US FTAs with Korea, Colombia, Panama Face Long-Awaited Congressional Vote

12 October 2011

After four years of political limbo, the US free trade agreements with South Korea, Colombia, and Panama are scheduled for votes in both chambers of the US Congress later today. The free trade agreements are largely expected to clear both the Senate and the House; a vote in the House on a controversial worker aid programme blamed for slowing down the pacts' passage this summer is also expected shortly.

Negotiated and signed under the administration of previous US President George W. Bush, the FTAs have since struggled through the legislative process. Proponents of these three FTAs have lauded their potential for job creation and export increases; however, critics have been quick to warn of possible outsourcing of jobs and concerns regarding labour rights and tax law.

The last several weeks have seen a series of votes in both chambers designed to ensure the passage of these FTAs and the 2009 extensions to Trade Adjustment Assistance; President Barack Obama had made the latter a precondition to his sending the FTAs to Congress (see Bridges Weekly 28 September 2011).

The 2009 TAA extensions had expanded the programme's benefits to services workers; the worker aid programme as a whole is designed to assist those workers displaced by foreign competition.

The passage of the FTAs also coincides with a visit from President Lee Myung-bak of South Korea, which begins on 13 October. Lee has been invited by Speaker of the House John Boehner, a Republican, to address a joint meeting of Congress on that day.

Korean ratification of US-Korea FTA could still face hurdles

With the FTAs set to become law on the US side, attention is now turning to South Korea - the largest of the three trade pacts - which also needs to ratify the US-Korea agreement for it to come into force. The legislation has not been sent to the Korean legislature for debate, which could send it back to the negotiating table.

In an interview with the Washington Post, South Korean trade minister Kim Jong-hoon said that Korea would likely attach a worker aid programme, similar to the US TAA, to the Korean version of the trade legislation in order to contend with FTA opposition from the Democratic Party.

In a blog post for US Congressional newspaper The Hill, Chun Jung-bae, a member of the National Assembly in Korea, labelled the deal as "lose-lose" and likely to "have a negative impact on the middle class in the US and Korea."

Chun's concerns were echoed in a 7 October letter that members of the Korean National Assembly sent to the US House of Representatives, in which they expressed their displeasure with the FTA. The letter's signatories claim that the agreement is "biased in favour of narrow interests of multinational corporations."

Advocacy groups speak out against Colombia, Panama pacts

Labour rights in Colombia also have critics speaking out against the implementation of the US-Colombia FTA. In a statement released in April, the US Labour Education in the Americas Project (USLEAP) - a Chicago-based advocacy groups focused on Latin American labour rights - complained that the FTA does not go far enough to "[require] a reduction of violence as a precondition" for approval.

Criticisms included arguments that there was no mechanism to require implementation of labour laws and no requirements to reduce violence against trade unions, among other problems.

Meanwhile, the Office of the US Trade Representative recently outlined labour rights advances that have been seen in Colombia, some of which stem from the Action Plan Related to Labor Rights agreed upon by the two countries, in response to these concerns.

Panama's reputation as a safe haven for tax evasion has also drawn opposition in the case of the US-Panama deal. Despite a tax agreement, ratified in April, advocacy groups, such as the Citizens Trade Campaign, have argued that there are still many loopholes which allow US companies to set up subsidiaries and avoid US taxes.

FTA partners' agreements with other countries adding to the pressure

The potential economic benefits of these FTAs have also been a source of contention. In a recent letter to Congress, the US Chamber of Commerce - a business federation representing companies, business associations, and state and local chambers in the US - praised the agreements and their ability to shrink America's disadvantage gap in world trade.

The EU-South Korea FTA, which entered into force on 1 July, has increased the pressure for passing the US FTA with Korea. Wednesday's meeting of the newly-formed EU-South Korea Trade Committee highlighted the success of the "groundbreaking free trade deal" and presaged future progress with further implementation.

Ninety percent of EU goods now enter South Korea duty free, the US Chamber of Commerce noted - creating difficulty for US exports; due to Colombia's ties to South American customs union Mercosur, the US has already lost US$1 billion in export sales in that case as well. A Chamber of Commerce study suggested that further delays could cost 380,000 jobs and US$40 billion in export sales, whereas its passage could create 250,000 jobs in the first few years.

A report on benefits of the EU-South Korea FTA highlighted some of the lowered barriers as the "most ambitious tariff elimination achieved in any of the EU's bilateral trade agreements" - notably the €380 million that EU agricultural exporters will save annually.

Tami Overby, President of the US-Korea Business Council and Vice President on Asia at the US Chamber of Commerce, told Bridges that "[American] companies are at a significant disadvantage" compared to EU companies until the US-Korea FTA is ratified and enters into force. "Anything that we can do to create jobs," needs to be first priority, she noted, adding that "export-related jobs tend to be higher paying jobs."

Conflicting estimates

Estimates from the US International Trade Commission have illustrated the potential economic impacts of these FTAs, particularly the projected increases in goods exports of approximately US$12 billion. The ITC estimates also suggest that every US$1 billion increase in goods exports and services exports can support more than 6000 and 4500 jobs, respectively.

However, the validity of these estimates has also been questioned. Robert Scott, an economist at the Economic Policy Institute, told Bridges that the US is "likely to see growing trade deficits that displace an additional 214,000 jobs" due to these FTAs.

Scott also pointed out that "the consequences will be equally bad, if not worse, for workers in, especially, Colombia," but Korea and Panama as well. By opening up foreign investment flows, "these agreements are designed to benefit multinational companies... [which] hurts workers in all participating countries; globalisation and the growing power of multinational firms is driving wages to the floor around the world."

ICTSD reporting; "Trade a litmus test for US leadership," REUTERS, 9 October 2011; "Canada travellers to face US surcharge from US-Colombia trade pact," WALL STREET JOURNAL, 5 October 2011; "S. Korea aims to ratify US trade deal soon," WASHINGTON POST, 9 October 2011.

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