(What’s Left of) Our Economy: TPP’s Import-Fueling Potential Should be No Mystery

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free trade deals, imports, Korea, KORUS, Matthew Yglesias, Obama, TPP, Trade, Trans-Pacific Partnership, unions, Vox.com, {What's Left of) Our Economy

Matthew Yglesias, who covers economics for the Obama-worshiping Vox.com, is puzzled. Why are American labor unions so passionately opposed to the president’s Pacific Rim trade deal? Among the reason for his mystification: his confidence that “the TPP actually does almost nothing to increase imports of foreign manufactured goods into the United States” that could cost union members their jobs.

Yglesias provides no evidence to support his proposition; perhaps he is swallowing the White House line that, since other economies negotiating the Trans-Pacific Partnership (TPP) are much more closed than the U.S. economy’s, an agreement is sure to bring down more foreign trade barriers than American. But even if this outcome were likely – and I’ve explained why it’s not – all Yglesias needed to do was to peruse the Census Bureau’s website. The trade data he would find make clear that the U.S.-Korea Free Trade Agreement has had exactly that import-super-charging effect.

The Korea deal (KORUS) matters because the Obama administration has described its “high standards” terms as the blueprint for TPP. And the numbers show that since it went into effect, goods from Korea have flooded into the U.S. market. Since KORUS’ March, 2012 implementation, American goods imports from Korea have increased on a monthly basis by 33.65 percent (through this past January – the latest detailed trade data available). U.S. goods imports from the world as a whole during this period? They’ve actually fallen – by 4.97 percent.

Now the sharp-eyed among you will note that the above is not really a fair comparison. For America’s imports have been greatly restrained recently by the domestic energy production revolution, and South Korea doesn’t have oil and natural gas to export. Yet if you strip oil out, you find that U.S. goods imports between March, 2012 and January, 2015 rose only 6.18 percent on a monthly basis – less than one-fifth as much as the Korea increase.

Moreover, there’s a pretty compelling explanation for why the approach that has clearly failed with Korea will deliver similar results if TPP is approved: Korea, Inc., the secretive web of relationships between Korea’s government and so-called private sector that aims above all to push exports and boost trade surpluses, has not only survived KORUS’ efforts to limit its pervasive use of non-tariff trade barriers and subsidies. It’s still flourishing. (Click here to see how utter inability to analyze these practices threw Washington’s official projections for KORUS and similar deals off wildly.) That’s mainly why TPP, which includes Japan and other Asian countries using similar strategies, looks bound to flop even more spectacularly. And why America’s unions, which actually know what they’re talking about, are much more trustworthy on trade deal results than remarkably un-curious journalists.

(What’s Left of) Our Economy: The Wall Street Journal’s Designated Offshoring Spokesman?

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Korea, KORUS, McLarty, TPP, Trade, Trans-Pacific Partnership, trde deficits, {What's Left of) Our Economy

So is The Wall Street Journal‘s publication yesterday of a second article in less than three months by Thomas F. McLarty urging Congressional passage of the Trans-Pacific Partnership (TPP) the start of a regular feature? (Here’s the first.) Will we begin seeing columns by the former Clinton White House Chief of Staff-turned super lobbyist shilling for the trade deal monthly? Weekly?

There could be a bright side. Maybe McLarty or his editors will grow so tired of the stale arguments he and other TPP backers keep making that they’ll start searching for new material. Here’s a suggestion: Explain why any American should view the TPP as a boon for the economy as a whole given that it’s modeled in large part on the recent U.S.-Korea free trade deal – which has failed spectacularly.

As I’ve noted repeatedly (most recently Wednesday), since the agreement went into effect, in March, 2012, U.S. goods exports to Korea are actually down on a monthly basis, U.S. goods imports are up, and performance on both fronts has caused the American merchandise trade deficit with Korea to nearly quintuple. (Comparable data on services trade, whose volumes are much smaller, is not available.)

According to the measure used by the U.S. government and virtually every economist on this planet, a worsening of the trade balance subtracts from economic growth. So since the deal (known by the acronym KORUS) was implemented, U.S.-Korea trade flows have slowed the American recovery, therefore sandbagged job creation, and added to the nation’s indebtedness.

In most of the real world, results like this would mean “End of story” – and an immediate halt to TPP talks until Washington figured out at least a less disastrous approach to trade. But in the world of the Wall Street Journal editorial page and most of the rest of Mainstream Media opinion journalism, either these facts don’t exist, or they signal “Get me to that iceberg faster!”

All the same, here are some more, starting with what’s happened on annual basis to the U.S. merchandise trade deficit with Korea starting with the year before KORUS went into effect:

2011-2012: +26.03%

2012-2013: +24.26%

2013-14 year-to-date (November): +15.49%

Wait! Don’t these figures show that the deficit is at least growing at a slower rate, which isn’t great (or even good), but could be interpreted as a minimal sort of progress – an inevitably modest first step toward a possible turnaround? Sure – if the data existed in a vacuum. But they don’t. Here are the global figures to which America’s performance vis-a-vis Korea need to be compared – the growth since KORUS’ implementation of the nation’s worldwide trade deficit in goods except for oil (since America neither imports it from nor exports it to Korea):

2011-2012: +9.77%

2012-2013: +4.03%

2013-2014 (Nov): +17.10%

So under the vaunted “gold standard” KORUS trade deal, the United States has performed worse on the trade front with Korea than with the rest of the world. Since the TPP includes Korea’s own trade and economic model – Japan – as well as other thoroughly protectionist Asian countries, why would it produce significantly different results? The good news is that McLarty could well have many opportunities to answer that question before TPP is concluded. The bad news is that he’d lose his offshoring lobby membership card if he tried.

