Fuzzy math

Jul 1, 2011

Boy, it really makes you wonder just how these guys in government think. This country owes more that $14 trillion and we are running a $1.6 trillion budget deficit, but Congress is squabbling over a few free trade agreements (FTAs) that would create more than $20 billion in commerce between the U.S. and South Korea, Panama and Colombia. Believe me, the Colombia FTA is a no-brainer since Colombia already sends products to the U.S. tariff-free.

I suppose in politics you don’t give something without getting something in return. President Obama won’t give on the FTAs until Congress passes the Trade Adjustment Assistance (TAA) program that expired in February. The TAA program is designed to retrain workers who lost their jobs due to their company moving overseas. This is like a band-aid when the real issue is why the companies are moving overseas in the first place. Those answers are also relatively simple: lower labor costs, lower material costs, and often lower environmental requirements. It all comes down to a lower cost of simply doing business. When you sell products in a global economy, it really doesn’t matter where they are made in most cases.

The president may get his wish on this one with only $575 million going to the TAA fund rather than the $1 billion a year that he started with. I suppose that the $575 million payoff is worth $20 billion-plus in economic activity. But geez, think about a $20 billion deal in the face of $14 trillion in total government debt. I hate to say it, but Americans are being asked to lower their standard of living in order to pay off this debt. Higher taxes have to be around the corner somewhere.

If the free trade deals are going to create jobs in America, it’s a little hard to understand why the government would need funds to retrain workers. It almost seems that if the president gets his TAA funds, it may as well be considered prepaid tariffs, since most of what we’re trying to get is a gradual reduction to zero tariffs on exported U.S. products. It appears that taxpayers will have to pay the government to make this trade deal with these countries.

It’s amazing that these agreements have been ready to go for four years and that the president has sat on them this long. Creating jobs and commerce has been his No. 1 goal since getting elected, but it seems the only jobs he is concerned about are union jobs, which account for just 7 percent of the workforce in America.

The administration even says that the U.S.-Korea trade agreement creates new opportunities for U.S. farmers, ranchers and food processors seeking to export to Korea’s 49 million consumers. They also claim it will give American agricultural producers more market access in two ways: by getting rid of tariffs and by laying out a framework to tackle other barriers to U.S. exports, even those that may arise in the future. The administration says that elimination of the 40 percent tariff that Korea places on U.S. beef will further boost exports, saving an estimated $1,300 per ton of beef shipped to Korea. Those savings would total $490 million annually for U.S. beef producers at current sales levels.

Ironically, Canada is also in the midst of closing a free trade deal with South Korea. They agreed to conditions that would result in the resumption of beef exports from Canada and Korea that will reportedly allow Canadian bone-in beef from cattle less than 30 months of age.

Bill Donald, president of National Cattlemen’s Beef Association, said that if implemented, the U.S. beef industry would see $15 million in new tariff benefits in the first year alone, with about $325 million in tariff reductions annually, once fully implemented.

"Stalling on the South Korea FTA poses serious consequence for U.S. agriculture," he said. "If the FTA is significantly stalled or not implemented, the likelihood of relinquishing U.S. agricultural export sales to other countries such as Canada is imminent."

He said there are 13 trade agreements between South Korea and U.S. competitors in place, or in the works, involving at least 50 other countries.

I know that foreign trade is an aspect of business that the Obama administration isn’t terribly fond of because they think it’s going to send jobs overseas. Perhaps it has with manufacturing jobs, but there is no way it will happen with industries. Those jobs are already being threatened by the administration’s friends in the environmental and regulatory communities. If we want jobs, we have to sell something, and we can always sell food. — PETE CROW