[Ip-health] A Korea-U.S. trade agreement: what is at stake? - Dean Baker

[Dan Beeton]

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http://english.hani.co.kr/arti/english_edition/e_editorial/143941.html
[1]A Korea-U.S. trade agreement: what is at stake?
Dean Baker, co-director of the Center for Economic and Policy Research
There has been considerable opposition within South Korea to the proposed
trade agreement with the United States. The opponents of this deal have a g=
ood
case.
The basic story in any bilateral trade pact is that both countries reduce
their trade barriers, thereby allowing consumers in both countries to benef=
it
from lower prices and producers to benefit from an increased export market.
There are also losers - the domestic producers who are unable to compete
without protection from foreign competition. But, proponents of these trade
pacts will contend that the gains to the winners exceed the losses to the
losers, so the country as a whole benefits from trade.
That=92s the simple story. The reality is more complicated. First, the fact=
 that
the benefits to the winners exceed the losses to the people who are harmed =
by
increased trade provides little consolation to those who lose out from a tr=
ade
agreement. In the United States, most of the workforce has seen almost no
increase in real wages over the last quarter century. Trade has been one of
the main factors behind this wage stagnation. The benefits to those who gai=
ned
from trade - business owners and professionals - may have been larger than =
the
losses suffered by the bulk of the workforce, but this doesn=92t make worke=
rs
feel any better about a quarter century of wage stagnation. Those who stand=
 to
lose from a new trade agreement with the United States (farmers top this li=
st)
are certainly right to be concerned about their livelihoods.
But, this is only part of the story. While the United States likes to call =
its
trade deals "free trade agreements," this is inaccurate. An important part =
of
the proposed pact with South Korea would actually involve increasing
protectionist restrictions in the form of tighter patents and copyright rul=
es.
The United States trade negotiators make tighter intellectual property rule=
s a
central plank in their agenda in response to demands from the U.S. software=
,
entertainment, and pharmaceutical industries. They hope that with stronger
intellectual property rules, they will be able to charge more for their
products in South Korea, thereby increasing profits.
It is also important to realize that the United States takes these rules ve=
ry
seriously, especially when it comes to pharmaceuticals, where the most mone=
y
is at stake. The United States has a standard pattern in these negotiations=
.
It insists on new intellectual property rules with whom it is negotiating.
Then, as soon as the deal takes effect, the United States immediately press=
es
to get the strongest possible interpretation of every clause, even when it
means far higher drug prices for its new trading partner. The situation of
Australia, which just signed a new trade pact with the United States last
year, provides a good example of this pattern of behavior.
>From an economic standpoint, imposing more stringent intellectual property
rules in South Korea is largely just a transfer from firms and consumers in
South Korea to the U.S. corporations that hold the patents and copyrights. =
It
is very generous of the South Korean people to be willing to pay more money=
,
but it=92s not clear why they should.
The key argument usually put forward by proponents of a new trade agreement=
 is
that United States is the world=92s largest import market. According to thi=
s
argument, it might be worth paying more money for movies, software and drug=
s,
if South Korea can have better access to the huge U.S. market.
On this point, it is worth taking a more careful look at the numbers.
Currently, the United States is by far the world=92s largest importer; its
market has grown by more than 1.1 trillion USD over the last decade. While
this may look like an inviting market, it=92s important to realize that the
United States also has an enormous current account deficit. Virtually all
economists agree that it will not be able to sustain this current account
deficit for much longer. In the not too distant future, the current account
deficit must fall to a more sustainable level. When it does, the U.S. impor=
t
market will shrink.
At the Center for Economic and Policy Research, we did a short study that
projected that the U.S. import market would shrink by more than 300 billion
USD over the next decade, as the U.S. current account deficit adjusts to a
sustainable level. This means that, rather than competing away market share=
s
from domestic U.S. producers, South Korea=92s exporters will have to compet=
e
with exporters from China, India, and elsewhere for a share of a rapidly
shrinking market. This does not look like such a great prize.
In short, in this new trade agreement, South Korea is being asked to make
concessions on intellectual property and elsewhere that will impose
substantial costs on its economy. The benefit that it gets in return is
increased access to the U.S. market. If the U.S. import market shrinks as w=
e
have projected, then South Korea may find that it has made costly concessio=
ns
for nothing.
Dan Beeton
Center for Economic and Policy Research
1611 Connecticut Avenue, NW, Suite 400
Washington, DC 20009
Phone: 202 293 5380 x104
Fax: 202 588 1356
E-mail: beeton@cepr.net / www.cepr.net[2]

=3D=3D=3DReferences:=3D=3D=3D
  1. http://english.hani.co.kr/arti/english_edition/e_editorial/143941.html
  2. http://www.cepr.net/