Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
The Korea Free Trade Agreement would Enable Korean Mercantilism
The so called Korea US "free trade" agreement (KORUS) would not only permit continuing South Korean currency manipulation, thus costing U.S. jobs, but it would also prevent the United States government from responding to the trade imbalances created by currency manipulations.
According to Frederal Reserve Chairman Ben Bernanke (see Figure 8), from September 2009 to September 2010 the South Korean government devoted 4.24% of its country's GDP to the purchase of foreign exchange reserves. In other words, South Korea is one of the many mercantilist countries which has been accumulating currency reserves in order to beggar its trading partners.
Sam Wilford summarizes the worst aspects of the agreement (Korea Free Trade Agreement Plagued with Problems). His first point is bad enough:
But his second point is simply terrible. It would prevent the American government from responding to South Korean mercantilism:
Hasn't anybody in the United States government yet figured out how modern mercantilism works? Trade agreements should require balanced trade, not prevent the United States from responding to mercantilism.
Journal of Economic Literature:
Atlantic Economic Journal: