Future of of U.S. S.-Kor orea a Trade R Relation ons Phil - - PowerPoint PPT Presentation
Future of of U.S. S.-Kor orea a Trade R Relation ons Phil Eskeland, Executive Director Remarks before the Korean Chamber of Commerce & Industry in the USA Fort Lee, New Jersey, September 28, 2017 About KEI KEI KEI is a Washington,
Phil Eskeland, Executive Director Remarks before the Korean Chamber of Commerce & Industry in the USA Fort Lee, New Jersey, September 28, 2017
to promote dialogue and understanding on all aspects – political, security, and economic – of the U.S.- Republic of Korea (ROK) relationship.
American, and policymaking community all throughout the United States.
Asia & the Pacific Subcommittee for six years, and Vice President Mark Tokola, who served as a Foreign Service Officer at the U.S. Department of State for 38 years, including three years as the #2 U.S. diplomat (Deputy Chief of Mission) at the U.S. Embassy in Seoul.
personal and committee office, primarily as a trade and foreign policy expert to Members of Congress.
icon Ronald Reagan was President, wealthy New York real estate developer Donald Trump paid nearly $100,000 to publish an open letter to the American people in three major newspapers to criticize the U.S. government for allowing Japan and other nations to take advantage of the United States through large trade surpluses while not paying for the protection the U.S. extends to them.
together, which he believes has led to America’s massive national debt.
nothing new for him – this is his long-held immovable belief. “He who knows only his own side of the case knows little of that.” John Stuart Mill
Scenes from Donald Trump’s final 2016 campaign ad “A picture is worth a thousand words”
Locked factory gates Empty factory floor; idle machinery
“stripped our country of its wealth.” (from Donald Trump’s final 2 minute “closing argument” campaign ad, viewed over 8 million times)
rich while the wealth, strength, and confidence of our country has disappeared over the horizon. One by one, the factories shuttered and left our shores, with not even a thought about the millions upon millions of American workers left
We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.” (Inaugural address of President Donald Trump, January 20,
2017)
billion.
grew by 23 percent during that same time period ($56.7 billion in 2011 to $69.9 billion in 2016).
passed Congress.
95,000 estimated job-losses in U.S. as a result of growing trade deficit with Korea that EPI believes was caused by KORUS. EPI misapplies an exports to jobs ratio developed by the U.S. government (every $1 billion in U.S. exports supports approximately 6,000 U.S. jobs) to the trade deficit.
a) “[Hillary Clinton] supported the job-killing trade deal with South Korea… Our exports haven’t increased at all, but their imports to us have surged more than $15 billion–more than doubling our trade deficit with that country.” Remarks before the Detroit Economic Club, August 8, 2016 b) “Hillary’s Korea deal…cost us tremendous numbers of jobs. And South Korea, like almost every other country, is laughing at how stupid we are.” Remarks at Trump for President campaign rally in Henderson, Nevada, October 15, 2016 c) “[KORUS] is a horrible deal. It was a Hillary Clinton disaster, a deal that should’ve never been made. It’s a one way street… We may terminate… We’re getting destroyed in Korea.” Washington Post interview, April 28, 2017 d) “The fact is that the United States has trade deficits with many, many countries, and we cannot allow that to continue. And we’ll start with South Korea right now. But we cannot allow that to continue.” Remarks during 1st summit meeting with South Korean President Moon Jae-in, June 30, 2017 (Washington, D.C.) e) “[B]ecause of the fact that our trade deal is so bad for the United States and so good for South Korea, I said we’ll focus on the military. But actually, we’re going to try and straighten out the trade deal and make it fair for everybody.” Remarks at the bilateral meeting with President Moon during the U.N. General Assembly convocation, September 21, 2017 (New York, NY)
The hey ar are n not o
utliers – they ar are hi highly e edu ducated an and w d well-versed o
n trad ade
Committee; Deputy USTR during the Reagan Administration; Partner at the Skadden law firm, where he practiced international trade law for over 30 years defending U.S. industries from “unfair” trade practices.
the international trade group at King & Spalding in 2016 representing U.S. producers.
