Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
How to Trade Binance Vanilla Options for the First Time on Bitcoin Crypto's - 2nd Aug 21
From vaccine inequality to economic apartheid - 2nd Aug 21
Stock Market Intermediate Top Reached - 2nd Aug 21
Gold at a Crossroads of Hawkish Fed and High Inflation - 2nd Aug 21
Bitcoin, Crypto Market Black Swans from Google to Obsolescence - 1st Aug 21
Gold Stocks Autumn Rally - 1st Aug 21
Earn Upto 6% Interest Rate on USD Cash Deposits with Binance Crypto Exchange USDC amd BUSD - 1st Aug 21
Vuze XR VR 3D Camera Takes Near 2 Minutes to Turn On, Buggy Firmware - 1st Aug 21
Sun EXPLODES! Goes SuperNova! Will Any planets Survive? Jupiter? Pluto? - 1st Aug 21
USDT is 9-11 for Central Banks the Bitcoin Black Swan - Tether Un-Stable Coin Ponzi Schemes! - 30th Jul 21
Behavior of Inflation and US Treasury Bond Yields Seems… Contradictory - 30th Jul 21
Gold and Silver Precious Metals Technical Analysis - 30th Jul 21
The Inadvertent Debt/Inflation Trap – Is It Time for the Stock Market To Face The Music? - 30th Jul 21
Fed Stocks Nothingburger, Dollar Lower, Focus on GDP, PCE - 30th Jul 21
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Obama Makes Bad U.S. Trade Situation Worse

Politics / US Politics Oct 07, 2011 - 03:04 AM GMT

By: Ian_Fletcher


Best Financial Markets Analysis ArticleThis Monday, Obama submitted the long-pending Colombia, Panama, and South Korea free trade agreements to Congress. White House chief of staff William Daley has promised to pass them by the end of the month.

Guess the need for campaign cash finally caught up with the administration.

Honestly, I didn't have my hopes up, but I did harbor the vague hope that somehow Obama was going to stall on these. The Republicans have actually been accusing him of not really wanting to pass them, and one could certainly see why he wouldn't want them hanging around his neck for the 2012 election.

Frankly, I hope one of the Republicans who has wised up about free trade, like Buddy Roemer, long-shot former governor of Louisiana, takes a stick to him about it. Even Mitt Romney, who supports these agreements but also says (repeat, says) he wants to get tough on China's trade practices, might be better--if he means it.

You know a Democratic president is in trouble when he's getting outflanked by Republicans on an issue where Democrats are the natural owners of the popular (and correct) position.

Granted, Obama now seems to have the thin fig leaf of the so-called Trade Adjustment Assistance program, a "painkiller" program designed to blunt the harm to laid-off workers, in the bag. (The Republicans don't like TAA one bit, but accepted it as the price of the ticket.)

But these agreements are still bad news. You'd think America would have learned its lesson from NAFTA, which the Labor Department has estimated cost us 525,000 jobs? Think again.

The Panama treaty, for example, might as well be known as the Money Laundering Protection Act. Panama is one of the worst countries in the Western Hemisphere for both money laundering and tax evasion, and it's getting even worse now that Switzerland has gotten just a little more scrupulous about enabling foreign criminals.

These illicit transactions range from otherwise-honest business people ducking the IRS to outright drug-trafficking gangsters. Colombia and its billions in drug money are right next door.

If there's one thing we learned in the 2008 financial crisis, it's that if you really want a debacle, you take bad policy plus ordinary greed and add a dollop of outright criminality. Make no mistake, this is a pro-financial-crisis bill. And it makes matters even worse by committing us to foreswear basic measures of prudent finance like limiting the size of financial institutions. It prevents us from limiting what financial services they may offer. It bans regulation of derivatives. And it ban limits on capital flows designed to tame volatile "hot money."

Question: can a drug cartel be "too big to fail?"

As for the Colombia agreement: quite apart from all its other problems, this is a country whose government is accused of being in cahoots with right-wing death squads that hunt down and kill labor leaders. Something like 3,000 over the last 25 years. (Whatever one may think about labor unions, I think civilized people can agree this isn't acceptable.)

