Trade Pacts Obama Is Flacking in Jobs Plan Would Increase Trade Deficit Say Government Studies

Whatever one thinks about the idea of "free trade," the federal government's own studies predict that FTAs with Korea, Colombia and Panama would increase the U.S. trade deficit.
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Everyone expects Obama's imminent jobs plan and related speeches to include a pitch to pass Bush's leftover Free Trade Agreements (FTA) with Korea, Colombia and Panama. We got the preview of this during Obama's bus tour.

Problem is, whatever one thinks about the idea of "free trade," the federal government's own studies predict that these three deals would increase the U.S. trade deficit. Higher deficits mean more jobs will be displaced by imports than are created by exports.

This was a critical factoid largely missed by reporters covering Obama's speeches after the debt ceiling deal -- with many stories simply repeating Obama's claim that these FTAs were vote-ready job-creators for Congress to take up ASAP. See Minority Leader Pelosi challenging that claim of job gains when NBC's Andrea Mitchell assumed it into a question during an interview. (The FTA comments are at 11:40.)

The Korea FTA, the most economically significant FTA since NAFTA, is not only projected to increase the U.S. trade deficit. The Korea FTA would especially slam seven industrial sectors that include many of those "jobs of the future" Obama touts in alternative energy and transportation, high tech and more. This is the conclusion of the official U.S. International Trade Commission (USITC) study on the pact.

Yes, this is the same agency that systematically employs such optimistic assumptions about trade deals that it projected NAFTA would create a new trade surplus and China's WTO entry would have little effect on our trade balance, a projection that was off by hundreds of billions in greater trade deficits. Here's the USITC study data mashed with state-by-state data, which shows jobs at risk by state and congressional district in a searchable form.

Some other questions to consider about the trade aspects of Obama's plan:

  • If Obama's underlying trade goal is to double exports, as announced in his State of the Union speech, then why is he pushing Bush's old NAFTA-style trade deals -- given the data is conclusive that U.S. export growth to countries with which we have such FTAs is half of that to countries with which we have no FTA? If the difference between the U.S. FTA partner and non-FTA export growth rates for goods for each year were to be put in dollar terms, the total U.S. FTA export "penalty" would be $72 billion over the past decade.

  • And, if the goal is to double exports, why is the first and only major trade deal being negotiated by the Obama administration the Trans-Pacific FTA? This is a prospective deal with eight countries, except the U.S. already has FTAs with the four countries (Singapore, Australia, Chile and Peru) that comprise 80 percent of the combined $2.3 trillion GDP of the participating nations. Hardly seems Vietnam (per capita annual income $1,168), Brunei (population 417,000), or New Zealand (annual GDP $139 billion -- less than half of Maryland) are worth receiving priority in U.S. trade agency resources. Yet, while Obama was giving his Detroit Labor Day speech, trade negotiators from nine Pacific Rim nations descended on Chicago to start a Trans-Pacific FTA summit -- and were greeted by labor and other activists at a protest demanding a fair new deal or no deal.
  • What about the majorities of GOP, Independent and Democratic voters who, according to numerous polls, oppose more NAFTA-style deals and think current U.S. trade policy is a jobs killer? Why has Obama decided to flip-flop on his campaign promises for trade policy reform and take ownership of Bush's NAFTA-style deal rather than creating a new American trade agreement model that might actually create jobs here?
  • And then there is the Motor City, Korea trade and autos angle: If Obama uses his Detroit speech to tout "broad support" for the Korea FTA, after he tweaked Bush's text by slightly delaying the deal's auto tariff phase-outs, its worth noting that a the recent USITC study of just the auto sector changes still predicts that the Korea deal will increase the U.S. trade deficit in autos and auto parts by hundreds of millions of dollars. Obama's "new" deal also requires Korea to waive environmental and safety standards for U.S. cars, undermining Korean consumer demand for our cars. And the AFL-CIO will be scoring each of these FTA votes -- having opposed all three after Obama's "renegotiation" -- as have a wide range of unions including Teamsters, Carpenters, Communication Workers, Steelworkers, Machinists, IBEW, ILWU, and more.

    In sum, pretty crazy twist for President Obama to include in his emergency job creation plan a trio of leftover Bush trade agreements that official government studies show will increase the U.S. trade deficit and continue the NAFTA model reviled as job killers by a diversity of American voters who agree on little else...

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