3 trade deals advance, open door to more in future

McClatchy NewspapersOctober 12, 2011 

WASHINGTON_ Business groups hailed Wednesday the expected congressional passage of long-delayed free-trade agreements with South Korea, Colombia and Panama, hoping that the action signals a new opening for U.S. exports to Asian markets.

Both chambers of Congress were expected to approve by late Wednesday the trade pacts first negotiated by the Bush administration but stalled for more than three years over concerns by Democrats about their impact on labor, along with opposition by Republicans to assistance for U.S. workers affected by the trade deals. In the end, worker assistance was restored after the program's authorization had lapsed.

South Korea, with a $1 trillion economy, is the prize in the deals, which together are touted as potentially creating up to 100,000 jobs. That's not a huge number — the weak U.S. economy added more than that just last month — but it's still positive. The pacts also are projected to generate a $13 billion increase in U.S. exports.

"Not only do these trade deals expand opportunities for U.S. workers, but they also present tremendous opportunities for American farmers. It is estimated the Korean deal could increase the price farmers receive for their hogs by $10 per hog," Republican Sen. Charles Grassley of Iowa, a senior member of the Senate Finance Committee, said in a floor speech.

Sen. Max Baucus, D-Mont., the chairman of the committee, which oversees trade pacts, said on the Senate floor that the deals addressed Democratic demands for commitments on labor rights and environmental protection.

"These commitments require our trading partners to uphold internationally recognized labor rights, including the right to organize and bargain collectively," Baucus said. "They also require our partners to protect the environment. These important obligations are fully enforceable, just like the commercial obligations in the agreements."

More than 95 percent of U.S.-Korean trade in consumer and industrial goods would become free of duties within five years of the pact taking effect, and everything else within 10 years.

The Colombia pact provides new access to a $134 billion services sector, and the Panama deal should make it easier for U.S. engineers, architects and others in the services sector to participate in plans to expand the Panama Canal.

The three deals bring to 20 the number of nations with which the United States has separate free-trade pacts. They signal that America's pause on negotiating new trade deals under President Barack Obama may be over, and the path cleared for other important trade talks, especially with Asian nations.

"I think it's a necessary step on a path forward. We have to get these approved and implemented before we can move on to more agreements," said Frank Vargo, the vice president of international affairs for the National Association of Manufacturers. "They are important in themselves, but they are part of a process."

Next up is creation of a Trans-Pacific Partnership. The United States has been negotiating to reach a deal by November with eight other nations that trade goods and services across the Pacific: Australia, New Zealand, Brunei, Malaysia, Vietnam and three nations with whom the United States already has pacts — Singapore, Chile and Peru.

The National Association of Manufacturers was a major supporter of the latest deals, arguing that U.S. exporters in many sectors were disadvantaged because the European Union already had inked a deal with South Korea, and Canada had done the same with Colombia.

Trade critics warn that the South Korea deal repeats a past mistake, one that allowed China access to the markets of developed nations while not fully reciprocating.

"That mistake has been to open the U.S. market to an economic system so thoroughly protectionist that mutually beneficial trade is just not possible. Very much like the Chinese economy ... the (South) Korean economy can best be described as one gigantic trade barrier," said Alan Tonelson, a research fellow at the U.S. Business and Industry Council, a voice for U.S. manufacturers that don't have overseas operations.

Tonelson expects that U.S. trade negotiators will have little leverage over South Korea once the pact takes effect.

"We failed to do this with Japan ... we failed to do it with China and we will fail to do it with (South) Korea," he said.

About 20 percent of U.S. manufactured goods are exported, while just 4 percent of U.S. services are exports. That means free-trade deals are a boon for service sector firms, such as accounting, insurance and law.

"The services sector has a huge, long way to go to catch up and enter the global trading system," said Bob Vastine, the president of the Coalition of Service Industries.

The last round of global trade talks opened services in Europe to U.S. companies, but access to most of the rest of the world was left to the now-stalled Doha Round of talks, meaning that individual nation-to-nation trade pacts take on greater importance.

"This is very difficult stuff because it isn't tariffs, it's one country's regulation of its financial services sector, or its telecommunications sector versus its energy services sector," Vastine said. He said the language worked out with South Korea could become the gold standard for future deals, especially forthcoming talks with Pacific Rim nations: "Virtually every sector that we deal with gets some benefit out of this agreement."

One breakthrough on South Korea removes a barrier that prevented financial services companies from processing data outside the country.

"The whole approach of IT (information technology) and data processing is to centralize and achieve massive economies of scale. That was an important breakthrough in Korea that we'd like to see applied to the Trans-Pacific Partnership," said John Goyer, vice president of the Coalition of Service Industries.

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