Holding Trade Deals Hostage

Holding Trade Deals Hostage
By Andrew Cline on 7.28.11 @ 6:09AM

Should American families pop open a bottle of wine to celebrate a debt-ceiling deal, presuming we get one, the wine of choice probably would be Californian. More than 60 percent of the wine consumed in the United States is from a California vineyard, according to the Wine Institute, a trade group. Should South Korean families pop open a bottle to celebrate that nation's first-ever free trade deal with the United States, presuming we get one, the wine of choice is more likely to be French or Italian, even though the United States is the third-largest exporter to South Korea, behind China and Japan. That's because, as of July 1, there are no tariffs on European wine imported to South Korea. American wine? Big tariffs.

July 1 was the date the EU's free trade deal with South Korea took effect. In the first two weeks of July, EU imports to South Korea rose by 16 percent, South Korean Ambassador to the United States Han Duk-suu told me on Monday. Right now, Han said, South Korean restaurants, hotels, and merchants are negotiating multi-year contracts for wine purchases. California wineries suddenly are at a distinct disadvantage, as their wines come with the added cost of import duties. That same disadvantage is shared by all American exporters, but not by European ones.

How did Europe beat us to a free trade deal with South Korea, one of the booming economies of East Asia? President Bush signed a free-trade agreement with South Korea in 2007. It, and deals he negotiated with Colombia in 2006 and Panama in 2007, have been sitting dormant ever since. They should have been ratified well before July 1 of this year. But Congressional Democrats objected during the Bush presidency, saying the South Korea deal didn't open South Korea enough for U.S. auto and beef producers. President Obama​ renegotiated the deal last December, improving it for car makers and beef producers. But he hasn't submitted it to Congress.

You wouldn't know that from listening to the president, though. On July 15, President Obama said, "I've got three trade deals, sitting ready to go. These are all trade deals that Republicans told me were their top priorities. They told me this would be one of the best job creators we could have. And yet it's still being held up because some folks don't want to provide Trade Adjustment Assistance to people who may be displaced as a consequence of trade. Surely we can come up with a compromise to solve those problems."

Oh, those sinister Republicans. What Obama did not say is that he has not submitted any of the trade deals to Congress. How can Republicans be holding up trade deals they cannot even vote on because the President hasn't submitted them?

The president is the one holding up the deals to try to extract an expansion of Trade Adjustment Assistance from Republicans, who want to pass the trade agreements and have asked the president to submit them. Republicans want all three deals -- South Korea, Panama, and Colombia -- at once. Politically, that would be easier for some members of Congress who might have industries in their districts that fear competition with one of the three countries. It also prevents the United States from sending the signal that one of the countries is more important than another, though in reality the South Korea deal would be America's largest free-trade deal since NAFTA.

But Obama would not do that when Republicans asked earlier this year. Nor would he submit them unless Republicans agreed to expand TAA, which funds job training and other benefits for Americans who lose their jobs because of foreign trade, at the same time. That program has existed since 1962. But it was expanded as part of the stimulus bill. It still exists, but Obama wants to make permanent the stimulus expansion. To get that, he is holding up all three trade deals.

On Wednesday, there was a breakthrough, the Wall Street Journal reported. Administration and congressional sources said there was a tentative deal to get the trade deals and the TAA expansion passed in September, after Congress's August recess. That would be more than two months after the EU's free trade pact took effect.

The longer it takes to get these deals done, the longer European companies have to gain market share in South Korea. The president, in his insistence on expanding TAA to benefit his union financiers, has hurt American businesses by putting them at a distinct competitive disadvantage.