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Unpopular U.S.-Korea free trade deal on steadier ground after Korean election; CAW calls for end to Canada-Korea and other FTAs in new report

A U.S.-Korea free trade deal will not be sent back to the drawing board after Korea’s opposition party failed to win a majority in last week’s election. Meanwhile, a Canada-Korea FTA, stalled for years on auto concerns, is being challenged again in a new CAW report calling on the government to rethink Canada’s auto strategy.

Earlier this year I wrote that South Korean elections could have dealt a fatal blow to a free trade agreement with the United States that went into effect March 15. In February, the opposition Democratic United Party gambled on a trip to Washington, D.C. to protest parts of the Korea-U.S. FTA, in particular its investor-state dispute settlement mechanism (ISDM). But elections last week re-installed the ruling Saenuri Party with 152 of 300 seats, leading Jaung Hoon, a political scientist at Chung-Ang University to call the free trade debate in Korea “virtually dead” (reported in Inside Trade today).

Inside Trade adds that “Bruce Klingner, a senior research fellow focusing on Northeast Asia at The Heritage Foundation, also said he believes the FTA is now ‘safe’.” Klinger noted on a panel last week “that even if the DUP tries to continue pushing on the issue, it can do little without a majority in the National Assembly,” says the online trade magazine.

Korea Herald reported that business lobby groups welcomed the election results. The Korea Employers Federation said the results “reflected the public opinion that continued economic growth and stability should help improve the quality of life.” The Korean Chamber of Commerce quickly asked the newly elected National Assembly to “work together for deregulation, tax cuts and a more flexible labor market in order to inject fresh energy into the market economy,” according to the paper.

The U.S. free trade deal was fiercely opposed by Korean farmers and opposition lawmakers, one of whom opened a tear gas canister in the legislature to protest its ratification vote. The deal was also resisted in the United States by farmers, labour unions and social justice groups. Public Citizen issued frequent reports debunking U.S. government claims about the importance of free trade to the U.S. economy, including that they improve exports.

“The NAFTA model has been a failure for rural communities,” said the organization in a May 2011 memo. “Since NAFTA and similar deals with 17 other countries were implemented, America has lost hundreds of thousands of family farms. Large agribusiness companies have been able to use these trade deals to drive down the prices that farmers receive – playing producers in trade partner countries off of each other while concentrating ownership of trading, seed and other agribusiness firms.”

Canada’s free trade negotiations with Korea are still on hiatus after successful opposition from the CAW and other labour organizations. While supported by big business lobbies, the economic case for Canada’s FTA with Korea is about as weak as the case for a Comprehensive Economic and Trade Agreement with the European Union, which is estimated to kill between 23,000 and 150,000 jobs in Canada.

“A free trade deal with Korea poses substantial economic risks to Canada in its own right,” said a CAW statement in 2005. “Many important Canadian industries would suffer tremendous damage if Korean-based producers are allowed more freedom to penetrate Canadian markets: auto; auto parts; shipbuilding; electrical and electronics products; machinery; tool, die and mold industries; food processing; and other sectors. Canada’s bilateral trade deficit with Korea is already $4 billion, resulting in the destruction of some 15,000 jobs. This pain would inevitably get worse under a free trade deal with Korea. Some of the industries that will be seriously injured by free trade with Korea affect our overall economic and strategic capabilities as a nation (such as our shipbuilding and machinery industries); more than just jobs are at stake.”

The union has just launched a report called Rethinking Canada’s Auto Industry, in which it seeks big changes to “unbalanced trade policies, which it says have made it a ‘one-way street’ of imports over exports with practically every country except the United States,” according to the Winnipeg Free Press today. The report “called on Canada to cease free trade negotiations with automaking countries including those in the European Union as well as Japan, Korea, and Thailand,” adds WFP.