Kelsey Zahourek

The Good and Bad of the New US-Korea FTA

Posted by Kelsey Zahourek on Monday, December 6th, 2010, 2:11 PM PERMALINK

After nearly two years, the Obama administration has finally reached a deal with Korea on changes to the free trade agreement negotiated by the Bush Administration. If ratified, this would be the largest trade agreement since NAFTA.

The bright spot is the 2007 deal remains largely intact. The US-Korea FTA would abolish 95 percent of tariffs on all industrial and consumer goods within three years, and remove most of the lingering 5 percent within a decade. Korea is the world’s 13th largest trading partner and as the American economy continues to struggle, this deal will be an important component to long-term recovery.

Unfortunately, there are some trouble spots in the new agreement, specifically as it relates to tariffs on Korean automobiles. The original 2007 agreement would have eliminated U.S. tariffs on most Korean auto imports, while the remaining tariffs would have been phased out over three years. The new agreement now keeps the remaining tariffs in place an additional two years. Even worse, the new agreement keeps in place the astounding 25 percent U.S. tariff on Korean pickup truck imports. According to the U.S. fact sheet:

The 2007 agreement would have required the United States to start reducing its tariff on Korean trucks immediately and phase it out by the agreement’s tenth year. The 2010 supplemental agreement allows the United States to maintain its 25 percent truck tariff until the eighth year and then phase it out by the tenth year – but holds Korea to its original commitment to eliminate its 10 percent tariff on U.S. trucks immediately.

As stated many times on this site, tariffs are taxes and keeping them in place, no matter how temporary, harms consumers.

It is a disgrace that the Obama administration has held this agreement hostage, one that benefits almost all sectors of the economy, to appease just one sector- Detroit automakers and their protectionist unions. Nonetheless, the net gains from this agreement far outweigh the negatives and Congress should move quickly to ratify. Now if only we could get Colombia and Panama done…

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A New Direction for U.S. Trade Begins in Korea

Posted by Kelsey Zahourek on Wednesday, November 10th, 2010, 9:57 AM PERMALINK

This week, President Obama heads to Korea for the G20 Economic Forum, but before that, Obama and Korean President Lee Myung-Bak will sit down in an effort to finalize revisions to the US- Korean Free Trade agreement. Yes, the same FTA that was completed three years ago by the Bush administration but has since been shelved due to opposition by anti-trade lawmakers.

One of the main sticking points of the agreement has been Korean trade barriers on imports of U.S. automobiles and beef. While these concerns may be legitimate, they are also a bit overblown and as Cato senior fellow Doug Bandow points out, ratification of the FTA would go a long way in alleviating those economic barriers:

“In terms of tariff reduction, the agreement would deliver the “level playing field” many members of Congress demand. Tariffs on imported passenger cars and parts and accessories are currently 8 percent in Korea and 2.5 percent in the United States. Most of those tariffs would be eliminated upon enactment of the agreement, and all by its full implementation.”

More important is the overall economic benefit ratification of the U.S.-Korea FTA would bring. Today, South Korea is the world’s 10th-largest economy and America’s seventh-largest trading partner. The US-Korea FTA would abolish 95 percent of tariffs on all industrial and consumer goods within three years, and remove most of the lingering 5 percent within a decade. Since tariffs and trade barriers amount to government-imposed costs on both companies and consumers, eliminating these barriers in a free trade agreement amounts to a significant tax cut for both countries. Additionally, the U.S. International Trade Commission estimates that enacting the FTA would increase U.S. exports by $10–11.9 billion.

Not enacting an FTA with Korea only harms U.S. businesses and consumers. This is something Obama seems to get. Just last week in a New York Times opinion piece he wrote:

“Other nations like Canada and members of the European Union are pursuing trade pacts with South Korea, and American businesses are losing opportunities to sell their products in this growing market. We used to be the top exporter to South Korea; now we are in fourth place and have seen our share of Korea’s imports drop in half over the last decade.”

As a new Congress is set to come in, now is a great time for Obama to reassess his trade priorities. A good start would be ratification to the U.S.-Korea Free Trade Agreement.

Mexico Retaliates as Obama Continues to Pander to Unions Over Truck Ban

Posted by Kelsey Zahourek on Wednesday, August 18th, 2010, 10:34 AM PERMALINK

This week, the Mexican government announced it would add to the list of retaliatory duties on U.S. products for America’s refusal to allow Mexican trucks to operate north of the border. This move creates additional tariffs on 26 U.S. products, including pork, oranges, and chewing gum, among other products.  

