Is Obama's KORUS Deadline Good News for US Trade Policy?

As most everyone reading this blog already knows, President Obama announced over the weekend a November 2010 deadline for (re)negotiations on the US-South Korea Free Trade Agreement (KORUS) before he submits the deal to Congress for a final vote:

US President Barack Obama launched a new initiative Saturday to wrap up a free trade deal with South Korea delayed for three years due to market access problems over American beef and autos.

Obama ordered his officials to complete talks by November, when he visits Seoul for the next G20 summit, so that he can push the deal through Congress and implement it soon after.

"I want to make sure that everything is lined up properly by the time I visit Korea in November, and in the few months that follow that, I intend to present it to Congress," Obama said after talks with South Korean President Lee Myung-Bak....

Obama has asked US Trade Representative Ron Kirk to start discussions with his Korean counterpart, Kim Jong-hoon, "to resolve the outstanding issues in a way that levels the playing field for US producers," a senior administration official said.

During the past year, Kirk said his office conducted extensive discussions with "stakeholders" and congressional leaders to gain a detailed understanding of their concerns about the agreement.

"Now, at President Obama's direction, we look forward to finalizing ways to address these concerns, level the playing field for US workers and producers in the key sectors of autos and beef, and deliver to Americans the jobs and economic opportunity this agreement can bring," Kirk said in a statement.

"I expect to speak to Minister Kim today to express our intention to get to work as quickly as possible."

When news of the announcement hit Sunday morning, the ensuing response was pretty predictable.  Pro-trade CEOs, business groups and members of Congress were strongly supportive.  Anti-trade unions, and their congressional lapdogsallies, angrily vowed to oppose the FTA.  And the general consensus among the wonks - like AEI's Claude Barfield and Phil Levy - was that the announcement was praiseworthy because the establishment of a firm deadline here was a decent (and unprecedented) sign that the Obama administration was - after almost a year-and-a-half in the embarrassing wilderness - going to get serious about US trade policy.  And if the President can confront his Party and emerge victorious, it could mean great things for the broader policy future.  Quoth Levy:

The looming KORUS battle raises a number of questions about the administration's political strategy. Is this a decision to override the concerns of skeptical House Democrats, thereby paving the way for Colombia, the Trans-Pacific Partnership, and more? Or will the administration try to split the difference, as with Chinese tires, and pass only the one agreement while leaving the others hanging?

The answers will say a great deal about the prospects for trade policy in the remainder of the president's term. If the administration sees this through, it may mark a welcome return to U.S. trade leadership. If political obstacles prove too much, it will be very hard to conceal the failure in light of this weekend's specific and public commitment.

I must admit that I've been struggling with the President's announcement since I first heard of it on Sunday.  On the one hand, the pro-trade folks have it right: it's nice to hear our all-too-squirmy President finally pin himself down on an FTA and set a real deadline for action.  And anti-traders' public angst is always music to my ears.

On the other hand, there are several reasons for serious concern here, and it appears that, in the aggregate, the bad news here could very well outweigh the good.

First, as Barfield notes in his blogpost, the fact that the final call on moving KORUS forward came from the National Security Council instead of USTR shows that (i) this decision apparently had very little to do with free trade and almost everything to do with foreign policy, namely containing that nuke-craving psychopath on Korea's Northern border; and (ii) it took a nothing less than a nuke-craving psycho to finally force the President's political team to relent and let an overwhelmingly beneficial agreement with a key strategic ally that was signed three years ago finally move forward.  So what does that mean for the Doha Round or other trade agreements with less strategic partners?  Does USTR (or free trade's undeniable economic benefits) have any say in the matter, or will US trade policy be guided only by politics and foreign policy for the next 2.5 years?  If it's the latter, we're looking at a very, very limited US trade agenda through 2012 and an unlikely resolution of bilateral irritants like Mexican trucking or Cotton subsidies or Buy American.  And that's a shame.

Second, concern #1 above raises big doubts about the future of the completed US-Colombia and US-Panama FTAs, despite the fact that those agreements also deserve passage for both economic and foreign policy reasons.  But hey, who knows, maybe if Hugo Chavez tries to get nukes then the Colombia agreement will move.  Dare to dream!

Third, even with that raging, nuke-craving psycho in North Korea, the President didn't promise to actually advance KORUS in the near future.  He only promised a deadline for bilateral discussions, and not only is this deadline a really cowardly punt of the issue until after the November elections, but it also could be, contrary to the sunny optimism cited above, where things get really bad for KORUS and US trade policy more generally.  Remember, this agreement was completed and signed in 2007, and USTR Ron Kirk's team has been meeting with "stakeholders" for the last 18 months.  Yet the FTA's still not ready for primetime (i.e., Congress) and, even worse, the President has just made clear that it won't be ready until USTR and its Korean counterpart re-negotiate a few more details, namely Korean market access for US automobile and beef exports.  So all we have is a deadline to complete negotiations over a fully-negotiated-and-completed trade agreement.  Hmm.  Now, it appears that the President's commitment to these new talks is real, as he forced Deputy USTR Demetrios Marantis to cancel his plans to go to Angola for TIFA negotiations in order to begin staff work on KORUS.  But as Heritage's Anthony Kim explains in today's WSJ Asia, the Koreans aren't going to take this "re-negotiation" lightly:

From Seoul's point of view, the pact is signed and sealed. Mr. Lee has already stood up to trade unions and opposition parties to get his parliament to pass the deal. Especially after taking a beating in local elections earlier this month, he cannot afford to be seen making further concessions to the U.S.

Even if South Korea does come to the table, it's unclear whether the U.S. side can stand up to America's own trade unions, who likely want more concessions on U.S. access to Korea's beef and automobile markets. U.S. Trade Representative Ron Kirk said over the weekend that he would work "to ensure that our proposals adequately address outstanding concerns." Never mind that Congress has already demanded the Koreans renegotiate the deal's terms—twice.

A third attempt to push for concessions would further tarnish America's fading international credibility and leadership in free trade.

Kim's opinions are on very solid ground - the Koreans have repeatedly said over the last two years that yet another re-negotiation of the FTA is off-the-table.  And why on earth would they?  First of all, KORUS' automobile and "non-tariff barrier" provisions are the strongest of any US FTA ever, and yet the US automobile industry - in which this administration still has a political, emotional and financial stake - has promised to oppose the agreement unless it contains "meaningful market access" provisions (read: guaranteed market share).  That's "managed trade," not "free trade," and it has no place in a "free trade agreement."  Second, US trade stagnation over the last two years has given the Koreans a serious upper hand in any future negotiations because they've been signing trade deals - including a massive one with the EU - at a breakneck pace over that period.

So even if the President's commitment to advancing KORUS is, while admittedly less-than-courageous, genuine (and I have no reason to doubt that it is), there's still a very real chance that the Koreans stand firm, and that these new bilateral talks thus fail to produce anything new by this November.  Maybe an innocuous side agreement or two, but re-opening the text of the FTA seems like a real longshot.  And if that turns out to be the case, then the American automakers and their congressional allies (like Ways & Means chairman Sandy Levin (D-MI)) will almost certainly continue to oppose KORUS, and Obama's big November deadline could become a very big problem, rather than some great solution.  Don't think that's possible?  Well, just ask yourself the following questions:

If nothing changes between now and November, will the President - who thus far has caved to every anti-trader out there, no matter how small -  really stand up to US automakers and labor unions, as well as a very a large swath of his Democrat allies in Congress, and advance the agreement next year as he promised in Toronto last weekend?  Or will he cave to the political pressure and use the missed deadline as an excuse to bag KORUS altogether (something like "well, we tried, but we just can't agree on an agreement that truly provides a 'level playing field,' so we're abandoning our efforts")?

If Obama takes the former route, then his KORUS announcement could, as Levy states, open the door to real movement on US trade policy in 2011.  If he chooses the latter, then KORUS will die, and so will any hope for US trade policy in the next two years.

Now, are you really willing to bet that he'll choose door number one?  Because I sure as heck ain't.