Trade Deficit with S. Korea Doubled During Four Years Of Trade Pact

Dave Johnson

The U.S.-South Korea (KORUS) free trade agreement is now four years old. How’s it doing? Out trade deficit with that country has doubled, costing tens and hundreds of thousands of U.S. jobs.

The Office of the U.S. Trade Representative (USTR) tries to word it in a good way, saying that “overall” trade is up:

The U.S.-Korea trade and investment relationship is substantially larger and stronger than before the KORUS agreement. Since entry into force of the agreement in 2012, the U.S. and Korea have carried out five rounds of tariff cuts and eliminations, creating significant new market access opportunities for U.S. exporters. The agreement has also expanded opportunities for our growing services trade, improved transparency in Korea’s regulatory system, strengthened intellectual property protection, and leveled the playing field for key U.S. exports, including autos. Overall, U.S.-Korea goods and services trade has risen from $126.5 billion in 2011 to nearly $150 billion in 2015.

They boast that “trade has risen.” Here’s the thing. If a factory here closes, and the same goods are brought over from Korea instead and sold in the same outlets, that is an increase in trade, because now those goods cross a border.

Politico’s Morning Trade has the story, trying to make it sound not all bad:

On the four-year anniversary of the U.S.-South Korea free trade agreement, the news still isn’t great on the bilateral trade deficit. The U.S. spent $28.3 billion more on imports from Korea than the Asian country spent on U.S. products in 2015. That’s more than twice the deficit in 2011, the last full year before KORUS was in effect, and a 37 percent increase over the deficit in 2013, the first full year after KORUS was in effect.

The news on goods exports isn’t as bad, though it isn’t exactly good; shipments to Korea initially dipped from $43.5 billion in 2011 to $41.6 billion in 2013, but they were back up to $43.5 billion in 2015. U.S. imports from Korea are where the real change has happened; from 2011 to 2015, they increased 27 percent: from $56.6 billion to $71.8 billion. But USTR spokesman Matt McAlvanah pointed to an increase in overall exports, including services.

Back when the KORUS deal was being debated, several labor and other organizations warned this would happen. Dec. 2010’s “Reluctant Opposition To Korea Trade Deal” explained:

Trade deals have been sold to the public as good for us because they offer jobs, jobs and jobs. But decades of “free trade” agreements have not brought jobs, they have moved jobs out of the country, kept wages low here by letting employers threaten to move jobs moved out of the country, and they have created huge trade deficits.

This is because these “trade” deals were really about big companies using their influence to get around the protections that We, the People fought for: good wages, worker health and safety rules, protecting the environment. We, the People invested to create the circumstances that enable our business to prosper and asked businesses to pay us our dividend, and some business owners didn’t want to do that. And these trade deals allowed them to move the jobs to places that did not have the protections of democracy but still sell the same goods here.

… But the fact just is that countries like Korea have industrial strategies and we don’t, and they have a variety of protectionist measures that fall outside of the details of trade agreements but still affect trade – and we don’t. So these trade deals just let them play the long game, while we play the short game. Our big companies win short-term, their economies win everything in the end.

Click through to read the warnings from the Steelworkers, Machinists, Communications Workers of America (CWA) and AFL-CIO. Turns out they were right.

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