Any alleged benefits from the Korea-U.S. free trade agreement (KORUS), which was signed into law last week by President Barack Obama will certainly come at a high cost.
In addition to the 159,000 lost American jobs predicted by economists, the Congressional Budget Office (CBO) estimates the trade agreement will cost the United States approximately $7 billion between 2012 and 2021.
The cost estimate report submitted earlier this month to the House and Senate states:
“According to the U.S. International Trade Commission, the United States collected about $660 million in customs duties in 2010 on $48 billion of imports from Korea. Based on expected imports from Korea, CBO estimates that implementing the tariff schedule outlined in the U.S.-Korea free trade agreement would reduce revenues by $158 million in 2012, and by about $7 billion over the 2012-2021 period, net of income and payroll tax offsets.
“This estimate includes the effects of increased imports from Korea that would result from the reduced prices of imported products in the United States, reflecting the lower tariff rates. It is likely that some of the increase in U.S. imports from Korea would displace imports from other countries. In the absence of specific data on the extent of this substitution effect, CBO assumes that an amount equal to one-half of the increase in U.S. imports from Korea would displace imports from other countries.”
To read more about the projected impact of KORUS on our federal, state and local governments, click here for the complete text of the CBO’s Cost Estimate report.