This is the second such retaliation by the Mexican government following passage of the omnibus spending bill in early 2009 which included a provision to end the pilot program to allow Mexican trucks to ship goods deep within U.S. borders, violating our obligations under the North American Free Trade Agreement. Mexico raised tariffs on 90 U.S. agricultural and industrial products, worth more than $2.4 billion in American goods exported to our southern neighbor.

Sadly, since Obama took office such retaliation has become the norm rather than the exception. The stimulus bill included the protectionist “Buy American” provision, forcing manufacturers to give preferential treatment to domestic producers of iron, steel and other manufactured goods in building contracts and other spending.  As a result, countries from Europe to Asia signaled their own buy domestic policy aspirations. Additionally, over the past year Brazil has threatened retaliation over a nearly decade long cotton dispute and China has threatened to impose tariffs after the Administration raised prices on imports of Chinese made tires and steel.

Obama’s goal to double U.S. exports is an important and laudable goal but he is proving to be clueless or just plain ignorant in the ways to achieve export growth. Focusing solely on American goods creates a monopoly of sorts within our own borders. When American businesses face no competition from foreign companies, American consumers feel the impact. If Americans stop importing goods from abroad, then foreign nations could also stop importing American products.

Increasing trade by lowering tariffs and subsidies worldwide will provide new markets for American manufacturing and agricultural products and when firms find new customers abroad they are more likely to invest at home leading to new innovations and higher paying jobs.  If Obama continues to ignore this reality, America will be faced with higher prices and more job losses.

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Obama Believes its Time to Pass the US- Korea FTA. We Concur.

Posted by Kelsey Zahourek on Monday, June 28th, 2010, 12:02 PM PERMALINK

Since taking office, President Obama’s trade agenda has been anything but. With continuous pandering to protectionist allies (see here, here, and here), Obama has done more to halt international commerce, than open up new markets by enacting the trade liberalizing policies that would boost domestic exports, create jobs, and lead to higher economic growth. However, over the weekend the White House signaled a shift as the Administration announced it would move forward on the stalled U.S. - Korea Free Trade Agreement. The draft agreement was negotiated in 2007, however under the leadership of anti-trade Democrats, the agreement as not gone up for a vote in the House.

Today, South Korea is the world’s 10th-largest economy and America’s seventh-largest trading partner. The US-Korea FTA would abolish 95 percent of tariffs on all industrial and consumer goods within three years, and remove most of the lingering 5 percent within a decade. Since tariffs and trade barriers amount to government-imposed costs on both companies and consumers, eliminating these barriers in a free trade agreement amounts to a significant tax cut for both countries. Additionally, the U.S. International Trade Commission estimates that enacting the FTA would increase U.S. exports by $10–11.9 billion. The gains brought to the U.S. by enacting pro trade policies is apparently something the Obama Administration now understands (it only took three years).

The push for enacting the US-Korea FTA comes nearly a month after a group of thirty nine members of Congress from both parties sent a letter urging the Administration to move forward on another agreement, the US-Colombia FTA. And don't even forget about the third agreement in waiting, the US-Panama FTA.

President Obama claims to be a supporter of free trade, saying it is vital to the economic health of our nation and he has repeatedly called for countries to avoid protectionism. Hopefully, the announcement over the weekend indicates a change in the way this Administration views trade-- as less of a political tool and more a tool for economic growth and expansion.

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Robbing Joe Consumer to Pay Joe and José Farmer

