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baltimoresun.com

South Korean trade deal: A small step toward fixing the economy

Our view: Agreements with South Korea, Columbia and Panama would create jobs; we can't let politics get in the way of their passage

10:46 AM EDT, October 5, 2011

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President Barack Obama's jobs bill, a relatively modest effort given the risks the economy faces and the toll that extended joblessness has taken on American workers, is bogged down in a divided Congress and is about to get more so. Senate leaders are moving to amend the plan to substitute a tax surcharge on millionaires for the provisions Mr. Obama had used to offset the bill's $447 billion cost. That's a perfectly sensible idea, given the massive tax benefits the rich have seen during the last decade, but it's even more dead on arrival in the Republican-controlled House of Representatives than Mr. Obama's initial plan, which relied on things like an end to tax breaks for oil companies and a smaller tax increase on families making more than $250,000 a year.

If ever this proposal was a serious effort at finding something palatable to both parties, it has quickly exited that territory and is now a political marker designed to show the contrast between Republicans and Democrats. That's to be expected as we approach an election year, but it does leave unresolved an economic situation that could quickly go from bad to worse. All this is happening at the same time that Federal Reserve Chairman Benjamin Bernanke is warning that the U.S. economic recovery (such as it is) is "close to faltering" and that there is little more that he can accomplish through monetary policy. The onus to do more to prevent a slide back into recession falls on the White House and Congress, he told a joint committee of Congress.

As it happens, there is the prospect for bipartisan agreement on one of the ingredients Mr. Bernanke identified as key to Washington's policy response: an increase in foreign trade. Years after they were initially negotiated by the Bush administration, President Obama has sent to Congress proposed free trade pacts with South Korea, Columbia and Panama. Together, they could increase exports by more than $12 billion and support tens of thousands of jobs. That's a pittance compared to what we need, but it's a start.

Maryland would benefit from the South Korea deal in particular. An increase in American trade with the Asian nation is likely to boost business at the Port of Baltimore, which is in the midst of an upgrade that will give it a key competitive advantage over other East Coast ports after the Panama Canal is expanded to allow larger cargo ships in 2014. South Korea is Maryland's 14th largest export market, according to the Business Roundtable, a Washington advocacy group that is supporting the pact. Maryland exports bituminous coal, engines for passenger vehicles, parts for lab instruments, agricultural products and various specialized raw materials to Korea, and a free trade agreement would instantly make the state's businesses more competitive against suppliers from Europe, which recently signed its own trade deal with Korea.

Perdue Farms of Salisbury exports frozen chicken legs to South Korea at a 20 percent tariff. W.R. Grace & Co. of Columbia pays Korean duties of 5.5 percent to 6.5 percent on chemicals. Becton Dickinson & Co. of Sparks pays 10 percent duties on the medical instruments it exports to Korea. All of those tariffs would be eliminated by the new deal. Ellicott Dredges, a 136-year-old Baltimore company, has been supplying its products to Korea since the 1960s. It pays a 5 percent tariff on its exports to Korea, but its chief competitor in Europe does not.

Canada is also in advanced negotiations for a Korean trade agreement of its own. The Business Roundtable estimates that Maryland stands to lose 6,600 jobs if the U.S./Korea pact is not approved.

President Obama has been pushing for the Korean, Columbian and Panamanian agreements since 2009, which he renegotiated to address concerns by labor and environmental groups. The holdup in Congress has been over linking the deals to an expansion of the Trade Adjustment Assistance program, which helps those displaced by an increase in trade. After all, even if increased trade is good in the aggregate, it will hurt workers in certain industries who are undercut by cheaper foreign labor. What the assistance program does is to give workers displaced by foreign competition help with job training, relocation and health insurance.

The program makes sense on its face; it's an investment in making American workers more competitive and increasing the overall efficiency of the economy. But Republicans killed the program when they took over the House of Representatives last year, and Congressional Democrats refused to approve the trade deals without it. After extensive negotiations, the White House, Senate Democrats and House Republicans appear to have agreed to a compromise to partially restore the funding. There is no reason why Congress can't pass at least the Korean agreement before a state visit by South Korean President Lee Myung-bak later this month. These trade deals are only a tiny step toward fixing what ails America's economy, but they would be the only significant job creation effort Washington has mustered since the new Congress took office in January. This time, we can't let politics get in the way.