating texts, over 600 representatives from corporations have access to the texts, allowing them to steer the negotiations in their favor.

Choking on sugarcoating

Last night, the Office of the U.S. Trade Representative (USTR) released its hefty, annual Trade Policy Agenda and Annual Report. This statutorily mandated annual tome offers a good opportunity for Congress and the public to understand what USTR thinks it's doing, or what the agency wants us to think it's doing.

Unfortunately, the Trade Policy Agenda is (once again) an exercise in sugar-coating so extreme that it's surprising it got past Michelle Obama's nutrition advisers.

We've detailed how, after some initial honesty in the 2009 Trade Policy Agenda, USTR by President Obama's second year was back to the same old Bush administration rhetoric on trade policy. The 2012 agenda is in that latter vein as well. Here are just some of the flaws in the latest report:

Trade without a net (calculation). As we've detailed on this blog many times over (see here and here), one of the administration's biggest sins in its recent push for the Korea and Colombia trade deals was its claim that these deals would boost bilateral exports by $12 billion, without noting that the government's own numbers project that the deals will increase job-displacing imports more than job-creating exports. In other words, these deals are projected to be a net negative for job creating exports. We were kinda hoping that the administration might stop misrepresenting its own research once they got Congress to pass these deals. But this seems to be a case of repeating the same incorrect line so many times that you start to believe it's true.

American-made smoke and mirrors. The very first page of the Trade Agenda mentions the "Made in America" theme twice. But USTR is actually pushing the exact opposite of Made in America. Not only have our trade deals meant that imports of products Made-Overseas swamp exports of products Made-in-America, but these pacts also require that the U.S. roll back Buy American requirements for our trading partners. In fact, today, the morning after the Trade Agenda touting Made in America was published, USTR issued a determination stating that Korean-made products will be treated as if they were American for U.S. government procurement purposes.

Korea deal hurts U.S. auto sector. Everyone loves to love on the auto sector these days, and the Trade Agenda paints the Korea deal as a boon to Detroit. But once again, the government's actual numbers show that Korean auto imports will outstrip U.S. auto exports under the deal. Moreover, the harebrained (and high profile in Korea) exemption of U.S. autos from having to meet Korean auto safety and environmental standards will read like a "Do Not Buy American cars for your teen" label to every concerned Korean mother and father.

No mention of significant WTO attacks. The Trade Agenda also celebrates U.S. participation in the World Trade Organization (WTO) in 2011, but fails to mention the most important news: the U.S. lost not one, not two, but three high-profile WTO attacks on U.S. consumer protection policies. As the majority of WTO members cheered from the sidelines, three panels of nine unelected foreign "judges" ruled that U.S. efforts to reduce teen smoking and inform consumers about the origin of meats and the impact of tuna fishing on dolphins violate WTO rules. These three rulings were the first ever under controversial terms of the WTO's Agreement on Technical Barriers to Trade, and could open the U.S. up to trade sanctions. (Now, if you bother to look through the full 393 pages of the extended Annual Report, these disputes are mentioned, albeit with insufficient detail or balance to develop an informed view.)

Working hard to export less. Significant USTR resources are being expended on the Trans-Pacific Partnership (TPP). The Trade Agenda touts U.S. exports to the eight TPP nations (supposedly to point out how awesome the deal will be for U.S. exports), but fails to mention that USTR already put FTAs in place with the four most significant nations on the list (Peru, Chile, Singapore and Australia). Oops.

Don't Let the TPP Prohibit Capital Controls, Say 100 Economists

+++ Joint press release of the Global Development and Environment Institute and the Institute for Policy Studies +++

In advance of Trans-Pacific trade talks, over 100 economists are sending a letter today urging negotiators to promote global financial stability by allowing the use of capital controls.

Signatories include prominent scholars from six of the nine countries currently involved in the Trans-Pacific talks:  Australia, Chile, Malaysia, Peru, New Zealand, and the United States. The other participating countries are Brunei, Singapore, and Vietnam. Trade officials will meet March 1-9 in Melbourne, Australia for the 11th round of negotiations.  Click here for the full statement and list of endorsers.

The economist statement reflects growing consensus that capital controls are legitimate policy tools.  It notes, however, that nearly all U.S. trade agreements “strictly limit the ability of trading partners to deploy capital controls – with no safeguards for times of crisis.”

They recommend that the Trans-Pacific Partnership agreement “permit governments to deploy capital controls without being subject to investor lawsuits, as part of a broader menu of policy options to prevent and mitigate financial crises.”

Tucker in Extra!: The Trade Debate That Wasn’t Reported

Our own Todd Tucker has a piece on the media distortion of last year's trade debate in this month's edition of Extra!, Fairness and Accuracy in Reporting's magazine. Here’s a snippet:

++

In the 16 months leading up to the congressional vote on a set of trade deal with Korea, Colombia and Panama in mid-October, new reporting on the agreements scarcely mentioned that critics existed; when they were acknowledged, their objections were frequently mischaracterized. With media doing little to evaluate misleading claims made by the trade pacts' proponents, all three were approved by Congress by considerable margins.

