[M]y fellow chairman, Congressman John Spratt, and I just wrote a letter to United States Trade Representative Ron Kirk urging him to negotiate a fairer free trade agreement with the Republic of Korea. The current agreement, we wrote to Ambassador Kirk, is skewed unfairly toward South Korea. While we value our long-standing friendship with the people of South Korea, friends must trade with each other fairly.Umm, ok. Now, leaving aside the obvious arguments about how misguided it is to make "reciprocity" the ultimate goal of US free trade policy, let's for a moment assume that it's really important. What, pray tell, is one of the awful things causing this terrible lack of trade reciprocity?
The proposed trade pact is wrong because it would allow a massive flow of highly technical industrial textiles from Korea into the United States with few opportunities for reciprocal export of U.S. products to Korea. In its current form, the net result will likely be further job losses in segments of an industry critical to our districts. We have asked Ambassador Kirk, as he reopens the automotive and beef sectors of the agreement, to also revisit the textile provisions and revise sections that could cause great harm to the domestic textile industry.
The current trade framework will give goods of Korean origin duty-free entry into the U.S. market, while U.S. exports to Korea will still be subject to a 10 percent value added tax. It is misleading for U.S. officials to speak of zero-for-zero duty reductions when the U.S. imposes no comparable border tax on imports from Korea. Remedying this inequity should be part of any Korean trade agreement.Hmm. Well, there's only one problem with this argument: a VAT is not a "duty" at all. A VAT is an internal consumption tax, like a sales tax here in the US, on all domestic sales of a product - imports and domestically produced products. For example, an American (or Chinese or French or...) T-shirt sold in the Korean market would be subject to the same 10% VAT as a Korean t-shirt sold in Korea. Thus, the VAT provides perfectly equal (or "non-discriminatory" in legalspeak) treatment among like products, and if it were anything otherwise - for example if the VAT only applied to imports - such disparate tax treatment would be an express violation of WTO rules (and the KORUS FTA). Indeed, one only needs to conduct a 30-second Google search to see that no such tax discrimination exists in Korea. Furthermore, the United States might not have a national VAT (to the White House's chagrin, natch), but we do have state sales taxes, to which Korean (and all other) imports would also be subject. And yet we don't hear the Koreans screaming about that, now do we?
Put simply, it appears that Rep. Coble and his Textile Caucus buddies in Congress are complaining about a lack of "reciprocity" in the KORUS where none actually exists. Indeed, the only way that the US and Korea could negotiate Coble's version of "reciprocity"would be for Korea to dismantle its entire domestic tax system, or for the United States to adopt a 10% national VAT (and let's not give the administration any ideas). Put even more simply, Coble's comparing apples and oranges and then complaining that the oranges don't taste like apples. And in the process, he and his colleagues are throwing up yet another unnecessary political roadblock to the most economically significant trade agreement since NAFTA.
Such actions reflect either a stunning ignorance of global trade rules and basic economics, or a blatant attempt to intentionally mislead the American people to the detriment of the US economy.
But our elected officials would never do the latter, right? Right?