My latest video post discussed the potential benefits of the U.S-South Korea free trade agreement. However, the U.S. trade deficit with South Korea in manufactured goods has increased since the agreement took effect in March of this year.

According to a U.S. Congress Joint Economic Committee report, U.S. exports in goods to South Korea dropped from US$4.2 billion in March to US$3.5 billion in July. U.S. Imports from South Korea increased from US$4.8 billion to US$5.4 billion during the same period.

The United States mainly imports computer and electronic products from South Korea. On an industry-by-industry analysis, the United States holds a trade surplus with South Korea in food, chemicals and machinery, according to the same report.

I agree with the reports final conclusion that it still too early to draw a definitive conclusion about the impact of the agreement on the U.S. economy.

I would also go further to state that even if the agreement does not result in a trade surplus for the United States, it is not a zero-sum game on an industry level. Producers in the food, chemicals and machinery sectors benefit from increased access to the South Korean market, which, in turn, helps the labor market in the United States.

U.S. trade deficit has grown, candidate policy specifics have not

We are three weeks into the new year, and the GOP presidential candidates have already had several intense debates (New Hampshire – 2; South Carolina – 2 with another one scheduled for this Thursday). So far Mitt Romney has won the Iowa caucuses and New Hampshire primary. He has also been the main candidate to focus on international trade as a way of improving U.S. economic growth.

Romney has discussed China’s failure to play by trade rules set by the World Trade Organization and supporting free enterprise so that U.S. businesses can compete internationally. However, there has been scarce information as to exactly how Romney would improve U.S. competitiveness if elected president (see his perspective on international trade).

Such information is even more relevant now. A recent report by the U.S. Census Bureau shows that, despite a few months of the U.S. trade deficit narrowing, its trade gap with the rest of the world actually widened considerably by November 2011. 

As one who studies the U.S. domestic economy within the larger global economy, I decided to exercise my civic duty and participate in one of these debates to get the answer that I was seeking. So, during the Jan. 8 Concord, NH debate sponsored by NBC News, Facebook and the Union Leader, I submitted a question for Romney via Facebook asking the following:

You have discussed free and fair trade. Besides calling China a currency manipulator and telling China to play by the trade rules, could you say exactly how you would make the United States more competitive in the global market while ensuring that U.S. workers also benefit?

Well, my question did not reach Romney. Instead, it received two “likes” on Facebook, which still created a sense of pride that someone showed interest. 

I am still curious as to how Romney would enhance U.S. competitiveness in the global market. In November 2011, the U.S. trade with the world reached -$47.8 billion. That is an increase from -$43.3 billion in November 2010. 

As more debates occur throughout 2012, hopefully one of my questions via Facebook or Twitter will reach Romney and the other GOP presidential candidates. 

** For data on the narrowing trade deficit, see comments with citation in response to my post The Contradictions of the Free Trade Debate.

What’s at stake for Iowa?

Today, voters in Iowa will select their preference for the Republican presidential nominee. The
economy remains a significant issue for a number of voters, including those from Iowa. Since international trade has proven beneficial to Iowa’s economy, the presidential candidates’ perspectives on international trade are worth highlighting.

International trade has played a role in Iowa’s economic growth. As recent reports show, Iowa’s economy has grown as a result of its agricultural exports to the international market. The increased exports are the result of higher demand for U.S. agricultural products, according to a 2011 report.

Iowa agriculture and the global economy:

• Exported US$7.04 billion in FY2010
• Main exports are corn, soybeans, meat products
• Eight percent increase in agricultural exports from 2009
• Second leading U.S. agricultural exporter behind California in FY2010
• Top 3 markets for agricultural products – Canada (31%, $3.4billion); Mexico (17%, $1.8 billion); and Japan (8%, $853 million) 
• Will continue to grow as a result of renewable fuels production.

The perspective of each Republican candidate who is participating in the Iowa Caucuses can be viewed here.

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Basketball, football, and caucuses

The past few weeks have brought a wonderful holiday season, in which I could spend time with family and close friends. These weeks have been filled with watching my favorite basketball team win some games and lose others; hoping that my favorite college football team makes it to the Rose Bowl next year; and wondering who will make it to the Super Bowl this year. (Of course, I think I also ate way too much.)

