Dissecting the Korea-Obama Trade Agreement

The idea that Asian people are stealing jobs from American auto workers is one of the founding myths of the Democratic Party, one which probably goes back to the time of Henry Ford or the invention of the wheel.

For reference, here's a table of Democratic presidential candidates and their stealing-jobs countries of choice:

Carter	Japan
Mondale	Taiwan, Singapore
Dukakis	Japan, Tanks
Clinton	Japan
Gore
Kerry
Obama	Korea

Back during the election, I was surprised by how easily Obama trashed the KORUS FTA, and the dodgy accounting in his trade figures that went unchallenged by the press. Somehow he forgot to mention that GM-Daewoo has 13% of the market in Korea, and that Korean brands manufacture a significant number of the cars that they sell in the US, in the US. While these figures certainly cast doubt on Obama's fact-checking, it's still surprising that Korea buys fewer Escalades than the average public housing project. How did this come about?

A little more research revealed the utterings of Sander Levin, a congressman whose job it is apparently to sell cars. He was probably the author of Obama's remarks on "hidden trade barriers", and he is the type of congressman who sees no contradiction between voting against CAFE (fuel economy) standards and for CO2 reductions and the Kyoto treaty. He is from Michigan.

Unlike Obama he also sees no need to disguise his objections to similar legislation in foreign countries, so with his help I was able to dig out the gist of the Korea-Obama Trade Act. The "hidden trade barriers" in Levin's words are taxes based on engine displacement, which the Koreans enacted in order to avoid going broke importing oil, and another tax to fund public transportation. Similar taxes are levied in Europe and Japan.

So how discriminatory are these taxes? With a little more digging I found this little gem:

The Korean government levies such high tax rates because it wants to encourage energy conservation in addition to curbing spending on luxury goods. Accordingly, bigger cars which consume larger amounts of fuel and which have higher sticker prices are subject to higher tax rates. As heavy as these taxes may be, however, they and imported foreign cars on equal terms. Outside of import tariffs, it therefore cannot be argued that foreign cars are treated unfairly in the domestic market.

On the subway bond tax, another "hidden in plain sight" tax/trade barrier, here's the best description I could find:

Governments have also developed vehicle taxation programs to support government programs to ease environmental pollution. For example, Korea applies either a subway bond, or a rural development bond to vehicle sales (depending on location of vehicle sale). The subway bond program taxes vehicle sales in order to help fund subway development. One goal of this program would be to help ease traffic congestion and the corresponding vehicle emissions.

Sounds downright evil, this lowering of emissions and funding of public transportation. So how did a fairly innocuous, if not downright environmentally appealing tax scheme turn out to be Obama enemy number one? That's one answer we'll probably never hear.

Comments

[kushibo]

Good on you for this.

I made some similar points a year earlier, but as we can still see, they bear repeating.

I'm a lifelong Democrat, but I didn't vote for Obama because of this very thing.