No Deal: South Korea Trade
November 23rd, 2010 - 18 Comments
President Obama returned from his Asia trip earlier this month without accomplishing one of his principle goals: negotiating a new free trade agreement with South Korea.
Smeal’s Terrence Guay explains what tripped up the deal and what it indicates about the U.S. and global economies:
President Obama’s November trip to Asia sought, among other initiatives, to finalize a free trade agreement with South Korea. With negotiations concluded and a treaty signed in 2007, the U.S. Congress balked at ratifying the treaty. In effect, President Obama tried to persuade the Koreans to amend the treaty to allow greater access to U.S. automobile and beef exports. His inability to do so reflects several changes in the domestic and international political economy.
First, South Korea successfully stood up to U.S. pressure to change the terms of the treaty. The Asian country refused to weaken its fuel economy regulations, which are higher than U.S. standards and impose additional costs for U.S. auto companies seeking to expand into the Korean market. Also, due to citizens’ concerns about the safety of U.S. beef (the “mad cow” phenomenon), the Korean government refused to relax its regulations on beef imports. That two products presented an obstacle to completing a trade agreement with our seventh largest trade partner suggests that American influence on global economic matters is in decline. For further evidence, see the inability of the United States to persuade other countries at the G20 summit this month to apply pressure on China to revalue its currency, or the nine-year (and counting) negotiations on the World Trade Organization’s Doha round of global trade talks.
Second, the failure to reach a trade deal with South Korea underscores the growing distrust of many Americans and politicians of the benefits of global trade and investment flows, especially during “the Great Recession.” The global economy played virtually no role in the recent Congressional elections, other than the simplistic campaign ads blaming China for our economic problems. And while a Democrat-controlled Congress was wary of approving trade agreements with South Korea, Panama and Colombia for a variety of reasons over the past three years—including concerns about labor and environmental issues in those countries—it is not at all obvious that a Republican-controlled House of Representatives will pursue trade agreements with any greater fervor. Most economists expect modest contributions to domestic job and economic growth should these trade deals ultimately be implemented. But with opinion polls consistently showing an American public wary of globalization, the benefits of free trade, and the increasing global influence of other countries, there is little to be gained by congressional Republicans or Democrats using political capital on an issue where the benefits are not widely acknowledged.
Tags: Economy, Globalization, Guay, International Relations, Politics, Trade
This entry was posted on Tuesday, November 23rd, 2010 at 11:33 am and is filed under News. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.18 Responses to “No Deal: South Korea Trade”
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[...] This post was mentioned on Twitter by Cynde Fleagle, Penn State Smeal. Penn State Smeal said: PennState's Terrence Guay on what the US-South Korea trade agreement troubles mean for the US/global economies: http://bit.ly/e8iRFW. [...]
In light of the current problems North and South Korea are having, I find this quite interesting. I think they are on very shaky ground right now, hovering on the verge of conflict with one-another.
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President Obama made the ultimate business faux pas … you NEVER have the top guy attempt to negotiate anything … because in the end they can only lose!
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If South Korea is unwilling to open its markets to US goods, we should privately signal our willingness to pull our troops out of the country … or else have South Korea pay the FULL COST of their being there. There is a cost to not being a “partner” … and South Korea should be taught this lesson!
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@Robert … Forbes magazine had an interesting opinion on the issue of North Korea (see http://blogs.forbes.com/gordonchang/2010/11/29/how-to-stop-north-korea/ )
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I’m not sure if I fully agree with South Korea’s current tactics but it seems that they are receiving increase pressure from North Korea,, and often in a violent manner recently. Some scary stuff.
I would hope that in light of the turmoil between North and South Korea currently, South Korea would boost their economic relations with the United States to strengthen as an ally. In case they need some serious help over the next decade..
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