To what degree the Colombian government actually approves of this, and to what degree it is simply running a chaotic country with a long heritage of political violence, is unclear. But either way, America should not be entering into the intimate economic embrace entailed by a free-trade agreement with a nation at such a troubled stage of its history.

The Korea agreement is in a class by itself. Basically a NAFTA clone, it is the biggest trade agreement since NAFTA, measured by the size of the economy involved, and the first since NAFTA that includes an industrialized country. Korea has serious automobile and electronics industries, among others, and aggressive industrial policies to target American industries for displacement.

The Economic Policy Institute has estimated it will cost America 159,000 jobs over the next five years. At a time when the president says that his number one economic priority is job creation, this is nothing short of perverse.

Even the official U.S. International Trade Commission has admitted that KORUS-FTA will cause significant job losses. And not just in the low-end industries we are told are the sole casualties of freer trade: the ITC foresees the electronic equipment manufacturing industry, with average wages of $30.38 in 2008, as a major victim.

Paradoxically, Obama provably knows all this. He campaigned against KORUS-FTA during the 2008 campaign. (It was originally negotiated, but not ratified, by Bush in 2007.) Among other things, Obama said:

I strongly support the inclusion of meaningful, enforceable labor and environmental standards in all trade agreements. As president, I will work to ensure that the U.S. again leads the world in ensuring that consumer products produced across the world are done in a manner that supports workers, not undermines them.
Nice words. Unfortunately, none of them are reflected in KORUS-FTA, which contains no serious new provisions on these issues.

This agreement, like NAFTA, is fundamentally an offshoring agreement. That is, it is about making it easier for U.S.-based multinationals to move production overseas with confidence in the security of their investments in overseas plants. The provisions to protect workers and consumers are unenforceable window dressing. (That's why they're allowed to be in there.)

As an example of how one-sided the treaty is, consider that it will allow America to export 75,000 cars a year to Korea. This translates to about 800 jobs. Korea's exports of cars to the U.S. in 2009, on the other hand? Over 475,000.

Furthermore, even if the U.S. does get to sell more cars in Korea, American companies will mostly not be making the steel, tires, and other components that go into them, because the agreement allows cars with 65 percent foreign content to be considered American. Worse, it allows goods with as much as 65 percent non-South-Korean content to count as Korean, opening the door not only to North Korean slave labor but to the whole of China.

Even leaving aside trade-balance issues, this agreement is a legal disaster thanks to so-called "investor-state arbitration." This subjects American democracy to having its laws overruled by foreign judges as interfering with trade. To date under NAFTA, over $326 million in damages has been paid out by governments as a result of challenges to natural resource policies, environmental protection, and health and safety measures.

There about 80 Korean corporations, with about 270 facilities around the U.S., that would thereby acquire the right to challenge our laws.

"Free trade agreement," in American English, means "free trade agreement." In other languages, it means "gentleman's agreement for managed trade at a low tariff." Europe invented this game -- known as mercantilism -- back when trade was conducted with sailing ships. South Korea learned it from Japan, which learned it from Germany.

Uncle Sam (and maybe John Bull and a few others) are the only naïfs who still don't get it.

Ian Fletcher is the author of the new book Free Trade Doesn’t Work: What Should Replace It and Why (USBIC, $24.95)  He is an Adjunct Fellow at the San Francisco office of the U.S. Business and Industry Council, a Washington think tank founded in 1933.  He was previously an economist in private practice, mostly serving hedge funds and private equity firms. He may be contacted at

© 2011 Copyright  Ian Fletcher - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


13 Oct 11, 21:21
Great article

This is a great article! I purchased an American-made

washer and dryer last year. I guess Whirlpool will be gone--now, killed by LG.. much like the towel industry, the clothing industry, the small electronics industry-- and these workers will be looking for jobs in the service sector- waitress at 8 dollars an hour-- Gardener at 8 dollars an instructor.. personal trainer--

pizza delivery..

Post Comment

Only logged in users are allowed to post comments. Register/ Log in