Commentary

Hike Trade With Korea, Check China

The People’s Republic of China is ever more confident, challenging U.S. naval ships in the South China Sea and the U.S. dollar in international forums. China has displaced America as the No. 1 trading partner with leading East Asian states.

How do the Obama administration and Democratic Congress respond? By retreating economically from the region. Barack Obama called the U.S.-South Korean free trade agreement “badly flawed” and urged the Bush administration not to even submit it for ratification.

U.S. Trade Representative Ron Kirk calls the agreement “unacceptable.” Although increased trade with South Korea is “one of the biggest opportunities we have,” he affirms that the administration “will step away from that if we don’t get it right.”

This policy represents economic and geostrategic folly. Washington should be expanding American investment and trade opportunities in East Asia. The starting point should be to ratify the South Korean trade agreement.

Strengthening trade ties could help continue American influence in East Asia as China rises.”

U.S.-Korean trade ran more than $80 billion in 2008. The seventh largest merchandise trading partner of the U.S., Seoul is a major importer of aircraft, cereals, chemicals, machinery and plastics. Even a small expansion of U.S.-Korean trade would offer significant economic benefit.

South Korea has been a notoriously closed market. The free trade agreement helps change that. Jeffrey Schott of the Peterson Institute for International Economics writes: “The U.S.-Korea pact covers more trade than any other U.S. trade agreement except the North American Free Trade Agreement” and “opens up substantial new opportunities for bilateral trade and investment in goods and services.”

The pact does not eliminate all economic barriers. Autos have been a sticking point, but the pact offers important progress. Writes Schott: “The FTA outcome on autos makes both sides better off than they would be in the absence of the bilateral deal” and “the FTA liberalization of farm trade predominantly benefits U.S. agricultural exporters.”

For instance, tariffs on U.S. vehicles immediately would be eliminated while America’s protectionist 25 percent tariff on trucks gradually would be phased out over a decade.

Further concessions will be hard to get. South Korean President Lee Myung-bak has been attacked for easing restrictions on American beef imports. Trade Minister Kim Jong-hoon declared: “There are (to be) no renegotiations or additional negotiations.”

The likely increase in U.S. exports, perhaps $20 billion annually, would be particularly helpful during the deep recession. Overall, the U.S. International Trade Commission figures that American exports would rise nearly twice as much as imports.

Strengthening trade ties could help continue American influence in East Asia as China rises. U.S. companies have been pushed into second and even third place in South Korea and Japan. Observes Robert Kapp, a longtime president of the United States-China Business Council: “The growth of Korean-Chinese economic action has been even more impressive than China’s expanding ties with other trade and investment partners.”

South Korea is not waiting for the U.S. It has negotiated trade agreements with regional and European countries.

Failing to ratify the South Korean pact is likely to result in permanent economic and foreign policy damage at a time when China is rapidly expanding its influence.

Doug Bandow is a senior fellow at the Cato Institute. A former special assistant to President Ronald Reagan, he is the author of Foreign Follies: America’s New Global Empire (Xulon Press).