There were two major points that opponents of the trio of deals – including  labor, environmental, consumer and even Tea Party groups – consistently emphasized in reports, press releases, letters and direct outreach to reporters.

First, these trade deals were modeled on the controversial North American Free Trade Agreement (NAFTA), a pact whose actual content reporters have historically paid little attention to (Extra!, 11-12/97). The combined text of the three new deals was nearly 4,000 pages; as with NAFTA, the bulk of the provisions were not related to "trade" issues per se, but rather restrict how the U.S. and the other nations might regulate their domestic economies. For instance, corporations are given new rights to challenge environmental and other regulations outside of national court systems, and demand that taxpayers compensate them for regulations' potential impact on profits.

Second, unlike earlier trade deals, even the government's own projections showed that the pacts would increase the U.S. trade deficit (Extra!, 10/11). The projections were produced by the independent U.S. International Trade Commission (ITC), which typically produces overly rosy estimates of trade deals' impacts.

But at two of the country's most prominent papers, the New York Times and the Wall Street Journal, such criticisms were almost entirely absent.

++

The full article is available by subscription.

Bankers Trying to Use NAFTA to Kill Financial Reform

Remember the Volcker Rule? Proposed by former Federal Reserve Chairman Paul Volcker and endorsed by five former Secretaries of the Treasury, it aims to prohibit commercial banks from trading stocks, bonds, currency, and derivatives for their own profit. (Customers of banks could still ask their banks to buy and sell these financial instruments if the customers front the cash.) Banks' risky trades played a huge role in the development of the 2008 financial crisis and precipitated the bailout for these overextended banks.

A form of the Volker Rule made it into the Dodd-Frank financial reform bill that became law in 2010, but bankers are trying to cripple the rule as regulatory agencies write the details of how the rule will work. The Investment Industry Association of Canada has raised the possibility of attacking the Volker Rule with NAFTA. In a letter sent to the Federal Reserve last month, the Association claims:

[T]he Volcker Rule will clearly interfere and raise the costs of cross-border dealing in Canadian securities. As a result, the Volcker Rule may contravene the NAFTA trade agreement.

The Investment Industry Association of Canada perfectly illustrates how "trade" agreements can reach inside nations' borders and interfere with public interest regulations that have nothing to do with the flow of goods between countries. Since NAFTA was enacted, bankers have gotten much more aggressive in their attempts to block regulation through trade deals. For example, the Korea FTA, passed by Congress in October, included much worse restrictions on financial sector regulations than NAFTA. On top of that, the General Agreement on Trade in Services of the WTO has its own set of rules that conflict with policies on capital controls, bans on risky financial services, size limits on banks, and “firewalls” between banking and investment services.

Necessary efforts to make our financial system stable like the Volker Rule may continue to run into obstacles unless we have a turnaround in trade policy to protect, rather than restrict, the right of governments to regulate in the public interest.

99 Percent Asked to Leave While the 1% Takes Center Stage At Trans-Pacific FTA Hearing

The Occupy movement was in full force in Washington last week, as local activists and members of Trade Justice New York Metro attended the Trans Pacific Free Trade Agreement (FTA) hearings. The activists wanted to tell members of Congress as well as officials from the Office of the U.S. Trade Representative (USTR) that the Trans-Pacific FTA needs to live up to the high standards the Obama administration promised the American people.

The activists donned t-shirts, with the messages “Don’t Trade Our Lives Away,” “Make Trade Fair for the 99 percent,” and “Got Text?” to represent their opposition to the way the Trans-Pacific FTA has been negotiated thus far. During an intermission between panelists, the activists linked arms and stood by the door to allow the press and members of Congress to read their messages of dissent. The Capitol police photographed the activist attending the hearing and then promptly asked them to leave. While it was clear that the 99% was not wanted at the hearing, the 1% took center stage before the powerful Ways and Means Committee, which oversees trade deals.

First, the panel heard the testimony of Deputy U.S. Trade Representative, Ambassador Demetrios Marantis.

Angela Hoffman, Vice President of Global Integrated Sourcing and Trade for Wal-Mart Stores, also testified in favor of some very one-percenter policies. The Wal-Mart representative stated, “USTR should consider alternative approaches to yard forward provision.” The “yard-forward rule of origin” provisions was presented by members of Congress trying to protect over 470,000 American workers in their districts, who are employed in the US textile industry and cannot compete with the low wages paid to workers in Vietnam and China. Wal-Mart also pushed for greater liberalization of non-tariff regulations such as “limitations on size, geographic locations and merchandise assortment.

One of the concerns presented by the activists is the lack of transparency. While Obama and the USTR stated that they would usher in a new era of transparency, this has not been the case. Instead, the only text of the negotiations that has been released is a memo of understanding signed by the Obama administration and negotiating parties that they will not release the text of the negotiations until 4 years after the deal is concluded or the talks have ended. Activists were also concerned with troubling limitations on access to medicines, which may occur if trade negotiators extend intellectual property rights as well as data exclusivity beyond the May 10, 2007 agreement, which helped to increase access to medicine by allowing low income countries to produce generic medicines under more flexible arrangements.

