President Donald J. Trump scored a noteworthy victory for automobile and steel manufacturers in the Mahoning Valley and the nation when his administration secured its first major bilateral trade deal.
The deal with South Korea finalized earlier this week substantially revises the U.S.-South Korea Free Trade Act, ratified by Congress and the National Assembly of the Republic of South Korea in 2012.
That deal, however, failed to live up to its expectations of closing the large trade gap between this nation and South Korea. Nor did it result in a tsunami of new American jobs.
In 2016, U.S. goods and services trade with South Korea totaled an estimated $144.6 billion. Exports were $63.8 billion; imports were $80.8 billion, creating a U.S. trade deficit of $17 billion.
The deal became a whipping boy of then candidate Trump’s 2016 campaign for the presidency. He referred to it as a “job-killing trade deal,” a “one-way street” and “a deal that never should have been negotiated.”
The nonpartisan Economic Policy Institute provided ammunition for Trump’s argument by estimating the deal had cost the U.S. economy about 159,000 jobs.
Fortunately, however, the administration did not throw the baby out with the bath water as it rethought its initial instinct to scrap the deal completely. Instead, the new revisions fall into line with the chief executive’s focus on preserving American jobs while narrowing our huge trade gap.
The newly negotiated terms agreed to by South Korea that hold promise to benefit American commerce and consumers alike include:
Allowing each major U.S. automaker, including General Motors that manufactures the Chevrolet Cruze in Lordstown, to export 50,000 vehicles per year to South Korea that meet American safety standards, doubling the 25,000 previously permitted.
Substantially limiting South Korean steel exports to the United States. The cap will be set at 70 percent of what South Korea sends over in an average year now, providing opportunities for domestic steel-product producers such as Vallourec Star and others in the Mahoning Valley to make up the difference.
Agreeing to make sure neither country devalues its currency intentionally to gain an unfair advantage on trade. On that point, the deal is historic. The United States has never included a provision on currency manipulation in a trade negotiation before, according to U.S. Trade Representative Robert E. Lighthizer.
In return for those concessions, South Korea will be exempt from the 25 percent tariff the U.S. recently slapped on steel imports from countries around the world.
SEN. BROWN OFFERS PRAISE
On its surface, the deal looks generally positive for the U.S., particularly for its legacy steel and auto industries. U.S. Sen. Sherrod Brown, D-Cleveland, who strongly urged the president to renegotiate the trade deal, concurs.
“These new limits on Korea’s dumping will save Ohio steel jobs. Korea’s concessions prove that when we enforce trade laws, American workers win,” Ohio’s senior senator said.
“Any improvements to our failed trade agreements are a step forward for Ohio workers,” he added.
It is now incumbent upon Lighthizer and his staff to closely monitor adherence to the new deal. Given the lack of strong teeth in its provisions discouraging currency manipulation, that area must be watched particularly closely.
But the sooner the deal takes effect, the better. That’s why we would discourage the president from delaying its implementation until after talks among North Korea, South Korea and the United States take place later this spring.
In a speech Thursday in nearby Summit County, Trump raised that possibility, presumably as a tool to strengthen solidarity with its ally as they enter the critical nuclear-arms talks with North Korea later this spring. The trade deal, to which the South has agreed, likely would do little to weaken the two nations’ long-standing sturdy alliance.
Moving forward, the administration should explore other deals and initiatives to promote preservation and growth of American jobs. The responsible revisions in the Korea Free Trade Act could serve as a constructive model.