GOVERNMENT & POLICY
in the first 10 months of 2010, up 39% from the same period a year earlier, according to the Commerce Department’s International Trade Administration (ITA). The accord would be the largest for the U.S. since the North American Free Trade Agreement (NAFTA) with Mexico and Trade is as an area of POTENTIAL COLLABORATION Canada was ratified by Congress in 1993. between Obama and empowered Republicans South Korea is the U.S.’s seventh-largest GLENN HESS, C&EN WASHINGTON trading partner, ranking ahead of larger economies such as France, Italy, and India. Obama said the agreement with South CHEMICAL MANUFACTURERS and other will increase U.S. exports to South Korea by Korea shows that the U.S. is ready to finalU.S. businesses will press Congress to apas much as $11 billion per year and support ize more market-opening deals. Business prove a long-stalled free-trade agreement at least 70,000 American jobs, according to leaders are eager to also move two other with South Korea early this year. But some the White House. long-delayed trade pacts, with Colombia powerful labor unions are lining up against Currently, U.S. exports to South Korea and Panama, through Congress. the pact, despite new provisions negotiated face an average tariff of 11.2%, “I’m especially pleased by the Obama Administration to protect while the equivalent U.S. tariff that this agreement includes MORE ONLINE American jobs. on South Korean exports is groundbreaking protections The U.S.-South Korea Free Trade Agree3.7%. The agreement will level the playing for workers’ rights and for the environment. ment has been stuck in legislative limbo field, as nearly 95% of all bilateral trade in In this sense, it’s an example of the kind of since 2007 when it was signed by former consumer and industrial products will befair-trade agreement that I’ll continue to president George W. Bush. Democrats have come duty-free within five years. work for as President, in Asia and around blocked consideration of the proposed Two-way trade between South Korea the world,” Obama said. deal, arguing it did not go far enough in disand the U.S. totaled $67.8 billion in 2009, mantling South Korea’s nontariff barriers, down sharply from $84.7 billion in 2008 as CHEMICAL INDUSTRY officials have particularly in the automotive sector. global commerce sufwelcomed the breakthrough in trade talks President Barack Obama—who fered during the ecowith South Korea. “We applaud both govPARTNERS Obama sharply criticized the original accord nomic downturn. But ernments for their efforts to remove the and President Lee when he campaigned for the White U.S. exports to South remaining impediments to approval of the Myung-bak of South House in 2008—first announced Korea, which totaled agreement,” says Andrew N. Liveris, chairKorea discussed trade plans to revive the South Korea trade $28.6 billion in 2009, man and chief executive officer of Dow during a meeting in Seoul last November. pact last June, a few months after setjumped to $32.2 billion Chemical, the largest U.S. chemical maker ting a goal of doubling U.S. exports by revenue. over the next five years in hopes of The agreement will result in more spurring job growth. than $1 million in tariff reductions for Following six months of talks with the company’s U.S.-manufactured exSeoul, the Administration succeeded ports to South Korea, according to the in removing the main stumbling block company. by persuading South Korea to open The deal will also provide more than its market to more U.S. auto exports $6.5 million per year in duty reductions (C&EN, Dec. 13, 2010, page 10). In for Dow’s South Korean customers, remarks at the White House on Dec. according to Wan-Je Kim, manager at 3, Obama said the revised agreement Dow Chemical Korea Ltd. “These duty “includes several important improvesavings validate the commercial adments and achieves what I believe vantage of business ties between South trade deals must do. It’s a win-win for Korea and the U.S. and open up the poboth countries.” tential of increased sales based on the There are significant economic and market access commitments provided strategic issues behind the agreement. in the agreement,” Kim remarks. From the American perspective, South “This is a major milestone in Korea is a major export market where helping the U.S. regain sustainable the U.S. wants to widen the door for economic strength,” adds Dow Cornproducts and services that create jobs ing Chairman and CEO Stephanie A. at home. For South Korea, establishBurns. Korea is an important market ing closer economic relations with the for the company’s silicones and siliU.S. will help boost a security relationcon-based materials. ship with its biggest ally. “This agreement demonstrates the The wide-ranging trade agreement Administration’s willingness and comPETE SOUZA/WH ITE H OUSE/CNP
INDUSTRY APPLAUDS KOREAN TRADE DEAL
