Auto Concerns Holding Back South Korea Trade Deal

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"Auto Concerns Holding Back South Korea Trade Deal"

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In principle, an agreement with South Korea to lower trade barriers should make more countries more prosperous. It’s all the more appealing in that we’re talking about two wealthy democracies, so you don’t even have concerns about systematic undercutting of American wages. But there are some problems:

President Barack Obama’s call to complete a trade deal with South Korea in 2010 is stirring a hornet’s nest among Michigan lawmakers on Capitol Hill.

They worry it will harm the U.S. auto sector and warn it will have to be significantly changed to win support.

“If we don’t get an agreement on access for American automakers, I can’t support moving forward on an agreement,” said Sen. Debbie Stabenow (D-Mich.) in a short interview last week.

As I said earlier, it’s hard for me to see how liberal trade regimes are going to be sustained—much less expended—in the face of weak labor markets as far as the eye can see. I would ordinarily be quite comfortable telling the U.S. auto industry that their interests can’t take priority over an overall beneficial measure. But given the state of things in Michigan, who’s really going to say Debbie Stabenow is doing the wrong thing for her constituents? Nobody likes becoming a victim of frictional unemployment, but if it really is just frictional you can say that it’ll all work out in the end and observe that these measures raise overall living standards. But sustained high levels of unemployment make flexibility an incredibly hard sell. Which is fine for “insiders” who’ve got jobs, but makes it hard to generate the kind of economic growth that provides employment for new entrants into the labor market.

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