J.D. from Duke University; Partner and Head of the International Trade Group at the Skadden law firm, representing U.S. clients in “fair” trade cases.
WL Ross & Co. LLC with over 55 years of investment banking and private equity experience in restructuring distressed companies, including those in the steel and textile industries.
the full Senate), Undersecretary of Commerce for International Trade – J.D. from Harvard University; Deputy Assistant Secretary of Commerce during the George W. Bush Administration; Partner at King & Spalding where he represents clients in “fair” trade cases.
Professor of Economics and Public Policy at the University of California/Irvine; author of Death by China (2011) and the Crouching Tiger (2015).
CEO, Goldman Sachs.
Director of Economic Policy Studies at the American Enterprise Institute (AEI).
by JOHN CARNEY 11 Sep 2017 [Editorial note: John Carney was a former writer/editor at the Wall Street Journal, CNBC, and the Business Insider. He has a law degree from University of Pennsylvania Law School.]
The trade pact between South Korea and the United States has proven to be one of the most one-way global trade deals even signed.
Just five years old, the South Korea-U.S. trade deal known as KORUS has led to a huge rise in imports from South Korea with no reciprocal rise in exports from the U.S. Prior to the deal, the U.S. exported around $43.6 billion in goods to South Korea, while South Korea sent around $56.6 billion, producing a trade deficit of around $13 billion. Last year, the U.S. exported $42.3 billion to South Korea and imported $69.9 billion from South Korea. The trade deficit was around $27.6 billion. The rapid rise of the trade deficit with South Korea has caught even some trade hawks by surprise. “When we started looking into this, we couldn’t believe it. It’s like NAFTA on crack,” one U.S. trade official said. He spoke on the condition of anonymity because he wasn’t authorized to compare the trade deal to crack cocaine. The case for pulling out of KORUS was outlined in a recent op-ed by Michael Stumo, the CEO of the Coalition for a Prosperous America. First, Korea is a recidivist currency manipulator. Its currency, the won, remained 14.4 percent undervalued in May, making Korean goods and services cheaper than they would be with a fairly priced won. Mexico’s currency, in contrast, is not undervalued. Second, America’s trade performance under the KORUS agreement is the worst among all U.S. trade deals. Our pre-existing trade deficit with South Korea doubled in the first four years after the agreement was implemented. While tariffs were indeed cut, the result has been a 23 percent surge in Korean imports to the U.S. — while exports from the U.S. to Korea flat lined, clearly a failure. Third, South Korea is eighth on the list of countries with which the U.S. runs a trade deficit. Mexico is third. However, the trade-balance ratio* with South Korea is much worse. In 2016, Korea sold 65 percent more goods to the U.S. than it bought from us. Mexico sold us just 28 percent more goods than it bought. Fourth, South Korea operates its economy with an export-led, nationalist strategy to win. It grew from a poor country in the 1960s to developed-economy status, not with free trade, but with a hard-nosed industrial strategy. Mexico, like the U.S., operates in a laissez-faire manner, without a strategy. U.S. trade performance is poor with countries that have nationalist industrial strategies and undervalued currencies, and trade agreements clear the way for these strategic economies to sell more to U.S. consumers. President Donald Trump has certainly noticed the imbalance. In recent weeks, Trump has sent out several tweets criticizing the South Korea trade deal and warning that the U.S. might pull
South Korea Trade Deal: ‘It’s Like NAFTA on Crack’
What T t Trump R Reads – and W What t Hi His Core S Supporters Say a about K KOR ORUS
[Editorial note: the Breitbart news/opinion website had over 83 million visits last August. Average visit duration: 3.34 minutes. Pages per visit: 2.32]
*[Editorial note: the author neglects to mention the so-called “trade-balance ratio” in goods with the other top deficit countries: (1) China – 300%; (2) Germany – 131%; (4) Japan – 109%; (5) Italy – 171%; (6) India – 112%]
The Real Story: Trade Deficits are not the problem Shou
ld not
be sole
meas asure to
the s success or
failu ailure of
a trad ade ag agreement
Trade deficits have long been studied and analyzed multiple
leanings is that the trade deficit is not a problem for the United States; in fact, it may be slightly beneficial. The independent and non-partisan U.S. Congressional Budget Office (CBO) released this analysis 17 years ago during a similar era of heightened concern over the growing U.S. trade deficit. Conclusion of the March, 2000 CBO study “The cause [of the U.S. trade deficit] lies not in international trade but in factors affecting international capital flows… On balance, the continuing deficits have small, beneficial consequences for the United States. ...[I]f one nevertheless wanted to reduce the deficit, trade policy would not be a good way to accomplish that goal… [T]he standard tools of trade policy will not have much effect on the deficit…. In general, the government policies that are most likely to have a large impact on the deficit are not trade policies but budget policy and any other policies that substantially influence saving and investment in the economy.”
