Washington — The U.S. Congress overwhelmingly approved a long-delayed free-trade agreement with South Korea that is expected to create tens of thousands of jobs and expand economic growth for the two trading partners.
Congress approved trade accords with Colombia, Panama and South Korea October 12. The House of Representatives passed the U.S.-South Korea Free Trade Agreement by a vote of 278–151, and the Senate passed the measure 83–15.
Secretary of State Hillary Rodham Clinton said in a statement October 12 that “the stakes are not just economic. South Korea, Colombia and Panama are three important partners in strategically vital regions.”
“With the passage of these agreements, America has delivered for our friends and allies,” Clinton said. She thanked Presidents Lee Myung-bak of South Korea, Juan Manuel Santos of Colombia and Ricardo Martinelli of Panama “for their patience and willingness to partner with the Obama administration as these agreements moved through Congress.”
“But our work is not yet done. We will not be content until these agreements are fully implemented,” Clinton added.
The trade agreement with South Korea, a major security and economic partner, expands commerce at a time when the United States is experiencing high levels of protracted unemployment in the aftermath of the 2007–2009 recession, which was the steepest decline in economic activity since the Great Depression of the 1930s.
Economic experts say free-trade agreements are designed to reduce the cost of U.S. goods and services exported to foreign markets, and also reduce the cost of foreign goods and services imported into the United States, which makes for greater trading parity. The cost savings is achieved by eliminating, usually in several phases, trade tariffs, which are a form of tax on imported goods and services. By reducing prices, the trade agreements effectively create more demand for the goods and services of the trading partners. Trade agreements also have the added benefit of bonding nations strategically, improving security.
Passage of the U.S.-Korea Free Trade Agreement comes as President Obama hosts Korean President Lee October 13 for a state visit and a speech by Lee to a joint session of Congress. Obama and Lee are expected to talk about North Korea and regional security, commerce and trade, maritime anti-piracy efforts off the coast of Somalia, operational support in Afghanistan, stabilizing the global economy, and the agendas for the G20 summit November 3–4 in France and the Asia-Pacific Economic Cooperation forum set for Honolulu November 12–13.
The U.S.-Korea Free Trade Agreement was signed June 30, 2007, during the administration of President George W. Bush. Action was delayed on the trade measure as Congress raised concerns about the impact of the trade accords on American workers and the potential loss of jobs overseas. It is the largest pact of its kind for the United States since the 1994 North American Free Trade Agreement (NAFTA).
The agreement helps the United States balance its economy with greater exports and also helps South Korea foster economic growth, Obama said. South Korea will gain greater access to U.S. markets, and American products will be more affordable for Korean households and businesses.
It is expected to boost the South Korean gross domestic product by 0.6 percent over 10 years and help create hundreds of thousands of new jobs in the service sector, manufacturing and agriculture, Korean economic experts said in published news reports.
Obama has said that this agreement “is also a win for the strong alliance between the United States and South Korea, which for decades has ensured that the security that has maintained stability on the peninsula continues. And it’s also allowed South Korea its extraordinary rise from poverty to prosperity.”
Obama thanked Lee for his commitment to a successful outcome of the negotiations.
“The accord is significant because it lays the groundwork for a ‘win-win’ relationship by reflecting the national interests of Korea and the United States in a balanced manner,” Lee told Korean news agencies in December, after U.S. and Korean negotiators worked out final details on the accord.
One obstacle that blocked earlier action on the trade measure was a 2.5 percent tariff the United States levies on Korean-built autos, which the United States has agreed to phase out over five years. South Korea agreed to reduce its tariff on American autos to 4 percent from 8 percent immediately, and phase out the remainder over five years.
South Korea is the United States’ seventh-largest trading partner and eighth-largest export market. From January to August this year, the United States exported $29.085 billion in goods to South Korea and imported $37.587 billion of Korean products, according to the U.S. Commerce Department.
According to news reports, Korean economists estimate that South Korea should experience a surge in new jobs from the trade agreement over a 10-year period, with approximately 270,000 new jobs in the services sector, 79,000 new jobs in manufacturing and 10,000 in agriculture.
This agreement is the second largest for the United States after the 1994 NAFTA agreement with Canada and Mexico, the United States’ largest trading partners.
White House advisers have said that expanding economic integration and trade liberalization in the Asia-Pacific region is a vital element for the United States to grow the domestic economy. Expanding U.S. exports is a significant part of Obama’s National Export Initiative, which aims to double American exports by 2015 while lessening U.S. consumer demand as a driving force of the U.S. economy. A more balanced economy ultimately lessons the depth of future recessions.