President Barack Obama submitted a free trade agreement (FTA) to South Korea, along with similar deals for Panama and Colombia to Congress on Monday.
Obama has been pushing Congress to pass the bills arguing that it would be mutually beneficial. South Korean President Lee Myung-bak left his country to personally meet Obama on Thursday regarding passage of the South Korean FTA.
The agreement would remove 95 percent of the tariffs on U.S. exports which should significantly increase U.S. business confidence by allowing them to trade more freely with the 12th largest economy.
The South Korean FTA is expected to support 70,000 American jobs. It is also expected to produce $13 billion annually for the U.S. However, the U.S. will also be required to end tariffs on 87 percent of South Korea’s imports as well.
One of the sectors the FTA is supposed to benefit the U.S. is the auto industry. U.S. auto makers only exported 7,450 vehicles to South Korea in 2010.
To demonstrate the imbalance between the two economies, Korea exported 560,000 vehicles to the U.S.
But even if Korea no longer has tariffs on U.S. exports, there is no guarantee they will buy more U.S. cars.
According to a U.S. International Trade Commission (USITC) report, “The Korean market has long been perceived as preferring domestic over imported passenger vehicles, which could make Korean consumers less sensitive to changes in price and increased availability of imported passenger vehicles.”
Still, the House has been pushing to get the FTAs on the docket.
The House Ways and Means Committee approved all three agreements this week. David Camp, a Republican and chairman of that committee, said, “With zero jobs created last month and the unemployment rate hovering around nine percent, we must look at all opportunities to create American jobs.”
Obama has also strongly supported the bill, saying, “These agreements will support tens of thousands of jobs across the country for workers making products stamped with three proud words: made in America.”
Even though the bill has a lot of support from Republicans and Obama, there is still a healthy opposition. The Democrats on the House Ways and Means committees had disagreements about the Colombian FTA.
The Senate may even spark a bigger debate.
“I want everyone within the sound of my voice to understand that I do not like the Colombia Free Trade Agreement, the Korea Free Trade Agreement or the Panama Free Trade Agreement,” said Senate Majority Leader Harry Reid. “I will vote against them.”
Trade interests groups have also rejected free trade agreements because they think they ultimately hurt U.S. economic interests.
“We don’t have a free trade agreement with Great Britain, which could actually buy American products,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition. “Instead we have this penchant for doing free trade agreements with countries that are low-cost manufacturing centers. Why? Because multinational companies aren’t looking at this and saying, ‘It will be great to make things in Ohio and send it to South Korea.’ No, they’re looking at this and saying, ‘It will be great to make things in South Korea and send it to Ohio.’”
Regardless of whether the Free Trade Agreements are good or bad for the economy, they are being debated in Congress this week, and hose debates will be heated.
This time it will be Obama and the Republicans versus the Democrats. How that plays out in the 2012 elections remains to be seen.