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Obama Trade Policy Perils: Korea FTA Talks Resume Tomorrow

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That the Obama administration did not agree at the G-20 summit to push the same NAFTA-style Korea free trade agreement (FTA) that former President George W. Bush signed in 2007 is understandable. It's projected to increase the U.S. trade deficit, is wildly unpopular in both countries, and replicates the most threatening NAFTA provisions that promote offshoring and financial deregulation. And, its chapter on labor rights bans references to the International Labor Organization (ILO) Conventions that establish, well, the internationally recognized labor rights.

The real question is why the Obama administration would have been willing to sign off on the Bush agreement in Seoul if only the Koreans had agreed to some more market access for U.S. cars and cows. And why they might go for a deal based on those narrow fixes when talks resume tomorrow near Washington. ...especially since a large bloc of senior Democratic legislators, unions and other Democratic base groups made clear months ago that a short list of critical deNAFTAization fixes were necessary to avoid a nasty battle in Congress.

Recent polling has shown that perhaps the one issue that unites Americans across diverse demographics is opposition to more-of-the-same trade policy. The elections confirmed this, with an unprecedented number of candidates from both parties campaigning on fair trade themes.

In its current form, the Korea deal is definitely more-of-the-same.

But you wouldn't know it from the media coverage. You'd think that all anyone cares about are market access issues related to automobiles and beef - and that refusing to move another Bush NAFTA-style FTA somehow undermines Obama's efforts to double exports in five years. That, despite a recent study showing that, in fact, U.S. exports to countries with which we have NAFTA-style trade deals have grown at half the pace of exports to other countries.

I hope they fix the lopsided auto market access provisions and, while they're at it, the textile terms, which are also unfairly uneven. But dealing with cars and cows is far from sufficient to make the deal acceptable policywise, much less to avoid the foreseeable political disaster if Obama makes Bush's NAFTA-style trade deal his own.

The administration must remove the offshoring-promoting foreign investor protections that provide special privileges to firms that relocate and the new rights for Korean firms to use UN and World Bank tribunals to attack domestic regulatory policies and demand U.S. taxpayer compensation for regulatory costs. A major exception must be added to safeguard recent U.S. and Korean financial reforms from the Bush text's deregulation requirements. The footnote banning reference to the ILO conventions has to be removed as well.

In short, Obama should follow through on his campaign promises. He explicitly identified the Korea FTA's labor provisions and the "investor-state" enforcement mechanism as problems that needed addressing.

Getting rid of the investor-state private corporate enforcement of the deal's new foreign investor rights is especially critical. Korea is a major capital exporter with about 270 establishments currently in the U.S. that would be newly empowered to raid the Treasury and attack domestic policies using foreign tribunals. These provisions elevate corporations to the same status of sovereign governments by providing them with the right to privately enforce a public treaty. So far, over $326 million in compensation has been paid out by governments to corporations under NAFTA's similar terms. The cases include attacks on natural resource policies, environmental protection, and health and safety measures.

Korea has just as much of an interest in fixing these provisions as we do, and there are indications that Korean officials would be amenable to doing so. Certainly, the Korean public is as upset over them as we are. Anyone who saw the tens of thousands of Korean protestors on the streets during the G-20 FTA talks this month is aware that inking Bush's NAFTA-style deal does not improve U.S. standing or relations in Korea.

That a bad Korea FTA deal was not completed in Seoul means the Obama administration has time to make the handful of other essential changes to Bush's agreement and avoid a politically disastrous flip-flop on his campaign promises for trade reform. The question is: Will President Obama seize this opportunity to tackle our jobs crisis by starting to reform our failed trade policy like he promised as a candidate? His promised trade reform is a sure winner policywise and politically.