Apr 03, 2009
“When people are free to do as they please, they usually imitate each other,” wrote Eric Hoffer many years ago.
Hoffer made his name as the “longshoreman philosopher”--a manual laborer who became an influential 20th-century social critic.
I wonder what Hoffer would think about the world’s current turn toward protectionism. Longshoremen, after all, depend on trade for their livelihoods. If people don’t exchange goods, dockworkers have nothing to load and unload from ships. They would be nuts to think that protectionism is a trend worth imitating.
I think Hoffer might welcome the recent news that the European Union and South Korea have come to terms on a free-trade agreement--in apparent defiance of a harmful global trend. Meanwhile, he might wonder why the United States is choosing to ape the economic isolationists rather than pressing to finish its own deal with the Koreans.
Last year, two-way trade between the EU and South Korea totaled $100 billion. Europe was South Korea’s second-largest trading partner (after China) and South Korea was the EU’s fourth-largest, non-European trading partner. So it’s no wonder these two large economies want to remove barriers to the additional exchange of goods and services, especially in times of financial turmoil. The result will be more choices and cheaper prices for consumers as well as more export-based jobs during tough times.
If a trade deal makes sense for Europe, it makes sense for the United States, too. We’re both advanced economies with large populations and a strong desire to prevent a bad recession from becoming a catastrophic depression. By one estimate, increased trade with South Korea would boost U.S. GDP by $12 billion annually.
Nearly two years ago, the United States finished negotiations on a trade agreement with South Korea--roughly when the Europeans were starting theirs. Although President Bush was eager to seal the deal, Congress wouldn’t even dignify the pact with an up-or-down vote. Now the Obama administration has signaled its own short-sighted displeasure. “The agreement as it is just simply isn’t fair,” sniffed U.S. Trade Representative Ron Kirk at his confirmation hearing last month.
That’s not true. Almost all bilateral trade goods would become duty-free in just three years, and they’d be wiped out entirely within a decade. American farmers already sell food worth about $2 billion to South Korea each year, and half of these products would shed their tariffs immediately. Both Americans and our South Korean allies have much to gain--the agreement is fair to both sides.
With the elimination of so many special taxes on Made-in-America goods and services, exports to South Korea would grow quickly--a genuine case of economic expansion during a time of overall contraction.
Last week, the World Trade Organization released a report predicting that international trade will drop by 9 percent this year--the worst performance since the Second World War. The rising specter of protectionism makes the picture even bleaker. The World Bank reported that although the members of the G-20 have promised not to build new trade barriers, 17 of them in recent months have broken their word. Argentina now demands special licenses for car parts and textiles, India has banned Chinese toys, and a number of countries, including the United States, are subsidizing their auto industries.
Charlene Barshefsky, who handled U.S. trade negotiations for the Clinton administration, recently described what’s at stake. “Lawmakers should keep in mind that trade spurs development - building alliances and security as economic integration creates shared interests,” she wrote. “We should focus on Asia, which remains the world’s most dynamic region, starting with the pending U.S.-South Korea free-trade agreement.” She has suggested some modifications to liberalize the Korean auto market, but her outspoken support for free trade stands in stark contrast to what’s being said in Washington and too many other capital cities.
The EU-South Korea free-trade agreement is a sign of hope amid the gloom. So is the news that South Korea and Australia are about to start their own trade talks.
President Obama should stake out his own similar position. Rather than follow the herd of protectionists, he should establish himself as a global leader on growth in trade and inspire the imitators to take after him.