This editorial will appear in tomorrow’s print edition.
Washington got an early Christmas president last week: the announcement of a revised – and politically viable – free trade agreement with South Korea.
Free trade pacts are easy to bash by playing on both xenophobia and economic fears. Agreements with South Korea, Colombia and Panama have been blocked in Congress for more than three years, primarily by Democratic lawmakers who fear union accusations that they are exporting American jobs in exchange for peanuts.
Congress must ratify all these treaties in a hurry. In reality, they will create American jobs.
The agreement with South Korea illustrates how much the United States has to gain by removing senseless and one-sided barriers to international commerce.
The highest barriers are erected by countries that don’t share America’s historical belief in free markets. South Korea, for example, levies average tariffs of more than 50 percent on imported American farm goods; U.S. tariffs on South Korean farm goods average 9 percent. For non-farm goods, it’s 6.6 percent against 3.3 percent.
That pattern plays out throughout the trade relationship, sometimes through tariffs, sometimes through arcane regulations, such as peculiar auto safety rules rigged to protect Korean automakers. That’s part of the reason U.S. manufacturers and farmers suffer an $11 billion annual trade deficit with South Korea.
Because the agreement is designed to create parity on both sides of the relationship, the United States would gain immensely from its lower barriers. The U.S. International Trade Commission estimates that the long-delayed pact would improve the American side of the trade balance by $3 billion to $4 billion a year.
The United States cannot continue to kiss off the opportunity to expand its access to the Korean markets. South Korea’s economy is a dynamo expanding at roughly 6 percent a year. Europe and Japan want a piece of that action, and they threaten to muscle America out.
The Obama administration – which is far more skeptical about trade than the Bush administration – estimates that this agreement would increase the export of American goods by at least $10 billion a year, creating tens of thousands of badly needed new jobs in this country.
Washington, being heavily dependent on Pacific Rim commerce, has more to gain than most states. But the pact, as recently renegotiated, now promises a boost to the U.S. automobile industry, Michigan and other distressed Midwestern manufacturing states.
Koreans are protesting this deal in the streets, and the United Auto Workers and car manufacturers are endorsing it. If that doesn’t impress the anti-trade crowd, nothing will.