With American companies panicking that a trade agreement between the European Union and South Korea is poised to rob them of millions of dollars, business groups are increasing pressure on Congress to pass a similar deal this summer.
While much of the debate surrounding the long-stalled agreement between the U.S. and Korea has focused on American automobile parts, pork and benefits for out-of-work Americans, the financial services and medical devices industries have become key players in the last-minute campaign, highlighted this week by a U.S. Chamber of Commerce tour of key districts.
The business lobby is also running print and Internet advertisements threatening massive job losses if a U.S.-Korea trade deal is not passed by Friday, when the country will open its borders to thousands of European products at a reduced or entirely duty-free rate.
The lobbying effort comes at a pivotal time for the Korean pact and for similar deals with Colombia and Panama. Senate Finance Chairman Max Baucus (D-Mont.) and the White House announced an agreement Tuesday to add to the Korea pact an expansion of the trade adjustment assistance program, which provides benefits to workers who lose their jobs because of international trade. Adding those provisions could help clear the way for a vote on Korea and the other free-trade deals.
But that fix is not without controversy. Already, crucial Republicans, such as Senate Minority Leader Mitch McConnell (Ky.) and Finance ranking member Orrin Hatch (Utah), have said they oppose adding trade adjustment assistance to the Korea pact.
No matter how fast Congress moves, getting a deal passed by July is all but impossible.
Meanwhile, lobbyists are stepping up pressure to pass the trade deals. American exporters say Congress’ failure to act could put them at an instant disadvantage with European competitors when the EU agreement goes into effect Friday. Both the EU and the U.S. exported just less than $30 billion worth of goods and services to South Korea in 2009, according to World Trade Organization data, and they compete across all major sectors.
Under the EU’s agreement, for example, the Korean tariff on medical devices from European companies will drop immediately from an average of 5.4 percent to 1 percent, giving European device companies a 4.4 percent price advantage over American companies. In 2009, the U.S. exported about $859 million in medical devices to South Korea, compared with the $839 million sold by European companies, according to the WTO.
“Many hospitals here do multiyear contracts, so locking this in will have implications for many years to come,” said Amy Jackson, president of the American Chamber of Commerce in South Korea, a group that encourages trade.
To drive home this point, the U.S. Chamber’s pro-trade, grass-roots campaign — with Korean ambassador Han Duk-soo in tow — is swinging through Syracuse, N.Y., today to visit medical device-maker Welch Allyn and Reps. Ann Marie Buerkle (R-N.Y.) and Bill Owens (D-N.Y.).
On Monday, the chamber delegation met with executives at Prudential in Newark, N.J., and on Tuesday, with employees of defense contractor Raytheon and an aide to Sen. John Kerry (D-Mass.).
This week’s trip is one of the chamber’s last in a six-month, 14-state tour with the Korean ambassador to crucial spots, focusing on states whose Members have not often supported free-trade deals and on the districts of most of the House Republican freshmen, said Leslie Schweitzer, the chamber’s senior trade adviser in charge of its grass-roots program, TradeRoots.
“We need to focus on the financial services and medical device sector because those are the ones people don’t necessarily think about benefiting from free-trade agreements,” she said.
It is not clear how real the deadline panic is. For some commodities, such as pork, it will take 10 years for the European agreement to be fully implemented, giving American producers time to make up losses. Opponents of the Korea deal say July 1 is nothing but empty rhetoric from corporate America.
“It’s total bulls—,” said Lori Wallach, director of Public Citizen’s Global Trade Watch. “They’ve said the same thing about every trade agreement … and it hasn’t been right.”
Still, American company lobbyists making the rounds on Capitol Hill this week said impression is everything.
“We don’t want to be left in the dust,” said Dianne Sullivan, a lobbyist for the American Council of Life Insurers. “South Koreans are likely to perceive, if nothing else, that a European brand is going to give them better bang for the buck if things are changing for European companies that aren’t changing for U.S. companies.”
European companies have spent the past six months gearing up for a new market that some say could increase the EU’s exports by $30 billion to $40 billion. Investors are already on the ground in Seoul, and business groups are holding events in major European commerce centers to help companies take advantage of the new market, said Adrian van den Hoven, who manages international affairs for BusinessEurope.
“When we look at U.S. trade policy, we wonder, ‘What are those people doing there?’” he said. “That’s not at all what our business community would accept.”
The chamber’s grass-roots effort won’t go unchallenged. Opponents of the trade deals also have ramped up activities for the recess. Activists are distributing “No Korea FTA” signs for July Fourth parades that Members are planning to attend, said Wallach, whose group is part of a coalition fighting the agreements. The coalition, Citizens Trade Campaign, includes unions, environmental and religious groups.
“We basically have made every Congressional recess a major field action week,” said Wallach, whose group is focusing on states such as Iowa, Florida, New York and Colorado. “Just in the states we’re covering, there must be 50 meetings and town halls.”