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Trade Pact Used as TPP Template Leads to Decrease in U.S. Exports -- Seriously!

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In the two years since implementation of the U.S.-Korea Free Agreement (FTA), U.S. exports to Korea have declined 11 percent according to recently-released government data. Really.

That's a first: usually these NAFTA-style deals that are sold with promises of expanded exports and related job creation end up increasing our trade deficit and killing jobs because ballooning imports outweigh modest export growth.

Indeed, a favorite trick of corporate and political FTA backers is to only count exports, even though the balance is what affects domestic growth rates and jobs. The Korea FTA was sold by President Obama with the exports-only line: it would mean "more exports, more jobs." No mention of imports or the balance.

But even if you count only exports on the Korea FTA's unhappy second birthday, it's bad news. And American farmers, ranchers and auto and other manufacturing workers -- the sectors Obama said would be the major winners -- are the hardest hit.

It's a real man bites dog story, even if the mainstream media has barely mentioned it. This despite coverage of the pact's promised glories back when it was passed.

Oh, and imports did increase too. Our bilateral monthly trade deficit with Korea has ballooned 47 percent. Using the administration's export-to-job ratio, the estimated $8.6 billion drop in net U.S. exports to Korea in the FTA's first two years represents the loss of more than 50,000 jobs lost. Recall that Obama said the pact would generate 70,000 new American jobs overall.

All of this would be sufficiently alarming on its own merits. But, the Korea FTA text was literally used as the U.S. opening text for most of the Trans-Pacific Partnership (TPP). Despite these shocking results, Obama hopes to close the controversial 12-nation TPP during his April Asia trip instead of taking the actual outcomes of the Korea FTA seriously and launching a major rethink of the TPP.

But the Korea FTA pact's dismal outcomes are making it even more difficult for the Obama administration to get Congress to delegate away its constitutional trade authority via Fast Track for the TPP. While two-thirds of House Democrats opposed the Korea pact in 2011, many of those who supported it are now announcing opposition to Fast Track, having been moved by the evidence of its damage and the emptiness of the administration's promises. And GOP members who supported the FTA are also facing heat as the damage sinks in.

The data is stunning, and we've compiled it in a report on the two-year record of the Korea FTA. Some details:

• U.S. goods exports to Korea have fallen below the pre-FTA average monthly level for 21 out of 22 months since the deal took effect.
• U.S. average monthly exports to Korea have fallen in 11 of the 15 sectors that export the most to Korea, relative to the year before the FTA.
• While losing sectors have faced relatively steep export declines (e.g. a 12 percent drop in computer and electronics exports, an 11 percent drop in exports of machinery), none of the four "winning" sectors have experienced an average monthly export increase of greater than 2 percent.
• Average monthly exports of U.S. agricultural products to Korea have fallen 41 percent.
• The average monthly U.S. automotive trade deficit with Korea has grown 19 percent.
• The United States has lost an estimated cumulative $9.2 billion in exports to Korea under the FTA's first two years, compared with the exports that would have been achieved at the pre-FTA level.

Meanwhile, growth in U.S. services exports to Korea has slowed under the FTA. While U.S. services exports to Korea increased at an average quarterly rate of 3.0 percent in the year before the FTA took effect, the rate has fallen to 2.3 percent since the deal's enactment -- a 24 percent drop.

The U.S. exports downfall is particularly concerning given that Korea's overall imports from all countries increased by 2 percent over the past two years (from 2011 to 2013).

In sum, the data simply do not support the Obama administration's tired pitch that more FTAs will bring more exports. In fact, many sectors that the administration promised would be the biggest beneficiaries of the Korea FTA have been some of the deal's largest losers.

AGRICULTURE: While the administration argued for passage of the FTA in 2011 by claiming, "The U.S.-Korea trade agreement creates new opportunities for U.S. farmers, ranchers and food processors seeking to export to Korea's 49 million consumers," average monthly exports of U.S. agricultural products to Korea have fallen 41 percent under the FTA.

• U.S. average monthly poultry exports to Korea have fallen 39 percent.
• U.S. average monthly pork exports to Korea have fallen 34 percent.
• U.S. average monthly beef exports to Korea have fallen 6 percent.

Compared with the exports that would have been achieved at the pre-FTA average monthly level, U.S. meat producers have lost a combined $442 million in poultry, pork and beef exports to Korea in the first 22 months of the Korea deal -- a loss of more than $20 million in meat exports every month.

AUTOS AND AUTO PARTS: The administration also promised the Korea FTA would bring "more job-creating export opportunities in a more open and fair Korean market for America's auto companies and auto workers," while a special safeguard would "ensure... that the American industry does not suffer from harmful surges in Korean auto imports due to this agreement." U.S. average monthly automotive exports to Korea under the FTA have been $12 million higher than the pre-FTA monthly average, but average monthly automotive imports from Korea have soared by $263 million under the deal -- a 19 percent increase. So while U.S. auto exports have risen very modestly under the FTA, those tiny gains have been swamped by a surge in auto imports from Korea that the administration promised would not occur under the FTA.

• In January 2014, monthly auto imports from Korea topped $2 billion for the first time on record.
• About 125,000 more Korean-produced Hyundais and Kias were imported and sold in the United States in 2013 (after the FTA) than in 2011 (before the FTA).
• Sales of U.S.-produced Fords, Chryslers and Cadillacs in Korea increased by just 3,400 vehicles.

The post-FTA flood of automotive imports has provoked a 19 percent increase in the average monthly U.S. auto trade deficit with Korea. The Obama administration has sought to distract from this dismal result by touting only the percentage increase in U.S. auto sales to Korea. This allows the sale of a small number of cars beyond the small pre-FTA base of sales to appear to be a significant gain when in fact it is not.

The overall decline in U.S. exports under the Korea FTA contributed to a zero percent growth of total U.S. exports in 2013, rendering virtually impossible Obama's stated goal to double exports by the end of 2014. At the export growth rate seen over the past two years, the export-doubling goal would not be reached until 2054.

And while the Korea pact is the only U.S. FTA that has led to an actual decline in U.S exports, the overall growth of U.S. exports to nations that are not FTA partners has exceeded combined U.S. export growth to U.S. FTA partners by 30 percent over the past decade.

Um, so why is Obama pushing more of the same deals?

Read the new Public Citizen report on the Korea FTA record at http://www.citizen.org/documents/Korea-FTA-outcomes.pdf