On Friday the U.S. concluded a long-awaited free trade pact with South Korea, an early step towards achieving President Obama's goal of doubling U.S. exports within five years. The agreement possesses several key changes from the Bush-era agreement, which was never ratified by Congress. While generally the agreement remains similar to the Bush administration's pact, several alterations made by the Obama administration do indeed water-down President Bush's attempt to more fully embrace free trade.
For example, as The Wall Street Journal points out, a 25 percent tariff on South Korean trucks that would have been eliminated immediately will continue to negatively affect American truck consumers for another eight long years. Furthermore, an 8 percent Korean tariff on American cars will now be continue for another five years instead of being done away with immediately. Thus, these tariffs will continue to put a damper on US economic growth at the exact moment the US needs growth the most.
But we do applaud this agreement as a whole for eliminating 95% of tariffs on goods within five years, and believe it will have an overall positive effect on the US economy, facilitating trade, lowering costs for the American consumer, and increasing exports for the American producer.
Exports, in particular, are a focus of the administration as a way out of the recession. But if Obama is truly sincere about his pledge to boost the sale of U.S. goods to foreign markets, he should not stop at South Korea. These free trade agreements need to continue to develop, ideally among as many countries as possible. For example, the US should pursue freer trade with Turkey. They are the 17th largest economy in the world (Korea is 15th), Goldman Sachs has them labeled as one of the "Next 11" world economies, and militarily they have been close to the US over the last 60 years.
Recently, much has been done to educate US and Turkish companies about each other; now the next step is incentivizing these countries to expand their business to new frontiers. A free trade agreement would play a key role in providing those incentives, thus increasing US exports and decreasing domestic unemployment.On the flip side, cheaper Turkish imports would allow the American consumer to buy less costly products, which will then allow these consumers to either save more or spend that extra money on other goods. Either way, free trade can play an important role in improving the economy. When one takes a closer look, of course a president with the goal of doubling exports should pursue free trade with a country of 73 million consumers. It just occurred with one ally, why not another?