South Korea ‘Free Trade’ Deal: Another Funnel for Exploitation

BASED ON NAFTA, BUT ​‘WAY WORSE’

KORUS is based on the NAFTA model, the outstanding achievement of which was managing to lower living conditions for the majority of citizens in three nations (United States, Mexico, and Canada) simultaneiously.

KORUS has the enthusiastic support of President Barack Obama despite the fact his winning presidential campaign heavily depended on stirring up anti-NAFTA and anti-“offshoring” sentiment in Midwestern industrial states.

Along with South Korea, Obama is also seeking to consummate ​“free trade” deals with Panama, distinguished by its role as a tax-avoidance haven and money-laundering center, and Colombia, whose elite has presided (see here and here) over the killings of some 2,100 trade unionists in the past two decades.

These trade deals are unlikely to be greeted with enhtusiam by the American public, 44% of whom believe that economic conditions are growing worse, according to an April poll.

Continuing job losses to offshore subsidiaries of U.S. firms — the Wall St. Journal reporting that U.S. firms created 2.4 million jobs outside the United States while eliminating 2.9 million American jobs since 2000 — have discredited ​“free trade” with nearly nine out of 10 Americans. 86 percent of Americans are convinced that the offshoring of jobs is a significant factor undermining America’s economic situation.

Besides swimming upstream against public opinion and triggering feelings of betrayal among his original supporters from 2008, Obama’s new helping of ​“free trade” via KORUS is certain to provoke wide anxiety even more job losses as the U.S. heads closer toward the crucial 2012 elections. 

“According to the Economic Policy Institute’s estimates, in the first seven years, the agreement will cost as many as 159,000 American jobs and increase our trade deficit by $16.7 billion,” notes Kenneth Davis, former US undersecretary of Commerce. 

“It is way worse than NAFTA,” declares Matt McKinnon, political director of the International Association of Machinists and Aerospace Workers. All but two major unions oppose KORUS, and the AFL-CIO as a whole has been forceful in fighting the deal. ​“KORUS will be setting up a funnel for the worst actors in the region to get their products into the US under the South Korean label,” McKinnon argues. It ​“will essentially be a regional trade deal under which we won’t be able to exert any influence over the conditions in which the goods are produced.”

He explains that KORUS defines ​“South Korean-made” as any product that has at least 35% of its value created in South Korea. Under this rule, the origin of the remaining 65% does not matter. ​“So South Korea can use components made by slave labor in Myanmar or in China with its repressive conditions and currency manipulations,” McKinnon told In These Times.

OPENING FUNNEL TO REPRESSIVE REGIMES’ PRODUCTION

KORUS would potentially open up the United States to components produced under one of the world’s most tightly-repressive nations. The rigid police state of North Korea has opened up a free-trade zone employing about 40,000 workers currently. South Korean firms operating factories in the zone typically pay the North Korean government just $3 to $4 per day per worker, of which the worker gets to keep just $1.

South Korean planners are now considering a ten-fold expansion of the North Korean free-trade zone, along with the potential for setting up another near the Chinese border. As long as 35% of the final value of the products is derived from South Korea, these, too, would be entitled to ​“free trade” status with the United States. 

Yet many Democrats, led by Senate Finance Chair Max Baucus of Montana, remain unperturbed by the implications for more domestic job losses and U.S. complicity in 21^st-century varieties of slave labor.

Baucus and many other Democrats are unable to resist the appeal of ​“free trade” deals ardently backed by corporate donors and almost universally supported by the nation’s major media.

ENSURE SAFETY NET, THEN SHOVE ​‘EM OFF CLIFF

For them, the only important angle yet to work out remains adequate funding for Trade Adjustment Assistance. ​“It’s clear that we need trade-adjustment assistance to be enacted along with” the free-trade agreements, Baucus said at a hearing on a pending deal with Colombia. ​“The two must go together, one way or another. We have to find a way so that they both are passed this year.”

Republican resistance to this most minimal compensation for job loss will create a side-show, allowing pro-“free trade” Democrats to feel that they are actually doing something meaningful for workers whom they are about to shove over a cliff with KORUS and other proposed free-trade agreements.

“Republican leaders say they back those free-trade deals, too, while worrying about the cost of approving further aid to laid-off workers,“ Bloomberg News reported. ​“I don’t think the current funding level is sustainable,” said Senator Charles Grassley (R-Iowa).

This tension over TAA funding would set the stage for a battle between Republican ruthlessness and free-trade Democrats’ distorted sense of ​“compassion” for the victims of their pro-globalization policies.

But while TAA’s extended healthcare and training provide some degree of help to displaced workers including some close friends, Democrats are deluding themselves if they feel that they are actually helping workers to re-enter the middle class. 

“Out of a hundred laid-off workers,” says New York Times economics writer Louis Uchitelle in his valuable book, The Disposable American: Layoffs and Their Consequences, 27 are making their old salary again, or more, and 73 are making less, or not working at all.” 

Or, as McKinnon asks forcefully, ​“Retraining for what? People want a job, they don’t want TAA because the new jobs don’t exist.”

THE CHORUS FOR KORUS

But despite the realities for workers who lose their jobs or face intensified pressure to accept lower wages, Congress will be hearing a chorus of CEOs beseeching them about the urgent necessity of KORUS’s passage because of rising wage rates in China and some other Asian nations.

A shortage of labor has pushed up wages (from present levels which often run at 30 cents to 40 cents an hour in China, or about 3% of US manufacturing wages, according to Jeff Faux, author of ​“The Global Class War”) and many firms are now seeking an even lower – wage alternative.

One alternative seems to have been ruled out, the ordinarily pro-globalization New York Times noted with unusual acuity about the loss of middle-class jobs in the U.S. and other relatively high-wage nations:

Rising wages and strengthening currencies in Asia are making it less attractive to move higher-value industries like auto manufacturing out of the West.

But little mentioned by almost anyone making or trading consumer goods in Asia these days is the possibility of moving these relatively labor-intensive manufacturing industries back to the United States or Europe.

But [a top U.S. executive in China] was dismissive of the idea in his remarks on Tuesday at the Foreign Correspondents’ Club. ​“The Western world does not have the work force to do this kind of business,” he said. ​“For ​‘made in Italy,’ the workers are old now and there are no new workers coming in.”

America’s workers are all too old? The U.S. has no new workers? 

Some 30 million jobless (or under-employed) and increasingly desperate unemployed American would beg to differ. These same workers and their families will lose more hope if Obama and leading Democrats move forward with the Korean free trade agreement.