North Korea Crisis No Reason to Preserve Failed Trade Deal; U.S. Exports to South Korea Dropped, Deficit Nearly Doubled Since Pact
Statement of Lori Wallach, Director, Public Citizen’s Global Trade Watch
“How to peacefully resolve North Korea’s nuclear escalation is a thorny question, but what should happen with the 2012 U.S.-South Korea Free Trade Agreement is an entirely separate question that is not complicated. We opposed the U.S.-Korea Free Trade Agreement in 2011 when it came before Congress because we knew that any deal that has at its heart new rights and powers for corporations to offshore jobs, raise medicine prices and attack environmental, health and financial stability safeguards is bad for people and the planet.
In its five years in effect, this U.S.-Korea trade agreement proved even worse than expected. The unique outcome is that U.S. exports to South Korea actually declined after the pact was implemented. As with most other U.S. FTAs, imports into the United States soared. Thus, the U.S. goods trade deficit with Korea increased by 85 percent in five years. U.S. average monthly exports to South Korea have fallen in nine of the 15 U.S. sectors that export the most to South Korea, relative to the year before the FTA. U.S. exports to South Korea of agricultural goods have even fallen 5.4 percent in the first five years of the FTA.
Claims that U.S.-Korean cooperation on a mutually shared existential priority will somehow be undermined by cancelation of a trade deal that has done the opposite of what was promised is absurd. The 28,000 U.S. troops stationed in Korea are just one demonstration of U.S. support for South Korea and commitment to its defense. Hysterical foreign policy arguments are always the claim of last resort in support of a failed trade agreement, and time and again they have proved meritless. Given the broad public opposition to the FTA in Korea, ending a deal negotiated in secret with 500 official U.S. advisers representing corporate interests would be viewed by many in Korea outside the foreign policy elite as good news.”
With respect to the economics of the deal’s termination, Korean tariffs would not rise to 14 percent as suggested by former-U.S. Trade Representative Robert Zoellick. An oped he wrote that ran earlier this week says levels “could” rise, a hedge to cover the reality that he is citing Korea’s bound World Trade Organization tariff rates, not their actual applied rates. (It is the “applied” rate that reflects the actual tariffs charged while the “bound” rate is the highest level to which a country could raise tariffs although only on a Most Favored Nation basis, which means with respect to all countries.) The relevant data is the applied trade weighted mean tariff level provided by the World Bank, which for Korea is 4.78 percent. The United States is at 1.63 percent. (The applied trade weighted mean is the actual average tariff level based on actual trade flows.)
Public Citizen press release summarizing the Korea FTA five-year data release by the U.S. International Trade Commission