Trade Policy

South Korea Free Trade Agreement Goes South

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Some good news for U.S. workers. Obama's negotiations with South Korea for yet another NAFTA styled trade agreement failed. There will be no new trade agreement. This one was a battle of the businesses, the labor arbitrage loving statistical spin machine U.S. Chamber of Commerce against U.S. auto makers Ford and Chrysler.

President Barack Obama won’t be returning from his Asia trip with a renegotiated free trade agreement between the U.S. and South Korea. Concerns over barriers to American automakers selling more vehicles in that country remain a point of contention.

The Obama administration had hoped to reach a deal on the free trade agreement first settled in 2007. That deal was never formally approved by either nation, and congressional Democrats – particularly those in the House – had balked because of concerns that U.S. automakers still couldn’t compete on equal footing in South Korea.

This week, Chrysler Group LLC joined Ford in opposing the deal as written. Last week, Ford took out a full-page ad claiming that for every 52 Korean cars sold in the U.S. only one American car is sold in South Korea.

Of course the Obama administration is pledging to keep at it, but the House, including the new Republicans might have some different ideas.

In a joint statement, current House Ways and Means Chairman Sander Levin, a Royal Oak Democrat, and his presumptive replacement, Republican Dave Camp of Midland, said “Further negotiations will succeed only if South Korea adopts concrete steps to open its market to U.S. exports” including autos.

South Korea Free Trade Agreement Will Cause 159,000 Americans to Lose Their Jobs

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Economist Robert E. Scott has cranked the numbers on U.S. job losses if the South Korean Free Trade Agreement is passed. Yet another bad trade deal would cause 159,000 Americans to lose their jobs over 7 years.

EPI’s research shows it will increase the U.S. trade deficit with Korea by about $16.7 billion, and displace about 159,000 American jobs within the first seven years after it takes effect.

 

WTO Rules Against Airbus for Illegal Subsidies, while China subsidizes Paper Industry

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The WTO has ruled against Airbus for illegal government subsidies.

The World Trade Organization ruled Wednesday that European governments gave planemaker Airbus illegal subsidies in its battle with U.S. competitor Boeing Co., in a first key ruling on a long-running dispute between the European Union and Washington.

Problem is the ruling is over 1000 pages and interpretation, as in will anything happen as a result, is confusing. So now the U.S. and the EU are arguing over what the ruling means.

Take, for example, one key argument in the dispute: did the U.S. prove that Airbus funding was harming Boeing? The U.S. says yes, as the panel recognized the ''serious prejudice'' suffered by the Chicago-based company.

But the EU is happy that American claims of ''material injury'' were rejected.

There were differing views on whether that means European subsidies were responsible for lost American jobs or market share.

Another question is what this means if the U.S. wishes to subsidize and protect key industries and innovation for future economic growth.

Notice this ruling comes years too late to stop Airbus from taking away orders and business from Boeing.

Meanwhile EPI has a new report, which shows China subsidized it's paper industry by $33 billion dollars from 2002-2009 to overtake the global market.

Treasury Delays China Currency ManipulationReport

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The U.S. Treasury has delayed a currency manipulation report on China according to the New York Times. The report was due out mid-April.

For now, the United States is setting aside the most potentially divisive issue, deferring a decision on whether to accuse China of manipulating its currency, the renminbi, until well after Mr. Hu’s visit, according to a senior administration official. That decision, the official said, reflects a judgment that threatening China is not the best way to persuade it to allow the renminbi to appreciate against the dollar.

Many economists expect China to act on its own to loosen the tight link between the renminbi and the dollar — a policy that keeps the currency’s value depressed and makes Chinese exports more competitive in global markets.

USTR - No Mention of China's Currency Manipulation in Report

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The Office of the United States Trade Representative has issued a report on foreign trade barriers. Contained within is no mention whatsoever of Chinese currency manipulation. There is mention of VAT manipulation, tariff-rate quotas and even a 35% tariff on raisins. (who knew?)

While the press is calling this report hard line, I find it kind of wimpy and even question some of the trade figures quoted.

Whirlpool gets $19 million in Taxpayer Stimulus funds, Offshore Outsources the Jobs

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Believe this or not, Whirlpool received Stimulus funds to create jobs and instead they are closing plants! This is obscene that they are being given funds to create jobs and instead offshore outsourcing them. We should demand at least those funds be rescinded.

It can barely get greedier than this: We're in tough economic times, so Whirlpool receives $19 million in taxpayer funds to create jobs. Then it turns around and announces it will shutter its Evansville, Indiana refrigerator plant and displace the 1,100 workers there. Disgusting.

Our Current Policy is to Beg

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Our Current Policy is to Beg - Ralph Gomory

Gomory is referring to the United States response to the mercantile trade practices of China. In the piece, The Innovation Delusion, Gomory exposes the absurdity the United States can create intellectual property, advanced R&D and innovate it's way out of the trade deficit. Gomory also calls out Thomas Flat Brain Friedman, one of my favorite things to see. (I have yet to figure out how such nonsense even gets published never mind on the best sellers' list!)

A new term, Backshoring

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Remember how so many experts periodically proclaimed those jobs aren't coming back!

You cringed, grimaced and threw things at the pundit du jour all the while your friends, neighbors and probably yourself, were out of a job.

Well, well, some of those jobs are coming back, so much so we have a new term, backshoring to describe the phenomena.

Trade Reform has some more details:

China's "Indigenous" Intellectual Property Government Procurement Policy

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This is yet another amazing example of Chinese protectionism, or way beyond protectionism, gosh darn brazen unfair trade practices.

The Hill is reporting Tech groups are trying to get something done on China requiring patents be developed and registered locally for all government purchases. This isn't the product, this is the advanced R&D behind the product!

Wondering now why so much U.S. advanced R&D has moved to China?

China has imposed new procurement rules there require government agencies to purchase equipment only from businesses that develop and register their intellectual property patents locally.

Krugman's Back of the Napkin - 1.4 million U.S. jobs lost due to Chinese Mercantilism

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Paul Krugman has done a rough, on the back of a napkin calculation on the cost of jobs due to Chinese Mercantilism alone.

if we think of the United States as bearing a proportionate share, and also use the rule of thumb that one point of GDP = 1 million jobs, we’re looking at 1.4 million U.S. jobs lost due to Chinese mercantilism.

Bear in mind this is not a formal result, simply a very rough estimate put forth on his blog for discussion, not a formal research paper.

A couple of IMF researchers estimated China accounts for 0.9% of GWP (gross world product).

Since China's GDP is heavily export driven, Krugman asserts one can look at this as a negative impact on world exports., which in turn, negatively impacts purchases of goods and services from U.S. providers and this is a multiplier effect.

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