Lost U U.S. m manufacturing jobs s not d due to trade
Summary “….Three factors have contributed to changes in manufacturing employment in recent years: Productivity, trade, and domestic demand. Overwhelmingly, the largest impact is productivity. Almost 88 percent of job losses in manufacturing in recent years can be attributable to productivity growth,* and the long-term changes to manufacturing employment are mostly linked to the productivity of American factories…. Exports lead to higher levels of domestic production and employment, while imports reduce domestic production and employment. The difference between these, or net exports, has been negative since 1980, and has contributed to roughly 13.4 percent of job losses in the U.S. in the last decade. Our estimate is almost exactly that reported by the more respected research centers in the nation. Manufacturing production remains robust. Productivity growth is the largest contributor to job displacement over the past several decades.”
* [Editorial comment: labor productivity in the U.S. steel industry has increased five-fold since the early 1980’s, according to the American Iron and Steel Institute. What used to take 10.1 man-hours to make a finished ton of steel in the early 1980’s now (2014) takes 1.9 man-hours.]
What are the additional, clarifying facts about KORUS?
The Korea-U.S. Free Trade Agreement meets all the criteria identified by the Trump campaign and administration as necessary elements of a successful trade agreement for America. The KORUS FTA: 1) Is a bilateral trade agreement; 2) Has increased U.S. exports (U.S. exports to Korea of KORUS FTA beneficiary items increased 18% between 2011 and 2015) 3) Has increased U.S. jobs (including 18,600 additional U.S. jobs resulting from new Korean FDI since 2011); 4) Has increased U.S. wages (export earnings premium averages 16%, in addition to a $9,300 compensation boost for U.S. workers employed as a result of new Korean FDI in the U.S. since 2011); and 5) Has improved the trade deficit
Opponents of
KORUS r rely on ly on old
incomple lete data a to
ake t their ir c cas ase
ent Y t Year-to to-Date (Y (YTD) D) dec ecrease Korea ea’s total tr trade defi ficit with th th the e U.S. is ranked 7th, e even en b bel elow I Italy’s
If present trends continue, U.S. goods and services trade deficit with South Korea could fall below $9 billion for 2017
0.5 1 1.5 2 2.5 3 3.5 4 4.5 5 7-16 8-16 9-16 10-16 11-16 12-16 1-17 2-17 3-17 4-17 5-17 6-17 7-17 BILLIONS OF DOLLARS
U.S. merchandise exports to South Korea
Source: Foreign Trade Division, U.S. Census Bureau Next release of monthly U.S. trade data: October 5, 2017 (to reflect statistics from the month of August 2017)
Latest update from the U.S. Department of Commerce on the amount and composition of FDI (majority
to and from South Korea
Information about the amount and composition of top exports to Korea; historical trends; number of district jobs tied to exports to Korea; cumulative amount of investment from Korea over the preceding decade (plus the number of jobs created); and number of residents of Korean descent in the district.
TX-17th Merchandise Exports to Korea: $236.8 million TX-17th Service Exports to Korea: $46.3 million TX-17th Jobs Related to Trade with Korea: 1,844 New FDI from South Korea since 2006: $4.089 billion → 1,020 jobs Number of Korean-Americans in TX-17th: 3,028
These gains are potentially at risk if growing negative public opinion in South Korea against President Trump’s policies discourages visitation to the U.S. (as experienced recently with other countries, especially Mexico)
an increase of 12 percent from 2015 levels.
number of international visitors to the United States.
has more than doubled.