Now that we are in 2012, I already know that the same experiences that I have had in the last few weeks for the holiday season, except for the eating part, will continue over the next 11 months as a part of the political season.

That political season heats up tomorrow with the Iowa Caucuses. (To read about the importance of the Iowa Caucuses, click here.)

Some of the GOP candidates have won debates and lost others. Other GOP candidates claimed victory during some straw polls and accepted defeat in others. Some GOP candidates enjoyed high ratings in the polls and watched as their support declined rapidly. Other GOP candidates dropped out of the race altogether.

After all of this, many voters in Iowa are still undecided on a candidate to represent the Republican party during the general presidential elections. 

2011 In and Out

1. Herman Cain – Businessman from Georgia – ended bid on 12/3/2011
2. Jon Huntsman, Jr. – U.S. Representative for Utah
3. Michele Bachmann – U.S. Representative for Minnesota
4. Mitt Romney – Former Governor of Massachusetts
5. Newt Gingrich – Former Speaker of the House
6. Rick Perry – Governor of Texas
7. Rick Santorum – Former Senator of Pennsylvania
8. Ron Paul – U.S. Representative for Texas
9. Thaddeus McCotter – U.S. Representative for Michigan – ended bid on 09/12/2011

Candidate Views on International Trade (in order of standing in latest poll)

• Mitt Romney – 24%
• Ron Paul – 22%
• Rick Santorum – 15%
• Newt Gingrich – 12%
• Rick Perry – 11%
• Michele Bachmann – 7%
• Jon Huntsman – not competing in Iowa (Huntsman explains why.)

My conversation will not only be about which two teams will play in the Super Bowl and who I think will win, but also which GOP candidate will secure the nomination and who the president for the next four years will likely be.

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U.S-China Trade Dispute, What Businesses Can Learn

In several GOP debates, the phrase trade war was thrown out in the war of words over international trade. Some are questioning whether the dispute between the United States and China over the latter’s subsidies for solar panel manufacturing will result in a trade war or create opportunities for the U.S. solar panel manufacturers and consumers.

Currently, solar panel manufacturers via the Coalition for American Solar Manufacturing (CASM) have filed a complaint against subsidized Chinese solar imports. Additionally, CASM request that the U.S. places new tariffs on these same imports from China.

The CASM has filed a complaint with the U.S. International Trade Commission and the U.S. Department of Commerce. On Dec. 2nd, the USITC found that the U.S. solar panel industry has been harmed by Chinese imports. A ruling from the Commerce Department is anticipated around January 12.

Viewpoints

CASM

• Chinese subsidies create unfair competition
• Many companies have gone bankrupt as a result of China’s subsidies

Coalition for Affordable Solar Energy

• Makes solar products cheaper for U.S. consumers
• Boosts business for installers and distributors
• Increased tariffs would reduce competition

As a supporter of free and fair trade, subsidies should be eliminated. Both China and the United States are members of the World Trade Organization. Therefore, the rules to promote trade liberalization and reduce trade distortion should be followed. From an economic perspective, subsidies and exports sold well below market value distort trade. From a legal perspective, the rules of trade established by the WTO should be followed to ensure fair competition and a trading environment that benefits everyone. (See related posts about agricultural subsidies: The Contradictions of the Free Trade Debate; The Selectiveness of Entitlement Reform; Loud rejection of subsidies to African American farmers, silence on agricultural subsidies overall)

What businesses can learn 

This case is an illustration of the resources available to those industries that may be harmed by international trade.

The steps to filing a complaint against unfair trade practices are as follows:

• File a complaint with the U.S. International Trade Commission;
• US DOC investigates and determines whether or not imports are entering the U.S. market at less than market value and/or have been subsidized, i.e, received governmental financial support;
• US ITC investigates and determines whether or not these same imports actually harm a U.S. industry; and
• If goods are sold at less than market value, have been subsidized and harm U.S. industry, US DOC will allow for the use of duties on imports to counter the negative impact on the U.S. industry.

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