The protectionists / isolationists aren’t the only ones who are nervous about a potential free-trade agreement between the United States and South Korea. The Japanese are jittery, too.
“We can’t get left behind,” said a Japanese official quoted in the Wall Street Journal last week. “Japan is worried about this.”
It’s not hard to see why: South Korea stands to gain an important competitive advantage over Japan. If American policymakers are smart, they will turn this Asian rivalry into an economic boon for the United States.
Think of it as a free-trade domino effect. If trade barriers in South Korea fall, they probably will fall in Japan as well.
Earlier this year, U.S. trade negotiators completed a free-trade agreement with South Korea. It’s the biggest deal they’ve struck since NAFTA more than a decade ago. Analysts say that total trade between our countries could grow by one-third in just a few years.
Congress still needs to approve the agreement, and so far lawmakers haven’t shown much interest in doing so. But anything is possible and the deal has many supporters. That’s why Japan is paying close attention.
The stakes are high for South Korea and Japan. If the agreement were to become a reality, South Korean manufacturers would gain improved access to American markets. Flat-panel televisions made in South Korea, for instance, would not have to pay a 5-percent tariff that would still apply to flat-panel televisions made in Japan. Moreover, cars imported from South Korea would avoid a 2.5-percent tariff that would still apply to cars imported from Japan.
Acting rationally, Japan would try to obtain similar preferences. Given that flat-panel televisions can cost hundreds of dollars and cars can cost tens of thousands, these tariffs represent a lot of money. Price-conscious consumers certainly would take note of them as they shop.
Under a single trade agreement with South Korea or two with both South Korea and Japan, consumer prices would come down and ordinary Americans would benefit. That’s an excellent reason for Congress to get the ball rolling and approve the trade agreement with South Korea.
The good news doesn’t stop there. Trade agreements are the products of bargaining – each partner should get more than what they started with. If Congress says yes to the pact with South Korea, many of the tariffs that currently inhibit American farmers would vanish. Farmers could move on to benefit from a deal with Japan as well.
In my half dozen trips to Japan, I’ve seen that Japanese farmers are incredibly inefficient. The average Japanese farm is less than 4 acres in size, compared to a U.S. average that approaches 500 acres. Rice is a staple of the Japanese diet, but Japanese protectionism makes its price more than three times higher in Japan than in the United States.
The bottom line is that negotiations can lower or remove these artificial barriers, letting American farm products in and take advantage of our competitive abilities.
Trade between the United States and Japan surely needs to grow. In 1996, about 11 percent of our total exports went to Japan. Last year, that figure had dropped dramatically to less than 6 percent, according to the U.S.-Japan Business Council.
Given the healthy growth in exports, perhaps we shouldn’t worry too much about which countries are buying our products and which aren’t. Yet exports to Japan haven’t suffered in a merely relative sense. They’ve suffered in an absolute sense. We sold fewer exports to Japan in 2006 than we did in 2000.
There’s no good reason for this to continue. Japan is the world’s second-largest economy. It’s the third-largest buyer of our exports, after Canada and Mexico. This is an economic relationship that we should try to improve through trade talks, rather than neglect through inaction.
In my view, the free-trade agreement with South Korea deserves support simply on its own merits. It will create economic opportunity in the United States and give farmers a better chance to sell their products abroad.
The prospect of constructive trade talks with Japan simply sweetens the deal--especially if Americans get to sell more corn sweeteners.
Dean Kleckner, an Iowa farmer chairs Truth About Trade & Technology www.truthabouttrade.org
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The protectionists / isolationists aren’t the only ones who are nervous about a potential free-trade agreement between the United States and South Korea. The Japanese are jittery, too.
