A new Economic Policy Institute study reveals the harsh reality of the “over-hyped” and job-killing Korea-U.S. Free Trade Agreement (KORUS) and warns of the further potential job loss the Trans-Pacific Partnership would inflict upon the American middle class.
Instead of increasing U.S. exports from “$10 billion to $11 billion” and supporting “70,000 American jobs from increased goods exports alone,” as the White house promised, U.S. domestic exports to South Korean fell $3.5 billion and 40,000 American jobs were lost in KORUS’s first year. While the KORUS deal has increased the already-massive U.S. trade deficit and slashed American jobs, imports from South Korea have jumped by $5.8 billion, a nearly 40 percent increase.
Estimates for 2013 suggest no reversal in the trend.
“Policymakers need to stop negotiating trade deals that hurt the U.S. economy,” said Robert E. Scott, the study’s author and EPI’s Director of Trade and Manufacturing Policy Research. “Unless free trade agreements reduce our too-high trade deficits, they won’t have a net positive effect on U.S. employment. This isn’t a radical stance on trade—it’s textbook economics.”
Despite job loss already caused by KORUS, the Obama administration is negotiating yet another flawed trade agreement that involves more than a dozen Asian countries, including South Korea. The Trans-Pacific Partnership (TPP), according to the study, “would significantly increase the threat that rapidly-growing trade deficits and job losses in the United States would be locked in if the TPP is completed.”
The study uses the common economic understanding that it is trade balance that determines the net amount of jobs created or lost by trade deals, not just tariff cuts. Although the losses are small when compared to the effects of the sequester, the repeal of the payroll tax cut and other spending cuts, the study says austerity policies coupled with unfair trade deals can help explain why GDP and employment growth have slowed in 2013.