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Trump's trade talk unnerves a nation [The Washington Post 2016-08-12]


Trump's trade talk unnerves a nation [The Washington Post 2016-08-12]

SEOUL — American cherries are widely adored in South Korea, the Asian nation that President Obama has called “one of America’s closest allies and greatest friends.” In the “premium” section of a bustling Lotte department store here, a small case of cherries from Washington state sells for 9,000 won, or about $8.

That money winds quickly back to American farmers, who have seen their exports soar since a 2012 U.S.SouthKorea free-trade agreement triggered a flood of new cash from Koreans to American automakers, tech firms and other companies. U.S. cherry exports have exploded 172 percent since 2011, to $109 million, alongside similarly rapid rises of made-in-America cars, beef and machines.

But the agreement has come under fire from GOP presidential nominee Donald Trump, who in his Republican National Convention speech last month targeted the agreement as a “jobkilling trade deal.” Those attacks have sent ripples of anxiety through South Korea, leading many in one of America’s top trade partners to pay close attention to an election 5,000 miles away.

“The atmosphere is very worrying for business leaders in Korea,” said Kim Inho, chairman of the Korea International Trade Association, the industry group that represents nearly all of the country’s international-trade business, roughly 70,000 companies. “Opponents of the free-trade agreement are using numbers and figures they don’t understand.”

That tension shows how Trump’s protectionist talk has not just spurred a debate over trade at home. It has also sent a wave of anxiety abroad, threatening to undermine the trade partnerships U.S. businesses and diplomats worked for years to secure. “If the Americans choose Trump, that will have consequences,” French President François Hollande said last week. “An American election is a world election.”

Trump’s campaign has focused exceptional heat on the South Korean agreement, the secondlargest
U.S. free-trade deal (after the North American Free Trade Agreement, or NAFTA). Sen. Jeff Sessions, the Alabama Republican overseeing Trump’s foreign policy team, previously supported the U.S.SouthKorea deal but now says it was a “mistake.” Trump foreign policy adviser Walid Phares told journalists at Yonhap, South Korea’s biggest news agency, in May that Trump wanted to “go back to ground zero” in the deal.

Trump’s recent campaigning extends a longrunning criticism of the South Korean deal, which in June he said “destroyed nearly 100,000 American jobs” — a claim made using calculations that The Washington Post’s Fact Checker has called “misleading.” In his 2011 book “Time to Get Tough,” Trump criticized “the deal Obama cut with South Korea” as “so bad, so embarrassing, that you can hardly believe anyone would sign such a thing.”

South Korea occupies a central point of U.S. defense strategy: Seated near North Korea and China, it serves as one of the U.S. military’s largest hubs in the AsiaPacific, an area of the world that military chiefs have sought to “rebalance” after years of focus on the Middle East.

But Trump has also targeted the two countries’ decadesold military agreement. Trump has said that South Korea should pay all of the costs for the more than 28,000 U.S. troops stationed there — Korea pays half the cost, or roughly $900million. to station U.S. troops — and that the United States should play hardball, including potentially withdrawing troops, unless Seoul pays.

Trump’s rise has become a nearconstant talking point in South Korea, which since the American intervention in the Korean War has taken a keen interest in U.S. affairs. South Korea is the United States’ sixthlargest trading partner, besting Britain, France and Taiwan. Some link Trump’s ascendancy with the British vote in June to leave the European Union, known as Brexit, as another worrying sign of retrenchment among the importers of the West.

The U.S.-SouthKorea trade deal, which took effect in 2012, launched a 20year process that would squash tariff barriers between the two countries and give U.S. companies a chance at selling more madeinAmerica goods. It became the United States’ first free-trade agreement with a major Asian economy and a model for deals to come.

Opponents in the United States worried that the deal would squeeze out American jobs, because Korean manufacturers could more cheaply produce clothes and other goods. Some Korean businesses responded similarly, worrying about the sudden import of cheap American beef and agricultural goods.

Since 2012, when the freetrade agreement was signed, U.S. imports from South Korea have climbed 18 percent, to $71billion worth of Kia and Hyundai cars, Samsung phones, LG televisions and other items, Census trade data from 2015 shows. But U.S. exports to South Korea have also grown 3 percent, to $43 billion.

