Bye Bye Trade Jobs with Korea

Bye Bye Trade Jobs with Korea

Mark Engler: Bye Bye Trade Jobs with Korea

The new trade deal between the United States and Korea will increase the U.S. trade deficit.

Trying to get a mainstream publication to report that simple fact during the debate over the recently passed ?free trade? agreement, far less to spell out its implications (a loss in U.S. jobs), was virtually impossible. It?s bittersweet, then, at this late date, to see the Los Angeles Times acknowledge it.

The funny thing is, the LA Times doesn?t say it outright. Rather, in an article that came to my attention via Arthur Stamoulis at the Citizens Trade Campaign, it sneaks the relevant information into a report about ongoing protests in South Korea against the trade deal:

South Koreans continue to express their displeasure over the Korea-U.S. Free Trade Agreement, which is set to go into effect March 15.

On Saturday, hundreds of riot police stood guard as throngs gathered in downtown Seoul to protest the pact. The activism has hit the streets and the political realm as minority lawmakers claim that President Lee Myung-bak’s administration blundered when it signed a deal that is bad for South Korea….

The agreement, which many estimate could boost annual trade between the two nations by 25%, was ratified in November in the South Korean National Assembly amid chaotic scenes as legislators scuffled in the halls of power, shouting and screaming. One ignited a tear gas canister.

The agreement is expected to boost the nation?s trade surplus, but critics say it will hurt the rural economy.

The overall tone of the article is not particularly sympathetic to the protests, and the line about Korea?s trade surplus could be read as a jab along the lines of, ?What do they really have to complain about?? Nevertheless, the implications for American workers are clear. By definition, an increase in Korea?s trade surplus with the United States means an increase in our trade deficit with them. And that means lost jobs at home.

There?s an old trick at work here. ?Free trade? defenders love to highlight the numbers of jobs that increased exports will create; however, they routinely neglect to mention the number of domestic jobs that increased imports will displace. As the Economic Policy Institute?s Robert Scott wrote in 2003:

[T]rade both creates and destroys jobs. Increases in U.S. exports tend to create jobs in this country, but increases in imports tend to reduce jobs because the imports displace goods that otherwise would have been made in the United States by domestic workers.

President Bush?s statements–and similar remarks from others in his administration and from members of both major parties in Congress [in support of the Free Trade Area of the Americas]–are based only on the positive effects of exports, ignoring the negative effects of imports. Such arguments are an attempt to hide the costs of new trade deals, in order to boost the reported benefits. These are effectively the same tactics that led to the bankruptcies of Enron, WorldCom, and several other major corporations.

The impact on employment of any change in trade is determined by its effect on the trade balance, the difference between exports and imports. Ignoring imports and counting only exports is like balancing a checkbook by counting only deposits but not withdrawals. The many officials, policy analysts, and business leaders who ignore the negative effects of imports and talk only about the benefits of exports are engaging in false accounting.

Such fuzzy math is pretty standard in ?free trade? debates. In fact, you sometimes have politicians on both sides of a given deal trying to sell the agreement to their domestic constituencies by claiming that it will better their balance of trade–leading to a trade surplus. But, there?s a basic trade-off at work here. Both sides can?t be right.

In 1997, Fairness and Accuracy in Reporting (FAIR) published a story that tracked the mainstream media treatment of jobs and trade deficits in the debate over NAFTA. Among other things, it reported:

In 1993 (5/11/93), the Washington Post declared without qualification that NAFTA would ?create twice as many jobs in this country as it will threaten,? while other outlets (e.g., L.A. Times, 5/29/93) limited themselves to the claim that it would generate ?many more U.S. jobs than it will eliminate.?

In 1997, however, the same outlets that were so confident in predicting the future threw up their hands at the idea of reporting the present. ?For all the claims and counterclaims about NAFTA?s impact on employment, analysts have no good way to measure it,? says the L.A. Times (7/9/97). The New York Times is similarly stumped: ?Officials said there were largely unsolvable problems in generating an accurate estimate of job losses,? they declare (7/11/97).

That last bit is a silly contention. While it might not be a perfectly exact science, economists estimate jobs gained or lost on the basis trade balances all the time. Robert Scott concluded in 2006:

Corporations, politicians, and economists repeatedly claimed in the early 1990s that the North American Free Trade Agreement (NAFTA) would improve the U.S. trade balance with Mexico and Canada, resulting in a net gain of about 200,000 jobs in the United States. The reality is that the U.S.-NAFTA trade deficit has soared over the past dozen years, displacing a total of 1 million jobs nationwide, with losses in every state…Simply put, NAFTA has failed to achieve the benchmarks for success established by its proponents.

Of course, ?free trade? boosters could argue for benefits from an agreement that are separate from its impact on balance of trade alone–just as critics point to all sorts of negative non-trade effects of these agreements (like damaging the environment or giving corporations veto power over public health laws). But we shouldn’t have to read between the lines in reports about Korean protests to get an honest accounting of how much-hyped deals will actually affect our trade deficit.

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