The Coalition for a Prosperous America makes the common mistake of taking the ITC’s estimates of U.S.–Korea trade relative to the 2007 baseline and comparing them with actual trade flows from several years later. The global economy—and bilateral trade between the United States and South Korea—has changed substantially since then.
A correct understanding of the ITC’s analysis can be illustrated with a few numbers. In response to the agreed tariff and tariff‐rate quota (TRQ) changes in the KORUS FTA, the ITC reported that U.S. exports to Korea were estimated to be $9.7 to $10.9 billion higher once the agreement was fully implemented..7 (This, of course, was measured against the baseline economy that existed in 2007.) United States imports from Korea were estimated to be $6.4 to $6.9 billion higher.
Because U.S. exports to Korea in 2007 amounted to $34.4 billion,8 the roughly $10 billion rise estimated by the ITC would amount to about a 30 percent increase. The 2007 number for U.S. imports from Korea was $47.6 billion, so the ITC estimate of approximately a $6.6 billion change would mean increasing imports by about 14 percent. If the global economy otherwise had remained frozen in 2007, KORUS likely would have reduced the U.S. bilateral trade deficit with Korea from about $13 billion to about $10 billion.
Those numbers seem intuitively reasonable. Korea was recognized as having a higher degree of protection against imports than the United States, so the market‐opening provisions of KORUS would be expected to lead to a relatively larger increase in imports to Korea than to the United States.
Now, let’s shift away from a comparative static approach and flip the calendar ahead a few years. By 2014, actual U.S. exports had grown 29 percent to $44.5 billion, and U.S. imports had risen by 46 percent to $69.5 billion, so over seven years the trade deficit actually widened from $13.2 billion to $25.0 billion.9 This result is opposite to what some people expected based on their misunderstanding of the ITC study.
Table 1. United States Trade in Goods with South Korea (2005–2014)
In this situation it isn’t entirely surprising that someone who is unfamiliar with the strengths and limitations of the ITC’s analysis might be tempted to say, “Wow, the ITC certainly doesn’t know what it is doing. They said KORUS would reduce the trade deficit, but it went up.” Or, taking the next step, someone might assert, “KORUS caused the deficit to increase!” This would be a particularly bold conclusion since KORUS did not start to be implemented until 2012 and won’t be fully phased in until 2032.
It is difficult to be much impressed by poorly informed (or poorly motivated) arguments from critics of trade liberalization who ignore the actual nature of the economic analysis. They also ignore many other things that are happening in the dynamic global economy. With respect to developments since 2007, the world experienced a particularly deep recession in 2008–2009 that has had a pronounced effect on production, consumption, and trade flows among many countries. (Bilateral trade between the United States and Korea fell 17 percent ($14 billion) between 2007 and 2009.) Substantial investments by Korean firms in the manufacturing sector may have shifted the comparative advantage of some industries in favor of Korea. Consumer tastes and preferences have continued to evolve. Americans appear to like telephones manufactured in Korea, not to mention automobiles. (From 2007 to 2014, U.S. imports of telephones from Korea rose 167 percent; automobile imports rose 66 percent.) There seems little doubt that those fundamental changes in the U.S. and Korean economies have had far greater effects on bilateral trade flows than KORUS. And it is ludicrous to think that those changes could have or should have been projected by economists focused on the effects of tariff reductions.
Looking ahead to the possible conclusion of TPP and TTIP, economic analysis no doubt will play an important role in the debate over those agreements. During consideration of previous FTAs, pro‐trade and anti‐trade members of Congress cited portions of the ITC’s findings that supported their views. Debates over the upcoming agreements certainly will provide similar opportunities.
Opponents of trade liberalization at times have sought to undermine the credibility of the ITC’s studies by claiming that economic analysis of past trade agreements has been incorrect. Simply enough, people always will be able to misconstrue the results of any modeling for any trade agreement. This will be an issue again for the TPP and for TTIP. Note that it’s still an issue for the North American Free Trade Agreement (NAFTA), which some commentators seem to believe has caused most U.S. economic problems for the past 20 years.10
Supporters of trade liberalization should be prepared to counter those who would misinterpret the economic analysis of trade agreements in order to advance anti‐trade arguments. Yes, trade liberalization will produce both winners and losers. But credible analysis clearly indicates that making markets more open and competitive will lead to improved resource allocation, expanded international trade, greater economic growth, and higher consumer welfare. Those objectives are genuinely worth pursuing.
1. United States International Trade Commission, “About the USITC,”
2. Bipartisan Congressional Trade Priorities and Accountability Act of 2015, PL 114–26, Sec. 105(c)(2),
3. United States International Trade Commission, “U.S.-Korea Free Trade Agreement: Potential Economy‐wide and Selected Sectoral Effects,” September 2007,
4. Ibid., ch. 2 and Appendix F.
5. Coalition for a Prosperous America, “Request for Delay of Economic Analysis of TPP and Upgrading of Methods,” letter to Meredith M. Broadbent, chairman, U.S. International Trade Commission, February 26, 2015,
7. United States International Trade Commission, “U.S.-Korea Free Trade Agreement,” p. xvii.
8. United States Census Bureau, Foreign Trade, “Trade in Goods with Korea, South,”
10. American Federation of Labor – Congress of Industrial Organizations (AFL-CIO), “Issues, Trade, NAFTA,” 2015,