Posted by Kelsey Zahourek on Friday, April 9th, 2010, 12:18 PM PERMALINK

The dispute started when Brazil, the world's fifth largest cotton producer, claimed the United States, the world's third largest cotton producer, is able to control global cotton prices and stay at or near the top of production through its agricultural subsidies, and for the past seven years the WTO has agreed. The 2009 WTO ruling in favor of Brazil allowed Brazil to impose sanctions on $829 million on U.S. goods which would have come into effect a day before the deal was reached with U.S. negotiators. Beyond the nearly $150 million American taxpayers will now be sending to Brazilian cotton farmers, the U.S. also agreed to slightly open up the U.S. market to Brazilian beef, as well as make “tweaks” to export credit guarantees.
The United States pays farmers roughly $3 billion annually to grow and market cotton. American farmers are helped, but only at the expense of the rest of the American population, as the government must tax its citizens more in order to subsidize U.S. farmers. With this deal, not only are taxpayers forced to foot the bill for an industry not willing to compete in the market, now they are also stuck with a payoff to appease Brazil. This cotton baron welfare program has additional implications beyond the Brazil dispute; artificially boosting the cotton supply, driving down the price and forcing cotton farmers in developing nations, especially African nations, out of business. 
Rather than enacting an easy short term fix, the Obama Administration should scrap the costly and illegal cotton subsidy program. Its these types of trade barriers that lead to higher prices which hurt the average consumer in both the short and long runs.

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Obama's First Year: Protectionist Trade Agenda Costs American Consumers

Posted by Kelsey Zahourek on Wednesday, January 20th, 2010, 3:00 PM PERMALINK

Day 13 – Feb. 1:  The European Union warns the US of serious ramifications, including an international trade war, if the President pursued a “Buy American Policy”.

Day 29 – February 17: Obama signs the “Stimulus” bill and violates his transparency pledge to the American people that he will allow legislation to be posted online for five full days before signing it. 
The “stimulus” still includes “Buy American” protectionist language. U.S. cities and some states aren’t obligated to follow the rules of the World Trade Organization and the North American Free Trade Agreement (NAFTA).
"I agree that we can't send a protectionist message," Obama said in an interview earlier in the month.
Day 65 – March 25: Mexico retaliates in response to the U.S. violation of NAFTA in the “Omnibus Spending Bill” by increasing tariffs on 90 U.S products. President Obama had inserted a provision in the bill that denied funding for a two-year-old pilot program which allowed some Mexican trucks to operate in the U.S.
"We consider that the United States is mistaken, protectionist and clearly violating the treaty," stated Mexico's Economy Secretary, Gerardo Ruiz Mateos.
Such protectionism favored by the Obama Administration only leads the US into an economic sinkhole from which it is very difficult to recover.
Day 165 – July 3: World Bank President Robert B. Zoellick warns that protectionism could threaten recovery from a global recession. “It seems appealing in countries to buy their own national products…Buy America. Buy Canada. Buy Chile. Buy China. But that's the road to the problem that exacerbated the downturn in the 1930s and led to the Great Depression.”
Day 235 – September 11: President Obama yet againbroke his campaign promise to not raise taxes when he announced the new tariff on Chinese tire imports. ATR President Grover Norquist stresses to the American people that “A tariff is nothing more than a tax on consumers.” This tariff in particular is a knife in the back for families making under $250,000 a year, since the tax applies primarily to lower-end tires.
Day 254 – September 30: Obama jumps in bed with labor unions when he humors their desire for more protectionism against free trade imports
Day 277 – November 23: The Obama Administration still struggles to pass the Colombia, Korea, and Panama Free Trade Agreements which would open trade between the US and these respective countries. The AFL-CIO and other big labor organizations in the pocket of the government play a key role in halting progress on free trade.
Day 345 – December 30: In what we’re sure was a happy end-of-the-year surprise to ailing US industries, another tariff was announced against Chinese steel. President Obama, now one of the first presidents in history to anger both the American people AND the Chinese government simultaneously, makes his protectionist policy blatantly and painfully obvious to the American consumer. It hardly sounds like the same man who told the G20 SummitHistory shows us that when nations fail to cooperate, when they turn away from one another, when they turn inward, the price for our people only grows.”
Day 354 – January 8: An article appearing in Reuters urges the Obama Administration to hurry up and pass the Free Trade Agreements for the sake of the US economy. But conservatives are still fearful that given the 2010 election year, Democrats won’t want to pass legislation that will divide the party. Especially since they’re already in pretty big trouble…
Day 357 – January 11: The WTO is investigating President Obama’s tariff on imported Chinese tires. “The panel will be asked to evaluate whether the U.S. tariffs violate rules governing trade among the WTO's 153 members.” Meanwhile, Jeff Jacoby of the Boston Globe reminds us why protectionism only harms the home economy.

Click here to view pdf


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Job Killing Buy American Provision Included in...Jobs Bill

Posted by Kelsey Zahourek on Wednesday, December 16th, 2009, 3:00 PM PERMALINK

Today, the House is set to vote on a “jobs” bill that includes a protectionist Buy American provision that would make it harder for government agencies to waive the requirement that steel and manufactured goods used for highway and bridge projects are American made.  This seeks to strengthen the previous Buy American provision that was included in the failed stimulus plan passed in February. 