(What’s Left of) Our Economy: New Trade Figures Show Monthly Gains but Longer-Term Deterioration

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China, competitiveness, exports, free trade agreements, gross domestic product, high tech, imports, Jobs, Korea, KORUS, manufacturing, recovery, Trade, Trade Deficits, trade policy, {What's Left of) Our Economy

Although the new monthly June trade figures revealed improvements in most trade flows heavily affected by free trade deals and other trade policies (e.g., non-oil goods, manufacturing, high tech products, Korea), they also showed American competitiveness faltering longer term in all these measures – along with China trade. Until these U.S. policy-influenced trade deficits start falling, and thus boosting the recovery on net rather than slowing it, Congress should deny President Obama renewed authority to negotiate new trade deals.

Here are the highlights of this morning’s Census Bureau report:

>The headline monthly trade deficit in June fell 6.99 percent, from an upwardly revised $44.66 billion to $41.54 billion – the second lowest total this year.

>The inflation-adjusted deficit in goods other than oil – the trade account most affected by U.S. trade policies – shrank in June from $49.04 billion to $46.73 billion, or 4.71 percent. But when released last month, the May total represented an all-time U.S. record, and has been revised even higher in the latest figures.

>Year-to-date, this real non-oil goods deficit – which also helps comprise the headline gross domestic product number – has risen 13.62 percent, from $237.7 billion to $270.17 billion.

>As a result, the trade deficit influenced strongly by trade policy continues to slow the recovery – and by extension, job creation – substantially

>Consistent with this pattern, although the overall current-dollar June trade deficit fell on a monthly basis, the total brought the year-to-date figure to $260.05 billion – 4.97 percent higher than the January-to-June, 2013 deficit. During the same period from 2012 to 2013, this trade shortfall had plunged by 14.07 percent.

>Total pre-inflation goods and services exports rose by 0.13 percent in June, to a new monthly record of $195.86 billion, and so far are up more on a year-to-date basis this year (2.77 percent) than last (2.36 percent).

>But although combined pre-inflation goods and services imports fell by 1.19 percent in June on a monthly basis (to $237.40 billion), year-to-date they have grown by 3.54 percent, after decreasing by 0.99 percent between the first half of 2012 and the first half of 2013.

>Nor could a monthly decline in the manufacturing trade deficit greatly slow the ongoing worsening in the nation’s manufacturing trade performance. The monthly shortfall decreased by 3.24 percent in June, from $62.24 billion to $60.11 billion, as imports fell faster (1.47 percent) than exports (0.29 percent).

>Year-to-date, however, the manufacturing trade deficit is 11.80 percent higher than last year’s comparable level – which eventually produced a new record annual manufacturing trade deficit of $646.77 billion. And manufacturing exports year-to-date are up a negligible 0.44 percent, versus a 4.30 percent increase in imports.

>In high tech goods, the monthly U.S. trade deficit fell in June by 1.47 percent, from $7.59 billion to $7.45 billion, as the growth in exports outpaced the increase in imports. On a January-to-June basis, however, this trade gap is up 1.58 percent, to $35.21 billion, after plummeting by 17.50 percent from the first half of 2012 to the first half of 2013.

>America’s immense goods trade deficit with China rose by 4.48 percent between May and June to $30.06 billion – just under the record $30.47 billion total of September, 2013. U.S. goods exports to the still strongly growing Chinese economy increased by 1.42 percent on month, but the much greater amount of U.S. goods imports grew by 3.73 percent.

>On a year-to-date basis, the U.S. goods deficit with China is up 4.94 percent from last year’s pace, which produced an annual record trade gap of $318.71 billion.

>In contrast to the China deficit, the monthly goods trade gap with new U.S. free trade partner Korea nosedived by 30.00 percent from May to June, from $2.68 billion to $1.87 billion. U.S. goods exports to Korea increased by 8.41 percent on month, while imports sank by 7.99 percent.

>Year-to-date, the U.S. goods deficit with Korea has actually fallen slightly, from $11.05 billion to $11.01 billion. On a monthly basis, however, the gap is still up more than 240 percent, from $551 million in March, 2012, when the KORUS free trade agreement went into effect.

Those Stubborn Facts: More Evidence of Obama’s Korea Trade Incompetence

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Korea, KORUS, Obama, Those Stubborn Facts, Trade

European Union trade* balance with Korea in 1st year of new trade deal (2011-12):
-$1.8 billion

European Union trade balance with Korea in 2d year of new trade deal (2012-13):
+$4.6 billion

U.S. trade balance with Korea in 1st year of new trade deal: (2012-13):
-$18.9 billion

U.S. trade balance with Korea in 2d year of new trade deal: (2013-14):
-$20.2 billion

*merchandise trade

(Sources: “Koreans Lap Up European Goods Under Trade Deal,” by Kwanwoo Jun, Korea Rea Time, Wall Street Journal Asia, June 30, 2014, http://blogs.wsj.com/korearealtime/2014/06/30/koreans-lap-up-european-goods-under-trade-deal/ and calculated from Trade Dataweb, U.S. International Trade Commission, http://dataweb.usitc.gov)