U.S. in 2016, acco counting fo for 41 41 perce cent of the U.S. ex exports of ser ervic ices es to to Ko Korea and thus offsetting the overall U.S. trade deficit with South Korea.
the United States in 2016.
19.4% thus far this year (January – April, 2017) over same four-month period in 2016, moving Korea up again in rank to 6th place.
shows declining support for President Trump from January to June – and this poll was conducted before Trump’s threat to withdraw from KORUS.
source: National Travel & Tourism Office, U.S. Department of Commerce
743,846 1,107,518 1,145,216 1,251,432 1,359,924 1,459,938 1,764,871 1,973,936 500,000 1,000,000 1,500,000 2,000,000 2,500,000 2009 2010 2011 2012 2013 2014 2015 2016
Number of Visitors from South Korea to the United States
students from South Korea learning at an institution of higher education in the United States.
international students in the United States (down from #3).
university added $2.3 billion to the economy of the United States in 2016. In other words, each Korean college student contributed, on average, $37,700 to the local economy.
enrolled at a U.S. secondary school (high school).
educational institutions has declined by 16% since 2013.
70,627 68,047 63,710 61,007 7,931 6,928 5,867 5,071 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 2012/2013 2013/2014 2014/2015 2015/2016 ACADEMIC SCHOOL YEAR
Number of International Students from South Korea in the United States
Higher Education Secondary school
source: Institute of International Education
Message t to Trump Ad Admini nistration f from bipart rtisan C n Congressional l leade dershi hip p on trade reg egardin ing t the e KORU RUS t talks: Do
Any c y changes w will h have t to pass C Congress
SEPTEMBER 05, 2017
Bipartisan Senate and House Trade Leaders Release Statement Regarding the U.S.-Korea Trade Agreement
WASHINGTON – Senate Finance Committee Chairman Orrin Hatch (R-Utah) and Ranking Member Ron Wyden (D-Ore.) and House Ways and Means Committee Chairman Kevin Brady (R-Texas) and Ranking Member Richard Neal (D-Mass) today released the following statement about the U.S.-Korea trade agreement: “North Korea’s latest nuclear test underscores yet again the vital importance of the strong alliance between the United States and South Korea. The U.S.-South Korea agreement (KORUS), negotiated under two presidents and approved by Congress, is a central element of that alliance. Just as important, South Korea is a significant economic partner, our seventh largest export market, and a vital customer for U.S. manufacturers, services providers, farmers, and ranchers. “Our trade relationship can be enhanced and, because KORUS’s operation has presented frustrations for some important U.S. industries and stakeholders, we must press South Korea to improve its implementation and compliance. To be effective and constructive, however, we must not withdraw from the agreement while we do so. We welcome bilateral discussions to strengthen the economic ties between South Korea and the United States, and we reiterate the importance of transparency and close consultation by the administration with Congress and American businesses and workers.” ###
Message to e to Trump A Administr trati tion f from b bipartisan Congr gres essional trade l e leader ership o
wi withdrawing f from KOR ORUS: D Don’t t do it, es especially in ligh ght o
th Korea’s p provocati tions
Nonethel eles ess, s, f facts/stats alone e will l not
e the c course se of the d discussi sion Must include a political dimension
both sides carry out a joint study to examine the effects of the FTA and the cause of the U.S. deficit in goods.
agreement” after reciting the statistics that U.S. goods exports to Korea declined and the overall U.S. trade deficit nearly tripled since KORUS went into effect.
a strong possibility that President Trump would soon sign the notification to begin the six-month process to withdraw from KORUS. “It is very much on my mind,” said Trump in response to reporters questions about the fate of the agreement during a trip to view hurricane damage in Houston, Texas (September 2, 2017).
table – at least for now. The second special session of the KORUS Joint Committee meeting will take place on October 4th in D.C.
significant victory on any issue (immigration, health care, tax reform, trade, etc.), he may later decide to terminate KORUS in order to chalk up a “win” to satisfy his base if he is told that can’t get his way on NAFTA.
somewhere else in the world on their local store shelves. They incorrectly conclude that nothing is made in America any more.
survey, 72 percent (a record high) saw foreign trade as an opportunity for economic growth, an increase from 58 percent from last year.
an opportunity while only 66 percent of self-identified Republicans had the same outlook, a reversal of partisan positions from a few years ago.
the U.S. while 40 percent viewed trade agreements as a “bad thing.”
positive view of FTAs.
