July 17, 2011
How Pa. would fare in jobs fuels debate
WASHINGTON — Mike Kelly traveled twice to South Korea as vice chairman of the Hyundai National Dealer Council, and he went back again this spring as a freshman member of Congress.
A Free Trade Agreement with the longtime ally is one of three awaiting congressional action, and the Butler Republican has been pushing for its passage. The first bill he sponsored as a member of Congress was a resolution urging President Barack Obama to formally submit the agreement to Congress.
For many Western Pennsylvanians it’s not an easy sell, as the 1993 North American Free Trade Agreement is often blamed for a decline in manufacturing jobs in the region.
But big business and many of its allies in Congress say free trade agreements would be a nice piece of cost-free economic stimulus, and the time to move on them is now.
“If we’re going to turn it around and create jobs again, we’ve got to look at the world as our market,” Mr. Kelly said. “There’s a global export market that’s out there, and it’s there. We’ve got to do it.”
Mr. Kelly’s Kia and Hyundai car dealerships stand to benefit from passage of the South Korea agreement, which would gradually eliminate tariffs on imported Kias and Hyundais and allow more competitive pricing and better profit margins for American dealers. Eliminating a 25 percent tariff on pickup trucks would, in effect, open the U.S. market to South Korean trucks for the first time.
Mr. Kelly rejects the notion that his advocacy stems at all from his personal gain.
“There are people who politically would use that,” Mr. Kelly said. “I’d say, ‘C’mon, c’mon, stop it.’ If you can’t see the benefit of an $11 billion to $12 billion boost to our economy and you want to say, ‘Does that benefit Mike Kelly?’ Not only Mike Kelly but everyone else in America, too. So I think it’s kind of foolish, and those are the kinds of games that get played.”
But it’s another illustration of the difficulty in navigating the tricky politics of trade — the loudest voices on either side often have a financial stake in the outcome.
Rep. Tim Murphy, R-Upper St. Clair, said he is still on the fence about the deals with South Korea, Colombia and Panama and he’s trying to study how they would affect his district.
“It’s hard to get analysis when … there’s no trustworthy group you can find on this,” Mr. Murphy said. “As soon as somebody says something, I say, ‘Well, how much money are you going to make on this?’ ”
The Obama administration consummated the deal with South Korea last year, while the Panama and Colombia deals are held over from the Bush administration. The South Korea deal is by far the biggest, as it opens up more trade with the world’s 15th largest economy, according to an International Monetary Fund estimate.
Colombia is a key strategic ally in South America, but U.S. labor unions have raised concerns about violence against union workers there. Panama is relatively tiny, but an agreement there would allow U.S. firms to participate in the construction bonanza of expanding the Panama Canal.
The U.S. Chamber of Commerce predicts that the South Korea deal alone would create 280,000 jobs nationwide.
The House and Senate recently held hearings on South Korea, but the administration has not formally submitted any of the agreements to Congress as it contemplates pairing them with an extension of trade adjustment assistance — payments and job training to workers who lose jobs when companies move overseas. The assistance was included most recently in the stimulus bill and expired in February.
The assistance is a possible sweetener to Democrats to help move the agreements, but House Republicans are balking at the additional government spending and some Democrats, including Pennsylvania Sen. Bob Casey, would prefer a separate vote on the program. Mr. Casey wants to register his support for trade assistance, but not the free trade agreements themselves.
“The United States of America does not have a trade policy,” Mr. Casey said. “We have fights about trade deals every couple of years or so, and that’s not good enough for our workers. An agreement is entered into by an administration and the best we can do for workers is try to nibble around the edges, make some adjustments and have some handshakes and winks and hope it works out. And it doesn’t.”
The legacy of NAFTA is particularly troubling for Mr. Casey, who — like many free trade foes — cited a recent report by the liberal Economic Policy Institute saying the agreement displaced 23,600 jobs in Pennsylvania. It noted that the Clinton administration and business groups predicted a trade surplus with Mexico, but the U.S. had a $66 billion trade deficit with its southern neighbor in 2010.
“Seeing is believing,” said Rep. Mike Doyle, D-Forest Hills. “We’ve experienced in real life what this has done to people I grew up with and people who live in my district.
“I saw jobs move to Mexico. I did not see any jobs move to Pittsburgh. I saw workers who were displaced. I didn’t see any new jobs that were created by NAFTA.”
But the free trade agreements don’t bear all of the blame. In talking about NAFTA, Rep. Mark Critz, D-Johnstown, cited the closing of the massive Volkswagen assembly plant near New Stanton as the company later increased production in Mexico. But the plant closed in 1988, a full five years before NAFTA was signed.
University of Pittsburgh economics professor James Cassing, who has studied free trade agreements, said NAFTA is generally considered to have been a mild positive for Pennsylvania’s economy and the nation’s as a whole as exports to Canada and Mexico increased dramatically. As for the overall trade deficit with Mexico, Mr. Cassing said that’s probably not NAFTA’s fault.
“The United States has a pretty big trade deficit with everybody, virtually everybody, which makes you think that it has less to do with a trade agreement and more to do with a macroeconomic environment,” he said.
Sen. Pat Toomey, R-Pa., said past free trade agreements have been “very, very constructive” for Pennsylvania and the nation. He pointed out that Pennsylvania’s agriculture and medical device industries stand to gain considerably by exporting to South Korea.
As for manufacturing fears, Mr. Toomey pointed out that domestic manufacturing output is near an all-time high, but jobs are declining because of increased automation — and free trade shouldn’t get the blame. He said he would support some spending on assistance to displaced workers, but not at the recent level of about $1 billion per year.
Labor unions, meanwhile, are lining up against the deals. On Monday about 30 union activists attended a rally outside Rep. Jason Altmire’s Aliquippa office opposing the Colombia deal because of anti-union violence there.
“We all know this is about jobs. We can’t afford to lose one more job to free trade agreements,” said Todd Fichera, business representative for Machinists Local 98.
Mr. Altmire, D-McCandless, opposes the Colombia pact, and issued a statement appeasing the demonstrators, but in an interview he said he’s still weighing the other two. He met last week with the South Korean ambassador for the second time to discuss the deal.
“There are places in the country where free trade is a benefit, an economic benefit to America and overall for the country,” he said. “I represent Western Pennsylvania so I have to decide given our workforce, our history with trade agreements and our future, what’s the best deal.”
Mr. Altmire, along with many of his colleagues, is particularly concerned with the Kaesong Industrial Zone, an area near the demilitarized zone where manufacturers from the South employ North Korean workers. Aside from opening the U.S. up to de facto trade with rogue North Korea, many lawmakers are concerned that Kaesong could be a pass-through for deceptively labeled Chinese goods.