Trade deals: three big winners from America's new free-trade agreements
Trade deals passed by Congress Wednesday could be double-edged, but several economic sectors look set to gain the most from the trade deals with South Korea, Colombia, and Panama.
The three free-trade pacts passed by Congress Oct. 12 could signify that both Congress and the White House, which bucked its labor allies to back the agreements, view trade as a potential way to grow the US economy.
With US imports vastly outweighing exports in recent years, free trade with South Korea, Colombia, and Panama is seen as one modest attempt to redress the imbalance, with farmers and the auto industry perhaps the biggest winners.
Of course, trade goes two ways, meaning the pacts have the potential to hurt US manufacturers as well as help them. But there have been signs that some exporters were losing jobs as Europe and Canada, with their own trade deals, took business away from the United States in these countries. As a result, US business was ramping up pressure on the Obama administration to act.
“The administration was suspicious of trade, but now there is a recognition of its importance and the need for a deeper engagement with the fast-growing economies of Asia and Latin America,” says Edward Alden, a trade expert at the Council on Foreign Relations.
All three of the trade agreements had been negotiated during the Bush administration, but President Obama delayed sending them to Congress for approval and renegotiated parts of them to respond to Democratic criticisms.
In the case of Korea, Mr. Obama won changes to help the US auto industry, says Mr. Alden. In Colombia, he successfully pushed for assurances over labor rights to assuage unions. And he pushed Panama, a big banking center, to be more helpful in rooting out tax cheats.
For the most part, the trade pacts are not seen as being a significant driver for new US jobs or economic growth. But the US Chamber of Commerce estimates that the agreements will save 350,000 jobs.
For example, after the European Union implemented a free-trade agreement with South Korea in July, US companies suddenly started to lose sales. The same thing happened during the past two years to US farmers selling goods to Colombia, where Canadian, Brazilian, and Argentine companies were paying lower tariffs.
But the same advantages could also work in the reverse direction, too.
Korean automakers, kept out of the US light-truck market by a 25 percent tariff, will see that tariff disappear in 10 years. And Colombian textile and apparel makers could benefit at the expense of the few US companies still in that market.
While Colombia and Panama have ratified their pacts, South Korea has yet to do so.
Here’s a look at who in the US might profit most from the three deals:
•Agriculture. The American Farm Bureau Federation (AFBF) estimates farmers will get about $2.5 billion in new orders. That could result in an additional 22,500 jobs in various sectors that bring goods to market, from truckers to longshoremen.
The bulk of the orders would come from Korea, which will be removing tariffs protecting its own farmers and ranchers. For the US this could benefit everyone from the almond growers of California to the big ranching and hog farming operations in the Midwest.
US farmers will also get the opportunity to win back some customers in Colombia, which used to be one of the top export markets in South America until Colombia joined the Mercosur trade bloc. In 2008, the US had 78 percent of the corn, wheat, and soybean market in Colombia. By 2010 it was down 21 percent.
US farmers also expect to pickup about $46 million in sales in Panama, mostly as a result of more livestock sales.
•Ports. The nation’s port operators expect more freight traffic, which means more jobs or hours for stevedores, crane operators, and tugboat crews. The Port of Corpus Christi, Texas, the nation’s fifth largest, is gearing up to ship Wyoming-produced high-grade coal used in steel making. “Korea is a natural for coal,” says John LaRue, executive director.
•Auto industry. The International Trade Commission, a nonpartisan federal agency, expects that US automakers will see some large percentage increases in Korea. But, given the small market share, the actual increase would be small in terms of value. US auto companies would also have to work around the various certification requirements and standards.
•Other. The US is also expected to sell more scrap, plastic, chemical feed stocks, and electronic components to Korea. However, many of these products will be used to make computers, television sets, and electronic games that are exported to the US, “exacerbating the trade deficit with Korea,” writes Robert Scott, in an analysis for the Economic Policy Institute, a think tank in Washington.