FTAs have been good for the United States. Again, this is a reversal from a few years ago when the Republicans viewed trade more positively than Democrats.
initiatives such as the KORUS FTA while Democrats who consistently support free trade agreements are in a distinct minority.
through trade, located along the coastal regions of the U.S., which lean toward the Democratic Party, while communities in the heartland of America, where most Republicans reside, have suffered the most when a major employer closes production.
globalization during the past several years and pushed the Trans Pacific Partnership (TPP) as a new paradigm of trade.
and has spoken negatively about trade and globalization, specifically about the TPP, KORUS, NAFTA), and China. He has deviated significantly from traditional post-WWII Republican thinking on trade by expressing deep opposition to how U.S. trade policy has been conducted for the past 30+ years.
and despondent residents who feel trapped in their local community, unable to adapt to a fast-changing world economy.
FTAs get the blame for economically distressed regions for years to come even if trade is not the reason.
Democrats in Congress for trade agreements because most Democrats rely heavily on trade-skeptical labor unions for their political base of support.
company should make every effort to ensure that the local community, particularly the local media, is repeatedly made well-aware of this good news event.
your workers (voters) so they can personalize the encounter by putting a face with a name. Discuss with your legislator how KORUS and the U.S.-Korea trade relationship has specifically benefited your company, workforce, and the local community.
significant charitable contribution to the local community, you can make people aware of this good news.
benefits of trade with Korea with U.S. policymakers and expert thought leaders.
Organization For International Investment (OFII), which promotes U.S. policies to encourage FDI. This has the additional side benefit of deepening your ties to American society.
Example f e from U U.S. a agricultural s sector: Personalize s e statisti tics Free t ee trade s e supporters n need to to t take a e a page f ge from t the playbook o
anti-trade a e advocates es The he W Was ashi hington P Pos
Republicans and Democrats urge Trump not to break ‘vital’ deal with South Korea
By Danielle Paquette September 5, 2017 …Major industries that would feel an immediate sting if Trump chose to back out of the deal include beef and dairy, two of the Midwest's largest employers, which have seen exports surge to South Korea since KORUS knocked down trade barriers. There are roughly 913,000 cattle operations in the United States. Dairy employs about 977,000 workers. U.S. beef has particularly benefited from business with Koreans over the last five years. Under KORUS, which lowered tariffs on U.S. meat, beef producers have recorded an 82 percent increase in annual sales to South Korea, jumping to $1.06 billion last year from $582 million in 2012. South Korea is the second largest export market for U.S. beef, behind Japan, according to the National Cattlemen’s Beef Association. (It's also in the throes of what the U.S. Meat Export Federation calls “a craft burger craze.”) Cutting off access to Korean buyers would lower the demand for beef and zap profits across the industry, said Kent Bacus, director of international trade and market access at NCBA. “The last five years, we have been reaping the benefits,” Bacus said. “For the president to threaten to walk away from this — it’s very dangerous for our business. It’s dangerous for farmers and ranchers who rely on the value they get through exports to be able to pay their bills.”
One such rancher is Dawn Caldwell, co-owner of Caldwell Cattle in Edgar, Neb. She and her husband, Matt, tend to about 150 cows on roughly 900 acres of land — a small operation by beef industry standards. She fears withdrawing from KORUS could put her out of business. “We’d be less able to absorb the impact,” she said. “And it could get to the point where I have to sell my great-grandmother’s land to one of the bigger operations. That would completely break my heart.”
…(The biggest producers of beef and dairy include Wisconsin, Nebraska, Iowa, Indiana and Illinois.)…
[Editorial note: Donald Trump won the popular vote in all these states except Illinois. Wisconsin and Iowa are traditional or targeted “swing” or “purple” states that could be won by either political party; Indiana, typically a Republican or “red” state, was won by Barack Obama in 2008. Nebraska splits its Electoral College vote for U.S. President by poplar vote in each separate Congressional district, which allowed Barack Obama to gain 1 out of the 5 eligible votes in 2008.]
