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The Korea Free Trade Agreement would Enable Korean Mercantilism
Howard Richman, 4/5/2011

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:

Projections from the U.S. International Trade Commission show no net gain in jobs from KORUS, while the Economic Policy Institute projects a loss of 159,000 jobs during the first seven years of the deal. Most economists also expect the deal to further widen America's trade deficit with South Korea. The 70,000 jobs promised by the president don't account for the jobs that will be lost with this shoddy agreement.

But his second point is simply terrible. It would prevent the American government from responding to South Korean mercantilism:

The trade pact also has sovereignty-eroding, public-interest-policy-chilling rules that allow multinational corporations to sue governments in private, foreign tribunals for taxpayer money on lost profits. The office of the U.S. Trade Representative has even admitted that it doesn't have the resources to enforce the provisions of the deal and defend the American public appropriately in these cases. This means U.S. taxpayer money could potentially go to subsidize South Korean companies that are putting American industry out of business.

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.

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