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Free Trade Or Bust?

Free Trade Or Bust?

This will be a particularly interesting spring for those who follow the politics of trade.

There will be attempts by the United States Trade Representative to revive the Doha Round of Trade Negotiations, which is now on life support due to the inability of the major industrial countries to agree on how much to cut agricultural subsidies and how quickly to allow tariff-free commodity trade with the lessdeveloped world. There will be consideration by the new Democratcontrolled Congress of the President's request for a renewal of his trade negotiating authority. This is the socalled "fast track" trade authority that empowers the president to bring trade agreements back to Congress for an "up or down" vote within a specified time and no changes allowed.

This spring, Congress will also consider what is shaping up to be the most important free trade agreement ever brought before it, the proposed Republic of Korea Free Trade Agreement. President Bush has announced his intention to submit it for consideration during the next three months.

After Japan, South Korea is our most important ally in East Asia. We fought a bloody war, with more than 100,000 casualties, to ensure that it would remain free of communist control. Our faith in South Korea has been rewarded. Today, it not only is a successful democracy with a formidable army, it has a thriving economy with world-class companies able to compete in our domestic marketplace. Companies such as Hyundai, Samsung, Kia, and LG certainly have to be taken seriously.

While only 50 years ago it was a starving, war-ravaged country, today South Korea has almost a trillion dollar economy and is our seventh largest goods trading partner. U.S. exports to the South Korea were twice as great as those to India, which has a population 14 times larger. Surprisingly, South Korea has an economy almost as large as that of Canada and a great appetite for U.S. goods, as our $32.5 billion in exports to them would attest. Not only that, it is one of the few countries where the market share of U.S. machine tool builders has actually gone up, although the Koreans themselves have developed a very competitive machine tool industry.

Given these facts, it would seem that the proposed Republic of Korea Free Trade Agreement would have easy approval by Congress. But my guess is that the process will be rocky, with a better than a 50 percent chance of defeat for the treaty. Why? There are three major reasons.

First, the Koreans are refusing to open their market to American beef, and the chairman of the Senate Finance Committee, which has jurisdiction, is Max Baucus (DMont.). Without a deal on beef, Baucus warns, the proposed Free Trade Agreement is "dead on arrival," and since he is up for re-election this year, he means it.

Second, U.S. automakers are unhappy with the deal, arguing that it does not go far enough to open the South Korean market. But, more importantly, U.S. auto workers, who have seen their union jobs disappear as Hyundai and Kia have taken bigger and bigger market shares, dislike the deal for the same reason as their employers, and they have enormous influence within the Democratic Party — which is already predisposed to vote against all trade agreements.

Finally, the constituency for continued expansion of free trade is shrinking. Not only have Democratic candidates been punished when they have dared to support expanded trade, but many Republicans see support for trade as an iffy proposition with their constituents as well. With a weakened president and only a few, select business groups going all out in their support, the prospects for passage of the deal diminish.

Unfortunately, failure of this Free Trade Agreement could have negative foreign policy as well as economic implications. Do we really want to tell one of our closest allies with one of the world's largest economies that we are not interested in closer trade with them?

You can help revitalize U.S. manufacturing! Send this page to your Congressman, local and state government leaders, or your local newspaper editor. Add your own comments on the importance of manufacturing innovation to the health of our economy. Your comments are also welcome at [email protected]

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