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mitment to opening new markets for American goods, boosting our exports, and leveling the playing field for American workers,” says Burns, a member of the President’s Export Council, a committee that advises Obama on international trade strategies. Exporters of chemicals and related products, including pharmaceuticals, cosmetics, fertilizers, and agrochemicals, will particularly benefit from the agreement’s tariff reductions. According to ITA, 51% of U.S. chemical exports by value will receive duty-free treatment as soon as the pact enters into force, with the remaining tariffs phased out within a decade. Current South Korean chemical tariffs average 6% and can be as high as 50%. “Our members view the South Korea free-trade agreement as the most commercially significant of the three pacts that have been negotiated and are awaiting votes in Congress,” says Justine Freisleben, manager of government relations at the Society of Chemical Manufacturers & Affiliates, a trade group that lobbies on behalf of nearly 300 small and medium-sized U.S. specialty and batch chemical producers. “It represents a huge market for them.” As global trade plunged in 2009 amid the worst recession in 60 years, the U.S. shipped $4.4 billion worth of chemical products to South Korea, down from nearly $5 billion in 2008. But in 2010, South Korea resumed its position as one of the fastestgrowing Asian markets for U.S. chemical manufacturers. The latest ITA data show that through October 2010, U.S. chemical exports to Korea totaled $4.9 billion, up almost 40% from the same period in 2009. South Korea is also an important market for U.S.-based pharmaceutical companies. IMS Health, a market research firm, says the Asian nation is the fastest-growing developed market for medicines in the world. Despite the recession, U.S. exports of pharmaceuticals and medicines to South Korea jumped from $435 million in 2008 to $579 million in 2009, a 33% increase. The rapid growth continued last year, with U.S. pharma exports to South Korea rising to $624 million during the first 10 months of 2010, a 45% increase over the comparable period of a year earlier. The free-trade agreement is a “terrific opportunity for South Korean patents to
KEY POINTS OF THE PACT The U.S.-South Korea Free Trade Agreement would provide the following: ■ Eliminate tariffs on more than 95% of industrial and consumer goods within five years of entry into force; remaining tariffs would be eliminated within 10 years. ■ Establish new rules on how South Korea will develop regulations applied to U.S. exports and require stronger protection and enforcement of intellectual property rights. ■ Increase investment opportunities for U.S. companies in South Korea by providing them access to the market and a way for investors to enforce their rights. ■ Include obligations for South Korea to respect fundamental workers’ rights and to effectively enforce high standards to protect the environment. SOURCE: White House fact sheet
access biopharmaceutical medicines produced in the U.S.,” says John J. Castellani, president and CEO of the Pharmaceutical Research & Manufacturers of America, a trade group representing the brand-name drug industry. “This agreement will contribute directly to increased U.S. exports and the expansion of highly skilled, wellpaying jobs here.” Although the United Auto Workers union agreed to support the deal after negotiators took steps to address South Korea’s big trade surplus in automobiles, the AFL-CIO, the nation’s largest labor federation, and the United Steelworkers are urging lawmakers to reject the agreement. Their opposition could complicate efforts to get the support of organized labor’s Democratic backers in Congress. AFL-CIO President Richard L. Trumka says the revised deal reached still does not do enough to allay concerns about the outsourcing of American jobs and the enforcement of tariff provisions. “We’ve seen U.S. multinational companies take advantage of the investment and other corporate protections in past trade deals to shift produc-
“This is a major milestone in helping the U.S. regain sustainable economic strength.” WWW.CEN-ONLINE.ORG
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tion offshore while maintaining access to the U.S. consumer market and undermining the jobs, wages, and bargaining power of American workers,” Trumka says. Other skeptics of recent free-trade agreements also oppose the agreement. Lori M. Wallach, director of Public Citizen’s Global Trade Watch, notes that during the 2008 presidential campaign, Obama endorsed an alternative “fair-trade model” that protects U.S. jobs and workers’ rights and the environment around the world. “Choosing to advance Bush’s NAFTAstyle South Korea free-trade agreement rather than the new trade policy President Obama promised during his campaign will mean more American job loss and puts the White House at odds with the majority of Americans who, polling shows, oppose more of the same job-offshoring agreements,” Wallach says. BUT BUSINESS GROUPS have pledged to
help the Administration round up votes for the South Korean trade deal in Congress. “We benefit from a more open trading environment,” says Calvin M. Dooley, president and CEO of the American Chemistry Council, a trade group that lobbies on behalf of the nation’s biggest chemical companies. “So we hope that we will be part of the coalition that tries to ensure passage once the agreement is presented to Congress,” Dooley tells C&EN. Industry officials also want the Administration to get behind the free-trade agreement with Colombia and the smaller deal with Panama, both of which have been bottled up in Congress since 2007, largely due to opposition by organized labor. Chemical manufacturers are particularly interested in the pact with Colombia, the second most populous country in South America after Brazil. U.S. chemical exports to Colombia totaled $1.9 billion during the first 10 months of 2010, up 25% from the same period in 2009. Republicans are demanding final action on all of the pending trade deals. “I feel like the President is getting serious about an ambitious trade agenda, and he will find a very willing and eager partner in House Republicans,” Rep. Kevin P. Brady (R-Texas), chairman of the House Ways & Means trade subcommittee, told the U.S. Chamber of Commerce in a speech in Washington, D.C., last month. “There’s no better way to show the rest of the world that America is serious about trade engagement than moving those free-trade agreements.” ■