Trump and other advocates, including the consumer rights group Public Citizen, have pointed to the difference between those two numbers, or the trade deficit, to suggest that the United States is getting a bitter deal.

But Chul Chung, a vice president at the Korea Institute for International Economic Policy who worked to ratify the U.S.SouthKorea agreement, said that Trump blaming free trade for the woes of the American middle class was “an old cliche.”

“The U.S. is not suffering from the freetrade agreement. It is enjoying it. Think about the benefits to the consumer. It’s no question,” Chung said.

Evaluating how much the deal has done for the United States can be tricky. In April, exports of U.S. goods to SouthKorea fell to their lowest point since 2010 — probably because the South Korean economy has slowed, hurting import demand — although U.S. exports have recovered in the months since. And the U.S.toSouthKorea trade deficit has doubled since the agreement began, to $28 billion in 2015.

There are also success stories. Exports of cars, pharmaceuticals, machinery and other madeinAmerica goods to SouthKorea climbed 8 percent between 2011 and 2015, to $37.3 billion — more than twice as fast as similar U.S. exports rose to the rest of the world, federal data shows.

The International Trade Commission (ITC), a bipartisan federal trade group, said in June that the trade agreement actually improved the trade balance between the United States and South Korea by $15.8 billion last year — meaning that, without the deal, the U.S. trade deficit would have been even bigger.

Expanding tariffs on U.S. trade would probably cause those foreign companies to raise prices on the items they sell to American consumers, economists argue. Those U.S. tariffs also would probably cause other countries to impose their own, hurting the American businesses that make goods sold overseas.

For a case study of how U.S. companies can benefit from open trade, look no further than the American business of plump, fresh blueberries. The United States is the world’s leading global exporter of blueberries, producing 334 million pounds in 2014, but trade restrictions and high tariffs prevented their import into South Korea until 2011, according to the ITC.

Since the trade deal, U.S. berry exports to South Korea have soared, sending millions of dollars back to U.S. growers. Koreans love berries’ health benefits but have limited land for farms, so importing from Oregon — where growers can move fresh berries from farm to market in less than 48 hours — just made sense. South Korea’s imports of fresh U.S. blueberries, cranberries and similar fruits have grown from less than 100 metric tons before the deal to more than 600 metric tons last year, an ITC report shows.

Besides the swapping of basic goods, trade with South Korea provides a few other benefits. The United States actually has a yearslong trade surplus with South Korea not in goods, but in services: American companies exported $10 billion more in services — mostly toward travel, accounting, technology, entertainment and other services — than they imported last year, up from $7 billion in 2011, Census data show.

As South Korea’s pop culture has taken off globally — aided by a “Korean Wave” of Kpop music, TV dramas and global hits like Psy’s “Gangnam Style” — the country has tightened its grip on piracy and paid far more money toward royalties and rights for American music, software and other intellectual property: more than $6 billion to the United States in 2014, data shows. South Korean businesses also create thousands of jobs in the United States, including at a Hyundai plant in Alabama and the Samsung Austin Semiconductor center in Texas.

Like Trump, Democratic presidential nominee Hillary Clinton has voiced opposition to the TransPacific Partnership (TPP) negotiated by Obama with 11 countries, including Japan, Vietnam and Australia. She has said she would review trade deals such as NAFTA, the 1994 agreement signed by the United States, Canada and Mexico. But, unlike Trump, Clinton has not called for the United States to exit global trade agreements or singled out the South Korean deal as specifically damaging.

Foreign anxiety over Trump’s pledges is not exclusive to South Korea. A representative for Huajian Group, the Chinese company that makes 2 million pairs of shoes a year for Ivanka Trump’s apparel line, told the Global Times last month that Donald Trump’s “promises to set up protectionist trade policies” had the company deeply worried.

Others, like the chairman of the Korea International Trade Association, said they were hopeful that Trump’s claims were merely assurances made to win political points.

“Politicians before any election are into winning votes. They can say whatever they want,” Kim said with a laugh from his office in the Trade Tower overlooking Seoul’s Gangnam district. “I don’t think all the pledges made by a certain candidate will be realized.”