Question

. Why do you think the Obama administration pursued a trade deal with Korea in 2012? What were the potential economic and political benefits? What were the potential costs?

2).Is there any evidence that the 2012 free trade deal between the United States and South Korea was a “job killer” as claimed by president Trump?

3). What were the motivations of the Trump administration in renegotiating the 2012 deal?

4). Who benefits from the revised (2018) deal? Who might lose? Does the 2018 deal represent an improvement over that ratified in 2012?

Answer 1

President Obama’s top priority is to make sure the United States builds on its economic momentum by continuing to grow businesses, create jobs, and expand the middle class. Thatis why the President is committed to free and fair trade agreements that levelthe playing field and benefit American businesses and workers.

1. U.S. businesses must overcome an average tariff hurdle of 6.8 percent, in addition to numerous non-tariff barriers(NTBs),to serve the roughly 95 percent of the world’s customers outside our borders.

2. Exporters pay higher wages, and the averageindustry’s export growth over the past twenty years translated into $1,300 higher annual earnings for the typical employee.

3. .Middle-class Americans gain more than a quarter of their purchasing power from trade.

4. Over the past twenty years, the average industry’s increase in exports translated into 8 percent higherlabor productivity, or almost a quarter of the total productivity increase over that time.

5. When countries make trade deals with China, outsourcing of American jobs increases, while U.S. trade agreements do not change the rate of U.S. investment abroad.

6. Trade raises labor standards and incomes abroad, helping developing countries lift people out of poverty and expanding markets for U.S. exports.

7. For every 1 percent increase in income as a result of trade liberalization, pollution concentrations fall by 1 percent.

8. Trade helps lower the gender wage gap,with a 10 percentage point decrease in tariffs leading to a 1 percentage point drop in the wage gap.

9. The United States has a $43 billion surplus in agricultural trade and is a worldwide leader in agriculture, employing almost 1.5 million American workers.

10. The United States is the global leader in services exports.

presidential debate, just about the only part of the election campaign where Donald Trump continues to frame the issues concern trade. He says trade with China is destroying American jobs, remembering that Bill Clinton pushed so hard for China’s entry in WTO. Trump calls NAFTA, which Bill signed into law nearly 25 years ago, the “worst ever” trade agreement.

There are three real problems with this argument:

1. Trade agreements have only a small impact on trade

Politics tend to focus on trade agreements, rather than trade, because politicians can sign agreements. Some people love them, others hate them. But they actually can do little about trade, which is driven by underlying economic factors.

The so-called “gravity model” of trade highlights the importance of geographic proximity—it is easier and more efficient to move goods and services shorter distance. This explains why Canada and Mexico are among the U.S.’s biggest trade partners. Most estimates say NAFTA increased North American trade a bit. But it was already extremely important to all 3 countries long before NAFTA.

When it comes to trade growth, there is no denying that trade has mushroomed in the past couple of decades. But economists tend to emphasize dramatically lower transportation and communication costs as by far the biggest driver of this trade growth. The flurry of trade agreements since the early 1990s probably came about because of these costs of movement, rather than causing them.

2. TPP ties a bow around existing FTAs rather than creating new ones

The U.S. already has FTAs with six of the 11 other countries that want to be part of TPP: Australia, Canada, Chile, Mexico, Peru and Singapore. Because of these FTAs, there are scarce few restrictions to trade left to remove. TPP boosters talk about “21st century trade agreements” and removing “behind the border” restrictions to trade. But there is little evidence that TPP will move the dial significantly when it comes to the countries with which the U.S. already has FTAs.

3. Completing TPP would hurt China; not completing it would help China

A casual observer of the debate over trade in the presidential election would likely believe that China is part of TPP, and hence that completing the agreement would only make worse the U.S.’s massive trade deficit with China. This is wrong, for a very simple reason. China is not in TPP.

In fact, the U.S. has pushed TPP as a counterweight to China’s growing influence in the Asian and global economies. Don’t listen to the U.S. Trade Representative. TPP is not fundamentally about reducing trade barriers and boosting trade across the Pacific. It is about laying down “rules of the road” (as President Obama often says) for Asia-Pacific trade in the 21st century. Rules designed by the U.S. Rules that China will have to accept if it ever wants to be part of TPP.

The pros and cons of Nafta have been hotly debated since its introduction more than two decades ago, most prominently in the US, where there has been opposition on both the left and the right. The deal has been blamed for job losses in traditionally heavy manufacturing states such as Michigan, and for holding back wage growth for the roles that have remained.

Trump previously called Nafta “the worst trade deal in the history of the country”, and has used aggressive import tariffs on both Canadian and Mexican goods as a means of influencing the renegotiation.

As per the NAFTA agreement, a country can withdraw from it after giving six months notice.

In the US, Trump can set that in motion without congressional approval. In April he requested a renegotiation of the terms of the NAFTA agreement.

Since NAFTA, trade quadrupled among the three countries, surpassing $1tn in 2015, reported Reuters news agency.

Economists Shushanik Hakobyan and John McLaren studied NAFTA’s effect on the US labour market in 2016. They found a severe impact on income among blue-collar workers in the most affected industries and areas.

College-educated workers were less likely to be affected, they said, and executives saw some benefits.

Since the U.S.–South Korea free trade agreement, known as KORUS, took effect in 2012, America’s trade deficit with South Korea has doubled. Trump warned he would back out of the deal and reinstate the threatened steel tariffs if South Korea didn’t agree to negotiate more favorable terms. South Korean officials traveled to Washington, D.C., in February to try. Time was of the essence: The two countries had scheduled separate talks with North Korea regarding its nuclear program in the spring and wanted to be able to present a united front when facing off with North Korean leader Kim Jong-un

South Korea offered to give U.S. automakers and pharmaceutical firms greater access to its market in exchange for becoming the first country to officially be exempt from the steel tariffs

At this writing, the U.S. trade deal with South Korea is unsigned, and the future of U.S.–China trade relations is up in the air. Still, the developments thus far lead to some useful conclusions about renegotiation