“Buy American” mandates in this year’s $787 billion spending package have clearly not helped create the jobs that legislators have promised.  Unemployment hovers around 10%, yet populist sentiments are attempting to make the same mistake twice.  According to the New York Times, employers across the country have been forced to lay off workers as a direct result of “Buy American” requirements in the bill.  One factory in Pennsylvania has let go of 600 employees because some of its products include goods produced overseas.

“Buy American” mandates raise barriers to trade and endanger American businesses to retaliation from trading partners.  Considering the escalating trade wars with both China and Mexico, the last thing that Congress should do is provoke trading partners further.  If the federal government is serious about spurring the creation of new jobs, Congress should focus on lowering taxes and pursuing enactment of pending free trade agreements.

Click here to read ATR's letter opposing Buy American

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Price Controls on Medicines are Not the Answer

Posted by Kelsey Zahourek on Friday, December 4th, 2009, 9:49 AM PERMALINK

Soon, the Senate will vote on an amendment (SA 2793) which would import price controls on prescription medicines into the United States. This amendment to the health reform bill currently being debated in the Senate would endanger every American (especially seniors), cripple research and development on the miracle cures of the future, infringe on the constitutional property protections of U.S. companies, and be a giant leap forward toward socialized medicine. For these reasons, ATR strongly opposes the drug importation amendment S.A. 2793, and urges all Senators to vote against it.

The Dorgan/ Snowe/ McCain amendment would mandate that drugs be filtered into the U.S. medicine supply that do not go through the normal FDA approval process for safety. These potentially-dangerous drugs could come from any one of thirty countries, and originate anywhere in the world. Consumers would not know if they were ingesting a miracle cure or a beaker full of death. The effect and real intent of the amendment is price controls to score political points.

The government telling manufacturers of innovative new medicines how much they can charge is shortsighted. It sucks all future venture capital away from research for the miracle cures of the future, and freezes in time current medical technology. AIDS, Parkinson’s, and other diseases can only be cured tomorrow by investing in research today.

Price controls are one of the hallmarks of socialized medicine. Government-mandated price dictates are bad policy, especially when people’s lives are at stake.

A pdf of the alert can be read here.

Property Rights Alliance's alert can be read here.

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New Website Alert!

Posted by Kelsey Zahourek on Thursday, December 3rd, 2009, 4:00 PM PERMALINK

Today, Property Rights Alliance unveiled a new website and blog.  I encourage everyone to head on over to check it out and to keep doing so over and over again to stay up to date on the latest issues and trends involving property rights, both physical and intellectual.

Click here to visit the site.

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No Time for Obama to Stall on Trade Agenda

Posted by Kelsey Zahourek on Wednesday, November 11th, 2009, 6:13 PM PERMALINK

As President Obama prepares to travel to Asia this week, Americans for Tax Reform (ATR) urged the Administration to move forward with trade deals in Asia in order to stimulate the economy by boosting exports and reject any policies that result in increased prices for American consumers.
Trade agreements across Asia and the Pacific have essentially created a large free trade area rivaling the size and buying power of the United States and Europe. According to the Wall Street Journal, there are 168 free trade agreements in effect in Asia today, with the U.S. involved in two—Singapore and Australia. 
As stated in the release:
International trade has long been a backbone of both America's economy and foreign policy. But recently, politics has gotten in its way. While Asian nations have accelerated their efforts to lower barriers to trade, the United States has remained idle. Free trade opens new markets for America’s exporters and promotes new economic opportunities for American workers employed by exporters. Obama’s refusal to set a comprehensive trade agenda that fosters a competitive market free from protectionist interference has resulted in a missed opportunity to speed up the economic recovery.

While Obama should be pushing for the ratification of pending trade agreements with Korea, Colombia, and Panama, the administration has chosen to pick trade fights with key trading partners, especially China. China has made a priority of negotiating trade treaties with its neighbors, and recently, a broad-sweeping agreement with several African nations. Meanwhile, Obama has pandered to his protectionist political allies by increasing taxes on tires and steel imported from China. 

Obama needs to realize free trade is a two way street, but in the end all parties will benefit. When it comes to making these benefits reality, however, it seems that the President has other priorities.

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