The Bush administration negotiated and signed a free-trade agreement with South Korea in 2007, but enough members of Congress found the deal unacceptable that it was never ratified. For years it gathered dust as Candidate and then President Obama paid lip service to the idea of renegotiating it, all the while claiming to share his colleagues’ concern that it did not do enough to open Korea’s markets to U.S. automobiles and U.S. beef. He announced the goal of having a new deal negotiated and signed by this month’s G-20 summit, now under way in Seoul.
You might have heard that he failed.
Do you want to know why? This one is actually funny.
Korea used to be one of the most protected automobile markets in the world. But it has gradually done away with most of the high tariffs and import restrictions that shut out foreign cars and trucks. An 8 percent tariff on cars and a 10 percent tariff on trucks remain, but the U.S.-Korea Free Trade Agreement would remove them immediately with respect to U.S. cars and trucks. As for our own markets, the ratification of the agreement would require us to immediately remove a 2.5 percent tariff on Korean cars, but would give us ten years to phase out a 25 percent tariff on Korean trucks. So it seems like Detroit is getting the better of this deal. What’s not to like?
Here’s the punch line: U.S. automakers, their unions, and their allies in government — including most Democrats and Barack Obama — think Korea’s fuel-economy and environmental standards are too high. They are arguing that these standards act as a non-tariff barrier to cars and trucks made in U.S. factories, because, gosh darn it, we just don’t make cars and trucks that clean and green over here.
Americans who favor free trade abroad and less regulation at home are left to scratch our heads: Should we be angry because Obama is holding up a market-opening agreement over such an obvious red herring? It’s the only excuse he has for wanting an even more one-sided deal for the Detroit automakers, who want the car tariff to be phased out gradually, like the truck tariff. Or should we be popping champagne corks because Obama has finally found an environmental regulation he doesn’t like?
All this time, the Democrats have told us that one of the biggest reasons they object to trade liberalization is that it causes countries to engage in a “race to the bottom,” particularly when it comes to labor and environmental standards. In 2007, U.S. trade ambassador Susan Schwab cut a deal with Democrats in Congress in which she agreed to incorporate every single one of their demands for labor and environmental standards into four new trade agreements: deals with Peru, Panama, Colombia, and Korea. But only the Peru deal got a vote. Democrats reneged on the other three, inventing new concerns after Schwab addressed their old ones.