Members of Congress have also issued letters to the United States Trade Representative, Ron Kirk, to ensure that the new TPP negotiations do not worsen access to medicines for critical programs to combat AIDS, malaria, tuberculosis, and other life-threatening diseases. Yet, it seems as if US trade negotiators hear the voices of the 1% far louder than those of the 99%, and are now considering a medical pricing proposal brought to them by Big Pharma. We have not forgotten the words made when President Obama was simply the Senator from Illinois, fighting for the 99% “Together, we must forge trade that truly rewards the work that creates wealth, with meaningful protections for our people and our planet.” We will fight to keep this promise even if the 1% do not.

Now They Tell Us: Korea FTA Auto Tweaks Were Useless

In the run-up to the congressional vote on the Korea FTA, the Obama administration claimed that its small tweaks to the Korea FTA's auto provisions would lead to greater exports of U.S. autos to Korea. The relaxation of Korean environmental and safety standards for imported U.S. vehicles was supposed to soften the blow of the clobbering that U.S. automakers would suffer when U.S. tariffs on Korea vehicles were lifted under the FTA. Trusting this claim, Congress passed the Korea FTA last month. Now Bloomberg is reporting that the tweaked auto provisions were all for naught:

When Back Seung Chul bought a new car in Seoul, he didn’t even look at imported models from General Motors Co. (GM), Chrysler Group LLC and Ford Motor Co....

Back’s decision -- he bought a Sportage R sports utility vehicle from Hyundai (005380) affiliate Kia Motors Corp. -- suggests that a new U.S.-Korea trade deal won’t mean a leap in sales in the Asian country for U.S. automakers, which accounted for just 1.1 percent of the market last year. The agreement, likely to take effect Jan. 1 after it was signed by President Lee Myung Bak in Seoul today, calls for the phasing out of South Korea tariffs on U.S. vehicles.

“It is highly unlikely American cars will do well in the Korean auto market,” said Kang Sang Min, a Hanwha Securities Co. analyst in Seoul. “Local automakers like Hyundai and Kia can make good cars and offer quick, convenient service.”

The article also discusses the widespread preference for fuel-efficient vehicles in Korea, since Koreans must buy gasoline at double the price of U.S. consumers. Somewhat ironically, the Obama administration's efforts to have Korea relax its fuel efficiency standards for imported U.S. vehicles will only solidify the negative perceptions of U.S. vehicles in Korea.

In sum, Koreans' preference for domestic vehicles over U.S. vehicles - not safety regulations - is the reason that sales of U.S. vehicles have lagged. We warned about this in our comments to the U.S. International Trade Commission (USITC) about the methodology that they would use to predict the impact of the FTA upon the U.S. auto sector. Even though the USITC did not adopt the modifications to their methodology that we recommended, its report still predicted that the annual U.S. auto trade deficit would rise by hundreds of millions of dollars under the Korea FTA. Although Bloomberg's reporting on this issue can be viewed as better late than never, it is certainly too late for the thousands of U.S. auto workers who will likely lose their jobs from the Korea FTA.

Election 2012: the Candidates on Trade

(Disclaimer: Public Citizen has no preference among candidates for office.)

With the budget and other scandals dominating political discourse, little space has remained for discussion of trade policy among possible presidential candidates.

To fill this void we decided to examine exactly where the politicians fall on key trade issues:

Bachmann
Although foreign policy hasn’t always been her strong suit, Rep. Michele Bachmann (R-Minn.) is pretty confident about her views on trade. Bachmann interrupted her presidential campaign and broke a streak of 88 absences to cast a vote in favor of the free trade deals with Korea, Colombia and Panama. In a press release she writes that these deals will “spur economic growth… without cost to taxpayers.” Notably, the representative voted against Trade Adjustment Assistance, which would provide support for workers displaced by the deals. Bachmann also voted against Fast Track cancellation in 2008 and in favor of the Peru trade deal in 2007.

In a blog post urging lawmakers to pass the Korea, Colombia and Panama trade deals, Bachmann writes that the “role of free trade as an expression of liberty….signifies the very principles our country was founded upon.” Unfortunately, these trade deals were negotiated under Fast Track, leaving Congress no authority to amend the agreements. (The constitution, or the document our country was actually founded upon, outlines a system of checks and balances granting Congress the power to “regulate commerce with foreign nations”).

Paul
A self-proclaimed proponent of free trade in its most pure form, Rep. Ron Paul (R-Tex.) opposes NAFTA-style trade deals because they erode U.S. sovereignty and are unconstitutional. He has voted against almost every trade deal that has surfaced during his tenure in office, including Peru, Oman, Bahrain, CAFTA, Australia, Singapore and Chile. Paul has also been an advocate of withdrawing from the World Trade Organization.