Well, it finally passed and whether or not it will be welcome news to all is still to be seen. One thing that has happened in the meantime is most countries who have been waiting for the US to implement more free trade agreements have moved on to court other partners and their trade balances are healthy and growing while the US is struggling under high unemployment and the “The Great Recession”. Let us hope that this is a first step forward where the US government can act on more legislation to further economic healing and growth. This in from Bloomberg…
The U.S. Congress approved free- trade agreements with South Korea, Colombia and Panama, bringing an end to years of stalemate and offering what supporters said was the biggest opportunity for exporters in decades.
The bills go to President Barack Obama, who spent two years seeking to broaden Democratic support for pacts revised from initial agreements reached by his predecessor. The South Korea deal, the biggest for the U.S. since the North American Free Trade Agreement in 1994, removes duties on almost two-thirds of American farm exports, and phases out tariffs on more than 95 percent of industrial and consumer exports within five years.
Yesterday’s step may diminish concern that the U.S. will turn to protectionism amid an unemployment rate that exceeds 9 percent, coming a day after a Senate vote designed to punish China for an undervalued yuan. The approval may also give impetus to Obama’s trans-Pacific trade initiative, which Japan, the world’s third-largest economy, is considering joining.
“This is a welcome development showing policy makers can be farsighted and come to an agreement that is positive for all parties involved in the long run in terms of GDP growth,” said Robert Subbaraman, Hong Kong-based chief economist for Asia excluding Japan at Nomura Holdings Inc. “There’s been a lot of market disappointment in policymaking this year.”
Stocks in Asia headed for a sixth straight day of gains, the longest winning streak in six weeks. South Korea’s benchmark KOSPI index rose 0.9 percent.
Economic Boost
The South Korea deal would boost American exports by as much as $10.9 billion in the first year in which it’s in full effect, according to the U.S. International Trade Commission. The accord with Colombia would increase exports as much as $1.1 billion a year. The U.S. Chamber of Commerce said the accords will prevent the loss of 380,000 jobs.
Companies such as Ace Ltd., Citigroup Inc. (C) and Pfizer Inc. have led the effort to get the South Korea deal passed, while Caterpillar Inc., General Electric Co. and Whirlpool Corp. were among the biggest backers of the accord with Colombia.
Obama submitted the legislation after House Speaker John Boehner, an Ohio Republican, said he would consider worker assistance along with the trade deals. First reached under President George W. Bush more than four years ago, the measures overcame a stalemate with Republicans on aid for workers who lose their jobs to foreign competition.
Obama’s Welcome
“I’ve fought to make sure that these trade agreements” with three nations “deliver the best possible deal for our country,” Obama said in an e-mailed statement. “American automakers, farmers, ranchers and manufacturers, including many small businesses, will be able to compete and win in new markets.”
The vote is a win for Obama in a week when the Senate declined to proceed with his $447 billion plan to increase employment. A government report last week showed the nation’s jobless rate held at 9.1 percent in September.
With advanced economies facing predictions of a return to recession, the free-trade deals show how developed nations are turning to emerging markets as sources of growth. Colombia’s gross domestic product rose 5.2 percent in the year through June, and that of South Korea, Asia’s fourth-biggest economy, increased 3.4 percent. U.S. GDP expanded 1.3 percent in the second quarter from the previous three months at an annual rate.
‘Sorely’ Needed
“These agreements will provide an economic boost at a time when our country sorely needs it,” Senator Max Baucus, a Montana Democrat who leads the Finance Committee, which controls trade bills in the chamber, said after almost eight hours of debate.
Obama is seeking to double American exports by 2015, in part through boosting shipments to Asian nations. Nine nations are involved in negotiating the U.S.-led Trans-Pacific Partnership trade accord, known as the TPP.
The administration negotiated terms for auto tariffs in the South Korea agreement that won over the United Auto Workers union, an exchange of tax information with Panama and labor- rights assurances from Colombia.
The House and Senate passed the agreements as South Korean President Lee Myung Bak visited Washington. Lee, who is to address Congress today, told the U.S. Chamber of Commerce yesterday that the trade accord will create “good, decent jobs” that will help spur both economies.
Japan’s Concern
“Japanese companies will be put in a further disadvantageous position compared with South Korean competitors in the U.S.,” Yoichi Kaneko, a ruling Democratic Party of Japan lawmaker said today in a telephone interview. “There is still an opposition within the DPJ but I think it’s important for Japan to join the TPP and free trade agreements.”
The South Korean tariff phase-outs increase market access for U.S. chemical, automobile, medical device and drug companies, and the end of duties on a range of agricultural exports benefits producers of meat, dairy, vegetables and fruits and nuts. Banks and communications companies would also gain opportunities through reductions in regulatory barriers.
“Removal of tariffs will of course be good. South Korean automobile-parts makers have started to attract heightened interest from customers in the U.S. since the earthquake that crippled Japan in March,” said Moon Seung Ki, a spokesman for Hyundai Mobis Co., South Korea’s biggest auto-parts maker.
Samsung Electronics Co., the world’s No. 2 semiconductor maker, said it would see little change in sales from the deal. Nam Ki Yung, a Seoul-based spokesman for the company, said “it will be good for overall trade for both nations. Still, we don’t expect a big impact on our business.”
Labor Opposition
The trade deals were opposed by groups including the AFL- CIO the nation’s largest federation of labor unions and a frequent Democratic ally. Richard Trumka, the organization’s president, had urged lawmakers to oppose them, saying in an Oct. 4 speech in Washington that they are “lousy” deals and will destroy 159,000 jobs by encouraging companies to send work overseas.
“These flawed trade deals are the wrong medicine at the wrong time,” Trumka said in a statement yesterday. “Working people know what too many politicians apparently do not: These deals will be bad for jobs, workers’ rights and our economy.”
Senators Robert Casey of Pennsylvania and Sherrod Brown of Ohio, both Democrats from manufacturing states facing re- election next year, opposed the bills. They said prior trade measures never worked as well as advertised for U.S. workers.
“They will in fact lead to job losses, especially in manufacturing,” Casey said before the vote.
Colombia Bill
The Colombia accord faced the most opposition, passing on votes of 66-33 in the Senate and 262-167 in the House. Brown in the Senate and Representative Sander Levin of Michigan led Democratic opposition, saying Colombia had done too little to protect union leaders from assassination.
“Colombia remains the most dangerous place in the world to be a trade unionist,” Brown said in a speech on the Senate floor.
While the 51 Colombian union members killed last year represent a 73 percent decline from 186 in 2002, according to the National Union School, a labor-rights organization based in Medellin, slayings increased from 47 in 2009. More than 1,700 union members were killed in Colombia in the past decade, the most in the world and 63 percent of the global total, based on union school figures.
The pacts are the first passed by Congress since a deal with Peru in 2007.
The House also voted last night to renew aid for workers hurt by foreign competition and tariff preferences for developing nations. The bill extends benefits, including those for service workers that expired in February, through 2013 while cutting the weeks of extended unemployment insurance that participants can receive to 130 from 156, and reducing the health-care tax credit for people enrolled in the program.