newjerseynewsroom.com

BY JOE TYRRELL

NEWJERSEYNEWSROOM.COM

Despite modest projected economic effects, proposed "free trade" deals with South Korea, Panama and Colombia have generated heated comments and political hijinks.

In New Jersey, the largest deal, the long-delayed pact with South Korea, has produced the largest public relations push. In part, that reflects efforts by Prudential Financial, a major player in insurance.

Official analyses of the South Korea pact suggest the American insurance sector would be a winner under the agreement, although this would not necessarily translate into new jobs in the United States.

"It's highly beneficial to the overall picture," Prudential Chairman and CEO John Strangfeld told The Star-Ledger, noting a subsidiary already employs 3,000 people in South Korea.

In contrast, Tom Buffenbarger, president of the International Association of Machinists and Aerospace Workers, said, “The last thing we need is—not one—but three more incentives to send more of our jobs overseas."

A review by the U.S. International Trade Commission found "aggregate U.S. output and employment changes would likely be negligible" from the Korean deal. The study estimated provisions could trim the United States' annual trade deficit with South Korea by about $3.5 billion net, but it currently runs about $10 billion.

Opposition parties and unions in South Korea and the other countries have questioned details of the agreements and official estimates of impacts on their industries and workers.

But in Washington, D.C., congressional Republicans took the opposite approach. They boycotted a June 30 hearing on the pacts because they were irate about Obama Administration efforts to include assistance for some American workers who stand to lose their jobs.

Most analyses expect some segments of U.S. agriculture—dairy products, meat and poultry—to benefit as South Korea lowers tariffs and shows a greater willingness to accept the safety of imported foodstuffs.

That has been a sore point for North American farmers since the Koreans banned beef from the United States and Canada in 2003 following outbreaks of "mad cow" disease caused by unsavory feeding practices here. The ban was relaxed five years later, but skepticism about the safety of U.S. beef has remained widespread among Koreans, and was a stumbling block in the trade negotiations.

Last month, though, the Koreans agreed to allow the import of fresh blueberries from Oregon. Although only worth an estimated $1 million, that deal was a breakthrough after several years of talks.

But the larger trade deal comes with some credibility questions.

On July 4, the newspaper The Hankyoreh noted that while the U.S. Department of Agriculture projects a $1.9 billion increase in American agricultural exports as a result, the South Korean government puts it at only $370 million.

"The South Korean and U.S. governments are making entirely different predictions about the scale of damages," opposition legislator Kang Ki-kab told the newspaper. The story can be read here.

The other key issue that has delayed the treaty since 2007 was the refusal of American automakers to meet Korean safety and environmental standards.

The carmakers have won that point in the revised version of the pact, but with a familiar and self-defeating argument. They contended their expected Korean sales are too small to build vehicles to comply with the higher standards.

In contrast, the ITC found that Korean automakers, with plants in the United States, would likely "continue growing their (U.S.) market share regardless" of the agreement.

Both sets of carmakers could benefit, because the deal would reduce and eliminate tariffs in both countries, although they are currently higher in South Korea than in the U.S.

But skeptics point to provisions in the trade agreements that seem to undermine prospective gains. A similar trade deal between South Korea and the European Union requires that at least 55 percent of content originate in Korea or the EU to qualify for reduced or eliminated tariffs.

In contrast, the U.S.-South Korea deal sets the figure at just 35 percent. So "American" goods do not have to come primarily from America, while sweatshops in China and North Korea could use South Korea as a screen to avoid U.S. duties and regulations.

The current debates are pointed because of the loss of American jobs as a result of the largest such pact, the North American Free Trade Agreement, which took effect in 1994.

At the time, the United States had an annual trade surplus of $1.3 billion with Mexico and a deficit of $10.8 billion with Canada, according to foreign trade figures from the U.S. Census Bureau. That changed in 1995 to deficits of $15.8 billion with Mexico and $14 billion with Canada.

The gaps continued to grow until the eve of the Great Recession, to deficits of $74.8 billion with Mexico in 2007 and $78.3 billion with Canada in 2008.

After a downturn, the trade gap with Mexico bounced back to $66.4 billion last year. Canada felt fallout from the fast-and-loose American financial sector, but with its better regulation and transparency avoided the same magnitude of problems. The stronger Canadian currency helped cut its trade surplus with the U.S. to $28.5 billion last year.

While one-time presidential candidate Ross Perot predicted NAFTA could cost as many as 6 million American jobs, the damage has not been that severe. The latest research by the Economic Policy Institute shows NAFTA has eliminated a net of 682,900 jobs here. That is down a bit from several years ago, thanks to the stronger Canadian dollar.

A liberal think tank, EPI has continued to track the NAFTA numbers long after the U.S. government gave up trying to spin them, although its estimate is based on the size of trade deficits rather than unemployment claims.

The group worries the new trade deals could have similar effects. It projects the U.S.-Korea pact could displace 160,000 jobs from the United States, a hair more than the Administration's most optimistic projection of gains.

Republican outrage centers not on potential unemployment, but on Democratic efforts to include the usual "trade adjustment assistance," retraining for some workers who lose their jobs.

But that dispute may be window-dressing. TAAs proved inadequate under NAFTA. The program covered only some workers in companies directly affected, and none in suppliers or subcontractors whose major customers moved to Mexico. Another 40 percent of applicants were rejected.

In the aftermath of NAFTA, though, small trade deals, while they also allow multinational corporations to move facilities and jobs from the country, have looked better for the United States on paper.

America's balance of trade with Peru went from a $2.9 billion deficit in 2006, when a deal was reached, to a $1.7 billion surplus last year. The country's low-volume trade with Bahrain achieved a $900 million surplus after an agreement there.

The not-so-fine print in these deals can be unsettling. The poultry industry has been one of the main American beneficiaries of the Peru deal. Peru had limited imports because of concerns about poor sanitary conditions in the U.S. poultry industry.

Under the trade deal, Peru agreed to accept the lower USDA sanitary standards for poultry, and its mad cow procedures. Global Justice for Animals and Environment, which opposes the pacts, cited a U.S. concession lifting prohibitions on the export of animals for cockfighting and bullfighting.

Public Citizen, which also opposes NAFTA-style deals, has greater worries about the possible effects of a deal with Colombia, which it terms "the world capital for violence against workers," with murders of union members increasing.

The United Steelworkers said they are "disappointed and outraged" that Obama is pushing the trade deal in the face of the killings. USW President Leo Gerard noted two union members were killed the week the President announced the deal.