Obama gets win as Congress passes free-trade agreements

Congress resoundingly approved long-stalled trade agreements with South Korea, Colombia and Panama late Wednesday, authorizing the most significant expansion of trade relations in nearly two decades.

While the deals with Colombia and Panama are likely to have limited economic impact, the agreement with South Korea is designed to break down barriers between the United States and the world’s 15th-largest economy.

The South Korea deal has the potential to create as many as 280,000 American jobs, according to a recent assessment by the staff of the U.S. International Trade Commission, and to boost exports by more than $12 billion. Several major labor unions have warned that any gains will come at the cost of layoffs among American workers because of heightened competition from South Korean imports.

The South Korea deal is widely hailed as the most consequential trade pact since the North American Free Trade Agreement was ratified in 1994.

The House approved all three deals and was quickly followed by the Senate. Final approval of the agreements represents a victory for the Obama administration and congressional leaders in both parties, who have touted the trade pacts as a means to jump-start the flagging economy without additional government spending. Ratification of the agreements holds particular importance for President Obama, who has set a goal of doubling U.S. exports by 2015 and is facing a tough bid for reelection with unemployment stuck at 9.1 percent.

“I look forward to signing these agreements,” Obama said late Wednesday. He hailed passage as “a major win for American workers and businesses.”

“Tonight’s vote, with bipartisan support, will significantly boost exports that bear the proud label ‘Made in America,’ support tens of thousands of good-paying American jobs and protect labor rights, the environment and intellectual property,” Obama said.

A variety of U.S. industries are expected to benefit from the agreements. Producers of beef, dairy, pork and poultry products, chemicals, and plastics are all likely to increase exports to Korea. The banking and financial services industries could also be big winners, analysts said, benefiting from relaxed regulations and rules relating to foreign investment.

“These free-trade agreements will give our economy a much-needed shot in the arm and create tens of thousands of American jobs,” said Sen. Max Baucus (D-Mont.). “The passage of these agreements today is a significant victory for American workers and businesses, and will help create jobs here at home.”

Several Democrats and prominent labor unions, however, oppose the deals, arguing that they could help U.S. companies without bringing much benefit to U.S. workers, particularly if increased imports lead to widespread layoffs. Some also argue that the agreements serve to reward two countries, Panama and Colombia, that have been hostile to organized labor and international environmental standards.

“The truth is, I think this is going to cost us jobs,” said Clyde Prestowitz, a Reagan administration Commerce Department official who founded the nonpartisan Economic Strategy Institute. Prestowitz noted that South Korea is a major exporter of textiles, steel, machined parts and semiconductors, among other goods.

Overall, the agreement is expected to increase imports into the United States by as much as $7 billion, with the textile industry potentially being hardest hit.

“You can see how various American companies can benefit,” Prestowitz said. “It’s hard to see how the United States benefits.”

To soften the blow of increased imports, Congress also renewed the Trade Adjustment Assistance Program, which provides job retraining and temporary income support to workers who lose their jobs as a result of free-trade pacts — the final piece of a bipartisan agreement that cleared the way for ratification of the agreements after a nearly four-year wait.

The trade agreements are a central part of Obama’s strategy for increasing exports to drive economic growth. With U.S. consumer demand lacking, Obama is looking to sales abroad to fuel job creation at home.

The pacts were first negotiated under President George W. Bush but were updated by Obama to include more guarantees for labor and human rights and environmental protections. The pacts were recently held up in a dispute between Obama and congressional Republicans over renewing the worker assistance program.

During Obama’s bid for the Democratic presidential nomination, he tended to underscore the risks that free trade posed for U.S. workers and the environment rather than potential benefits.

But for much of the past year, passing the trade pacts has been a tenet of Obama’s plan to bolster the economic recovery, along with other measures including an overhaul of patent laws, which Congress passed last month.

Lately, though, the trade pacts have been relegated to a supporting role, because the number of jobs would, at most, be a mild economic stimulant. Obama is urging Congress to pass elements of his jobs plan, which is worth as much as $447 billion in fresh spending and tax cuts. The Senate voted Tuesday not to proceed with this plan in its current form.

On Wednesday, the congressional Joint Economic Committee warned that free trade often has high costs for workers, particularly those in the manufacturing industry, who tend to be older and without a college education.

The report said: “Given the already high national unemployment rate and depressed home values still evident in most states, policies that seek to liberalize trade may impose even larger costs on these workers, bolstering the need for additional investments in training or other forms of trade-adjustment assistance.”

In pursuing the trade pacts, Obama has aligned himself with the U.S. Chamber of Commerce over key labor groups, including the AFL-CIO and the Teamsters.

Richard Trumka, president of the AFL-CIO, called the deals “lousy” in a speech in Washington this month.

Trumka asked: “Should we say yes to the Korea [pact], which will destroy 159,000 U.S. jobs? Should we approve an agreement with Colombia, where 51 trade unionists were assassinated last year? Should we trade away even more jobs to Panama, a country that routinely tramples workers’ rights and shelters money launderers and corporate tax dodgers?”

But Obama successfully enlisted support from other important members of the labor movement, including the United Auto Workers and the United Food and Commercial Workers. The unions tend to represent workers in industries that could gain from the pact.

The administration said this week that the South Korea pact would slash tariffs on 95 percent of U.S. exports of industrial and consumer goods and make it far easier for automakers and agricultural companies to sell their products into the $1 trillion economy. The administration also said it had worked out “high standards” for protecting labor rights and environmental concerns in its deals with Colombia and Panama.

Overall, the trade pacts with South Korea, Panama and Colombia could increase U.S. exports of goods by $12 billion or more a year. American companies will also have an easier time selling services in those countries, making the deals yet more advantageous. But the amount of goods imported is also likely to increase significantly, dampening the overall effect on the economy.

South Korean President Lee Myung-bak is to deliver a joint address to Congress Thursday and then travel with Obama on Friday to a General Motors plant near Detroit that is described as a likely beneficiary of the agreement.

Obama has a mixed history on trade. As a candidate in 2008, he questioned whether free-trade pacts give an edge to countries with low labor and environmental standards and criticized the North American Free Trade Agreement. Later in the campaign, however, he strongly endorsed trade agreements that addressed labor and environmental concerns.

The United States has similar agreements with 17 other nations, striking its last deal in 2007 with Peru. Other countries with such agreements include Canada, Israel and Australia.

Staff writer Felicia Sonmez contributed to this report.

Zachary A. Goldfarb is policy editor at The Washington Post.
Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
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