Monday, December 6, 2010

KORUS Afterthoughts

With a KORUS deal in the bag and both Presidents signaling strong support, here are a few more things - some big, some little - to consider since last Friday's original post on the new agreement.
  • It turns out that the agreement included more new protectionism than I originally noted.  In particular, Korea now gets to maintain its tariffs on US pork until 2016, instead of 2014 as originally agreed in 2007.  (The Korea Times has a nice rundown here.)  Market access for American pork was one of the big achievements of the original 2007 agreement, so this is a little more serious than it sounds.  That said, this bad change, like those on autos, won't override the agreement's overwhelming economic benefits, but it still stinks that our administration is bragging about "improving" a free trade agreement by increasing trade barriers, not lowering them. 
  • Thinking more broadly about last week's deal, it becomes pretty clear to me that the Koreans really caved.  Not only does the laundry-list of achievements/concessions appear to favor US negotiators (Nice work, team! Way to keep the US market closed! Grumble grumble), but the re-opening of the agreement necessary to complete last week's deal is also a dramatic shift from Korea's consistently firm stance on the FTA that, for economic, strategic and political reasons, they would not agree to substantive, textual changes.  So why the complete reversal, especially when, armed with the Korea-EU FTA and similar trade agreements with other US competitors, the Koreans had the upper hand?  I can only think of one thing, and it actually has very little to do with the FTA: North Korea.  It seems to me that the only thing that changed between last month's embarrassing meeting and non-agreement between Presidents Obama and Lee and last Friday's deal was the unprovoked attack on South Korea (and murder of several of its citizens) by a certain psychopathic dictator and his babyfaced dictator-in-training to the North.  After those Nork missiles were fired, I think completion of these distracting trade negotiations got a lot more urgent, and the South Koreans decided that the long-term bilateral relationship was a lot more important than a few million dollars in automobiles nonsense (and the UAW had no counterbalancing concerns, of course).  So in the end, it could be that the most effective KORUS negotiator wasn't an American or a South Korean but instead a stumpy, murderous jerk who likes to look at things.
  • Not everything about the KORUS deal surprised me.  For example, we got to watch our Mercantilist-in-Chief go through some typical contortions to avoid mentioning the economic benefits that Korean imports would provide American consumers (including many businesses).  In his remarks heralding last week's agreement, Obama stated that KORUS will benefit American exporters ("For our farmers and ranchers, it will increase exports of American agricultural products. From aerospace to electronics, it will increase our manufacturing exports to Korea, which already support some 200,000 American jobs and many small businesses."); he stated that it will benefit Korean exporters and consumers ("They will gain greater access to our markets and make American products more affordable for Korean households and businesses -- resulting in more choices for Korean consumers and more jobs for Americans."); but he didn't say anything about American consumers and the (very significant) benefits they'd derive from the FTA.  I guess American imports into Korea benefit Korean households and businesses, but Korean imports to the US?  Not so much.  And once again, when faced with a very public opportunity to educate the public on all of trade's benefits, President Obama whiffed.  Shocking, I know. 
  • Finally, and on a serious note, has anyone given any thought to how this new deal will affect congressional consideration and approval of FTA?  Sure, people are already vote counting, but that's not actually my concern (I think the agreement will pass pretty easily).  Instead, I'm very curious as to whether this "new" agreement will be covered by the now-expired Trade Promotion Authority (aka "fast track"), which subjects trade agreements completed and signed before July 1, 2007 to strict procedural requirements and thus prevents congressional meddling.  A few observers are assuming that TPA will apply because the original agreement was signed on June 30, 2007, but the law on TPA (19 U.S.C. 2191-2194 and 3803-3805) states, inter alia, that it will cover trade agreements "entered into" by the President before July 1, 2007.  Thus, it appears that whether TPA applies to the KORUS will rest entirely on whether the 2010 changes on autos, beef, etc. mean that the agreement wasn't "entered into" until now.  The changes announced to the FTA - especially those affecting the countries' previously-agreed tariff schedules - almost certainly constitute substantive changes to the agreement, so I'm having a very hard time figuring out how someone can seriously argue that TPA will apply - i.e., that the agreement wasn't substantively modified such that it must be re-signed and "entered into" again.  [Note: USTR is calling this a "supplemental agreement," so maybe they're going to spin this as outside the original agreement, but that seems like a pretty hard sell considering that specific tariff lines, present in the original agreement, have been changed by the 2010 pact.] 
  • And trust me, this is no small matter - if TPA doesn't apply, then all of its important procedural limitations - short timelines, limited committee consideration, no amendments, etc. - don't apply.  And, as I discussed a few weeks ago, TPA effectively prevents a few powerful congressmen or senators from singlehandedly derailing the deal (through procedural maneuvers, "poison pill" amendments and other nasty things).  Senate Finance Committee chair Max Baucus is apparently spitting mad that last week's deal didn't address Korean restrictions on US beef exports, and while he's powerful enough to scuttle the deal, I doubt he'll do it (although he might use his new power to get Korea to move on beef outside the confines of the FTA).  On the other hand, folks like anti-trade stalwart Sen. Sherrod Brown (D-OH) would probably have no such reservations, particularly if Brown's favorite constituents - the United Steelworkers Union - decide to oppose the deal (as of now, they're still decidingdetermining what goodies they can squeeze out of the White House).  So am I missing something here, or is TPA a bigger issue than most people are considering?  I'd assume that the White House and USTR have already considered this important procedural issue, so maybe I'm worrying about nothing; then again, considering that this is the same team that amateurishly allowed the President to set - and then miss - a very public November 2010 deadline for KORUS' completion, I'm not so sure about that anymore.  I guess we'll find out soon enough.
A little more food for thought.  Your thoughts on the last point would be particularly welcome.

[UPDATE: According to Reuters' Doug Palmer (via Twitter), USTR and the White House say that TPA will apply.  I'd prefer to hear that from the congressional experts - i.e., the House and Senate parliamentarians, and maybe the Ways & Means and Senate Finance trade counsels - not the agreement's salesmen.]

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