The Obama administration has announced that it intends to finalize a new free trade agreement with South Korea (KORUS FTA) in time for the next G-20 summit in November. Although the U.S. International Trade Commission (USITC) projects this will have a small positive impact on the U.S. trade balance, and “minimal or negligible “ impact on U.S. employment, history shows that such trade deals lead to rapidly growing trade deficits and job loss in the United States.
The Charts below compare USITC’s estimates of the impact of the forthcoming free trade agreement with Korea to EPI’s own calculation. Unlike USITC’s forecast of a small positive impact, EPI’s research shows it will increase the U.S. trade deficit with Korea by about $16.7 billion, and displace about 159,000 American jobs within the first seven years after it takes effect.
The USITC has a history of vastly underestimating the negative impacts that free trade agreements have on the U.S. economy. In 1999, it estimated that China’s entry into the World Trade Organization would increase the U.S. trade deficit with China by only $1.0 billion, and have no significant impact on U.S. employment. In fact, the U.S. trade deficit with China increased by $185 billion between 2001 (when China entered the WTO) and 2008, and 2.4 million U.S. jobs have been displaced or lost. The U.S. trade deficit with Mexico also rose rapidly after the North American Free Trade Agreement (NAFTA) took effect in 1994.
With U.S. unemployment close to 10%, and an employment gap of nearly 11 million jobs, it would be foolish and self destructive for the United States to implement a free trade agreement with Korea that leads to further job loss.