In an earlier post about Obama’s shine wearing off in the world, I commented that the President failed to secure a trade agreement with South Korea during his trip to Asia this past week. Why should these foreign affairs matter to us small town folks in SD? Well, one of their sticking points is over beef imported into South Korea. South Dakota produces beef.
Back in 2003, the US had its first case of mad cow disease. South Korea cut off imports of US beef as a precaution. In response, the US agreed to only export young cows (30 months or younger) to Korea as they are less likely to have the disease. In addition to the age restriction, South Korea also imposes a 40% tariff on all US beef.
In 2007, President Bush negotiated a trade agreement with South Korea that would lift the age requirement as well as phase out the beef tariff. The Democrat controlled Congress refused to ratify the treaty. It has still never come to a vote. Then Senator Obama stated that he opposed the agreement and said he would vote against it if it came to a vote.
Why would the Dems block such a treaty? Mainly because of the other industry the FTA deals with – automobiles.
The US automakers unions hate this agreement even though they would seemingly get the better end of the deal.
As noted here
Korea used to be one of the most protected automobile markets in the world. But it has gradually done away with most of the high tariffs and import restrictions that shut out foreign cars and trucks. An 8 percent tariff on cars and a 10 percent tariff on trucks remain, but the U.S.-Korea Free Trade Agreement would remove them immediately with respect to U.S. cars and trucks. As for our own markets, the ratification of the agreement would require us to immediately remove a 2.5 percent tariff on Korean cars, but would give us ten years to phase out a 25 percent tariff on Korean trucks. So it seems like Detroit is getting the better of this deal. What’s not to like?
It turns out the United Auto Workers consider Korean vehicles themselves to be a tariff, since they get better fuel mileage, often have better warranties, and have higher safety standards. Don’t get me wrong – I am all for “Buy American”, but what ever happened to competition driving better development? In South Korea, American cars aren’t popular (kinda like back here). US cars have a 10% market share while European and Japanese cars have a 62% and 28% market share respectively.
According to the Obama administration’s own estimates, if we could come to an agreement on this FTA it would increase the export of American goods to South Korea by approximately $10 billion. Billions more in services. And would support more than 70,000 jobs in the U.S. If the FTA were to be ratified, 85% of all tariffs would end immediately, and the rest would phase out over the next decade. Naturally the National Cattleman’s Beef Association supports the agreement as there are millions of dollars at stake for beef suppliers. Some of that money should belong to South Dakota ranchers. Obama just has to decide whether to side with his union base, or the American rancher.