Korea Trade Deal

Video: Korea Trade Deal Reality Check From the Public Citizen’s Eyes on Trade Blog While President Obama and corporate lobbyists attempt to sell the Korea trade deal, South Korean farmers and a mass of labor and environmental organizations in the United States are strongly and clearly opposed. Protesters depicted in the video below urged the South Korean government to abolish the trade deal “fearing it would harm both agricultural producers and cattle farmers.” Public outrage about the deal in the United States is no surprise as a September 2010 NBC/WSJ poll found that 69% of Americans believe free trade agreements with other countries have cost jobs in the United States. View a compilation of statements in opposition to the Korea trade deal here. In another protest in Seoul on Sunday, Lee Chun-seok, spokesman for the main opposition Democratic Party, accused the government of making “massive concessions against our national interests,” his party said. “We cannot find the principle of reciprocity anywhere in the agreement.” It is clear that President Obama did not take stock of American citizens’ opinions nor South Koreans’ welfare when reaching a decision to push the Korea trade deal. Now it is up to the 112th Congress to decide whether to settle for the deeply flawed pact or reject another NAFTA-style deal with no realistic promise of benefitting Americans or South Koreans. From Paul Krugman, editorial columnist New  York Times, December 6, 2010, 9:43 am

Trade Does Not Equal Jobs

One thing I’m hearing, now that all hope of useful fiscal policy is gone, is the idea that trade can be a driver of recovery — that stuff like the South Korea trade agreement can serve as a form of macro policy. Um, no. Our macro problem is insufficient spending on U.S.-produced goods and services; this spending is defined by Y = C + I + G + X – M where C is consumer spending, I investment spending, G government purchases of goods and services, X is exports, and M is imports. Trade agreements raise X — but they also lead to higher M. On average, they’re a wash. This, by the way, is why claims that the Smoot-Hawley tariff caused the Great Depression are nonsense. Yes, protectionism reduced world exports; it also reduced world imports, by the same amount. There is a case for freer trade — it may make the world economy more efficient. But it does nothing to increase demand. And there’s even an argument to the effect that increased trade reduces US employment in the current context; if the jobs we gain are higher value-added per worker, while those we lose are lower value-added, and spending stays the same, that means the same GDP but fewer jobs. If you want a trade policy that helps employment, it has to be a policy that induces other countries to run bigger deficits or smaller surpluses. A countervailing duty on Chinese exports would be job-creating; a deal with South Korea, not. If you want the Korea deal, fine; but don’t claim virtues for it that it doesn’t possess.]]>

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