North Dakota Tennessee Louisiana
* C Contributing n nearly $ $5 billion i in salary & bene nefits t s to a appr pproximatel ely 55,000 U 00 U.S. w worker ers s in 2 2015 * Ne Nearl rly 6 60 perce cent b better co r compensation p pack ckage than w what ca can b be found elsewhere * Since p pre-KORUS y year (2011) 1), t the n e number er o
worker ers g s grew ew 5 51% and t d thei eir compen ensa sation lev evel el i increased sed 11%
50,054 57,230 77,558 79,328 81,851 91,113 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 2011 2015 U.S. DOLLARS
Compensation Comparison
Average U.S. median household income Average compensation at U.S. firms with FDI Average compensation at U.S. firms with FDI from Korea
Highlights on Major Korea companies’ future FDI in the U.S.
Source: U.S. Korea Connect, KOCHAM
SC
What can be done to reverse the closed factory image? Highlight planned FDI – but will new investments be put at risk if KORUS is terminated?
BLOOMBERG South Korea Is Very, Very Interested in U.S. Natural Gas By Ryan Collins June 29, 2017 The country signed four pacts related to U.S gas in 24 hours
If there’s one thing that became clear during the White House’s “Energy Week,” it’s that South Korea is really, really into U.S. natural gas. In less than 24 hours, South Korea’s energy companies had announced four partnerships with U.S. companies to explore opportunities in the U.S. natural gas
It makes sense. South Korea is already one of the world’s biggest importers of LNG and has bought eight cargoes of U.S. gas from Cheniere Energy Inc.’s Sabine Pass terminal in Louisiana. While Sabine Pass is the only one sending shale gas abroad, dozens of terminals have been proposed along U.S. coasts to do the same. The exports have put the U.S. on a path to becoming a net gas exporter for the first time in decades. President Donald Trump told reporters Friday after a White House meeting with South Korean President Moon Jae-in that he was “gratified” to learn of new investments the country’s companies are making in the U.S. He noted a cargo of LNG that Cheniere just sent to South Korea, part of a deal that Trump estimated as being worth $25 billion.
Do n
look t k the im importance of
ilateral l national s security i inte teres ests ts
POLITICO
Kelly's West Wing crackdown tests trade adviser Navarro's pull with Trump
The chief of staff has limited the former academic's access to the Oval Office, but the president has often leaned on Navarro, even asking 'Where's my Peter?' when he's absent from meetings.
By TARA PALMERI and ANDREW RESTUCCIA
09/18/2017
“Navarro suffered his latest policy loss last week when [White House Chief of Staff John] Kelly and national security adviser H.R. McMaster prevailed on Trump to leave the South Korea trade deal intact.”
saved the KORUS FTA for now.
security leaders will be able to continue to convince President Trump to go against his gut instincts on trade.
the Trump Administration (i.e., Gary Cohn) will remain in their position.
part of an overarching national security strategy to solidify the U.S.-ROK Alliance and to draw our two nations even closer together.
1. Devotes 2.7% of its GDP to its own defense; 2. 80% of its imports of military equipment comes from America; 3. Has a compulsory military draft for adult young men; 4. Pays approximately 50% of cost of basing U.S. forces on the Korean Peninsula; and 5. Has contributed troops to support the U.S. in every previous conflict from the Korean War, including Vietnam, the liberation of Kuwait, Afghanistan, and Iraq (third largest contributing nation after the U.S. and the UK).
America’s strongest allies.
Phil Eskeland Executive Director Korea Economic Institute of America 1800 K Street, N.W., Suite 300 Washington, DC 20006 (202) 464-1982 Phil.Eskeland@keia.org Website: www.keia.org to sign up for our e-mails, view our events on-line, listen to our podcast (Korean Kontext), and access our publications, research, and The Peninsula Blog Follow us on Twitter (@KoreaEconInst); friend us on Facebook (www.facebook.com/KoreaEconInstitute)