Free Trade Agreements Approved; Good News for Employers Across US

Free Trade Agreements: Compromise Leading to Passage

Senate leaders reach agreement on Colombia, South Korea, Panama trade deals – 2chambers – The Washington Post.

Looks like compromise is underway to soften ratification of three, vital Free Trade Agreements for the US. A tie-in that will preserve the Trade Adjustment Assistance (TAA) program to provide aid and retraining to workers who have lost their jobs due to outsourcing brought about by FTA activity.

Last month, the European Union ratified its FTA with South Korea. Even though the US lost its “first in, best dressed” place in line, once this and other two FTAs (Panama, Colombia) are enacted our nation’s brands and innovation will attract new customers through reduced and eliminated tariffs and quotas.  Industry growth numbers will spike, jobs will be secured, and local and regional tax coffers will fill.

 

South Korea-US Free Trade Agreement

Wall Street Journal reports that the US auto industry has gained a strong concession in the terms of this FTA. The revised pact allows the U.S. five years to phase out a 2.5% tariff it levies on South Korean-built cars, rather than cutting the tariff immediately, as provided for in the original agreement struck in 2007.

After inconclusive negotiations between US and South Korea during last month’s G-20 agenda, North Korea’s recent attack on South Korean territory may have propelled the negotiation teams back to the table. In January, expect some bi-partisan drama as Congress reconvenes, spoiling for a fight before ultimately passing the deal at the recommendation of Ford Motors and the US Chamber of Commerce.

Seoul would immediately cut its tariff on U.S. auto imports in half, to 4%. A 25% tariff levied by the U.S. on South Korean truck imports would remain in place for eight years, while the corresponding South Korean tariff on U.S. trucks, 10%, would be cut immediately.

Overall, U.S. businesses that stand to benefit from a South Korea free-trade agreement include financial services, agriculture and manufacturers of big-ticket capital goods.

Speaking of food, reactions from Montana lawmakers tell how the beef industry’s desired concessions by South Korea didn’t get as far as those of automakers. Meanwhile, as import food prices fall for Koreans once the FTA takes effect, US citrus growers appear to be first in line for agriculture export gains.

Think about the potential for frozen juice and dried fruit, let alone fresh produce and nuts. Western US growers will get to the market first, so expect agriculture trade associations in that region to mobilize with trade shows and matchmaking trips.

White House Releases National Export Initiative Report

The president’s Export Promotion Cabinet has released its report to President Obama.

In so doing, Commerce Secretary Locke commented, “As American consumers spend a little less and save a little more, it has never been more important to connect U.S. businesses to the 95 percent of the world’s consumers who live outside our borders. Helping American companies sell more abroad will create jobs and boost our economy. This report is a blueprint for doing just that.”

On the same day, the European Union announced that it has signed its free trade agreement with its first Asian FTA partner-nation, South Korea. There’s a “safeguard” clause inserted to protect the small car industry from “sudden surges of imports in sensitive sectors, including small cars.” This added by Italy on behalf of FIAT. This development adds momentum to conclude our nation’s promising negotiations with South Korea, soon.

The Export Promotion Cabinet includes the Secretaries of Commerce, State, Treasury, Agriculture and Labor and the heads of all the trade-related government agencies. Its report provides an overview of the progress of the NEI and lays out a plan for reaching the President’s goals of doubling U.S. exports in five years to support several million new jobs. For a concise, brief executive summary of the report, visit the Commerce Department’s International Trade Administration’s website.

Buy America? Bye, American Jobs

Here’s the ultimate irony, one with dramatic consequences to US families: a federal policy to stimulate our flagging economy that actually puts more of our jobs at risk. “Buy American” provisions found within this year’s $788 billion stimulus spending package expose US workers in several manufacturing sectors to job loss. It’s that the stipulations of our national and local governments buying only “all-US-sourced goods” places an undue burden on most manufacturers who’ve sourced raw materials and components from foreign suppliers for decades. So – no competitive bids on public works contracts means loss of revenue… and layoffs.

That, coupled with the current administration lurching toward protectionist duck-n-cover, put the US as a whole at risk of losing ground in its export growth. Whose interests in the US are being served, in the long run? Considering that some 80% of Americans work for small to medium-sized manufacturers — all of whom partake of the international business pie — it’s dicey to start tariff wars. This month has produced a costly tit-for-tat between the US and China, having to do with Tires and Chickens. If other industries besides poultry and tires run for cover, then Sino-US upsmanship could tip the balance of world trade badly against our manufacturers. (I’ve written in an earlier blog post about the administration’s perceived double-talk regarding NAFTA-initiated reciprocal trucking rights for Mexico … to date, no satisfaction on either side of the fence)

I’ll be watching how our administration plays both sides of the crowd at this weekend’s gathering of the G20 (the group of big, rich, and emerging economies) in Pittsburgh.

A voice in the wilderness has been the U.S. Chamber, whose president and CEO Tom Donohue cheers from the bleachers for the US worker, while boosting the association’s goal of doubling US exports by 2014. Speaking recently in East Lansing, Michigan, Donohue reminded guests that “it was our free enterprise system and our values of individual initiative, hard work, and innovation that built our great country—and trade has been central to our success.” Read an excellent synopsis of the talk here.

What would I do if I were running the joint? Let the free market reign … remove obstacles to our successful competition and ratify pending free trade agreements with Korea, Colombia, and others.

Stalemate, or Escalation? American companies have too much at risk right now to get drawn in to this game. Unfettered, they can sustain competitive edge and continue to expand exports… which would make the US Chamber cheer even harder.

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