U.S., South Korea reach trade deal

The Obama administration announced Friday it had agreed to a trade deal with South Korea, a development certain to set off a major new debate in Congress next year.

The U.S. secured concessions from South Korea on auto tariffs that won praise for the revised deal by Ford Motor Co., previously the agreement’s most vocal opponent. It also won the support of Rep. Sandy Levin (D-Mich.) the lead House Democrat on trade issues, who in a statement said the deal would help reverse a lopsided trade with South Korea on automobiles.

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Yet the congressional debate will still set up a bruising battle within the Democratic Party between Obama and liberals who have criticized the agreement negotiated by President George W. Bush.

Rep. Mike Michaud (D-Maine), who with other Democrats met with Obama at the White House to discuss the deal just two weeks ago, said he would do "whatever I can to defeat it." He also said his concerns about the agreement were not addressed. 

"I had hoped for more from this White House, which campaigned on a need to change the way we negotiate trade agreements so that they truly benefit American workers and businesses. The deal reached today, while beneficial to the auto industry, falls far short of that goal," Michaud said in a statement.

The administration highlighted the economic impact of the agreement, the largest to be negotiated by the U.S. since 1993’s North American Free Trade Agreement (NAFTA) with Canada and Mexico.

The International Trade Commission has estimated the U.S.-Korea deal could increase U.S. exports by as much as $11 billion through tariff cuts alone. On a day when the Labor Department reported the unemployment rate had jumped to nearly 10 percent, the administration said the Korean trade deal could sustain tens of thousands of U.S. jobs.

The Korean trade deal is also a priority for the U.S. Chamber of Commerce and other business groups that have soured on Obama since he took office. Moving the deal through Congress gives the White House a pro-business item to try to complete before the 2012 presidential election year, and Chamber President Tom Donohue urged Congress to approve it.

Obama pledged in his State of the Union address last year that he would seek to double U.S. exports over the next five years, and a deal with a country that is already the eighth-largest trading partner with the U.S. will go some way toward meeting that goal.

The deal also has national security implications, a point underlined by North Korea’s strike against a South Korean island last week that left four people dead.



At the same time, it is likely to put Obama at odds with labor unions already disappointed in signs that the president is prepared to compromise and agree to extend all of the Bush-era tax cuts, at least temporarily.


Lori Wallach, the director of Public Citizen’s Global Trade Watch, said Obama was taking ownership of a Bush-style deal that would ship jobs overseas and put the president’s reelection in peril.

“Choosing to advance Bush’s NAFTA-style Korea free-trade agreement rather than the new trade policy President Obama promised during his campaign will mean more American job losses,” said Wallach, whose group is often aligned with unions. She said the deal “puts the White House at odds with the majority of Americans who, polling shows, oppose more of the same job-offshoring agreements.”

Administration officials on Friday said the revised agreement offered a better deal for businesses and workers, and they expressed confidence it would win congressional passage. They emphasized that Obama had walked away from a deal offered in Seoul earlier this month that would not have been as generous to automakers or auto workers.

On autos, South Korea agreed to concessions demanded by U.S. automakers that will allow a 2.5 percent U.S. tariff on cars from Korea to remain in place for the first five years of the agreement. The deal negotiated by the Bush administration would have immediately eliminated the tariff, which had prompted Ford and Chrysler to oppose deal.

The agreement also would phase out a U.S. tariff on trucks much more slowly than the initial deal, and includes new provisions intended to prevent U.S. cars from being sold in South Korea due to environmental and safety bars the U.S. industry has argued are unfair.

In a statement, Ford President and CEO Alan Mulally praised the revised deal. “These new provisions provide Ford greater confidence that we will be able to better serve our Korean customers,” Mulally said. “We deeply appreciate the tireless efforts of the Obama administration and Congress to improve this agreement and open the Korean auto market.”

Separately, a Ford official said the company would offer support for the deal on Capitol Hill. "We're happy to lend our voice in support of this agreement," the official said.

Ford has pushed for U.S. tariffs on South Korean automobiles to be lowered over a 10-year period, rather than eliminated immediately.

Levin's support for the deal also provides cover for other Democrats to vote in favor of the agreement. He said the slower elimination of the tariff would provide leverage to assure that South Korea opens its market. He also said it would provide time for the U.S. industry to root itself in the Korean marketplace.

"These changes represent an important opportunity to break open the Korean market for U.S. businesses and workers and boost American manufacturing jobs, particularly in the automotive sector," he said.


The revised deal does not provide access to the South Korean market for all beef exports. The initial deal did, but South Korea blocked exports of beef from cows 30 months of age and older after huge demonstrations in Seoul threatened to topple the Korean government. Demonstrators were worried because of reports of mad-cow disease in the U.S. 

Senate Finance Committee Chairman Max Baucus expressed bitter disappointment at the lack of progress on that issue. His committee has jurisdiction over trade in the Senate.

“I am deeply committed to righting this wrong and will work with the Administration in the period ahead to ensure that America’s ranchers and farmers are not left behind. I will reserve judgment on the free trade agreement until then,” Baucus said in a statement.