The makings of an Obama trade agenda

Most of the press following the recent G-20 summit in Toronto focused on President Obama’s inability to persuade Europeans that the global recovery is too fragile for a slowdown in stimulus spending. But the real story was his administration’s pledge to move forward on a long-delayed free trade agreement with South Korea.

The Korea-US free trade agreement (KORUS) was completed in 2007, but congressional Democrats, under pressure from labor unions, have refused to vote on ratification. They charge that, among other problems, the deal would allow South Korea to continue blocking entry to American automobiles and beef. Obama said he wants renegotiations to be completed before he visits Seoul for the next G-20 gathering in November and that he intends to submit the deal to Congress for a vote after the mid-term elections. This is Obama’s first explicit public commitment to push on a specific trade deal with a clear timeline for passage.

America’s 9.5 percent unemployment rate and a very challenging election season might make this a surprising time to try to move forward. But political and security developments in East Asia help explain the timing. China’s recent announcement that it will allow some upward movement in the value of its currency has not appeased critics in Congress, and U.S.-China trade frictions will continue. More importantly, the crisis created when North Korea sank a South Korean naval vessel has sharply increased tensions in the region. These developments provide good reason for the United States and South Korea to move closer together. In Toronto, Obama went so far as to describe South Korea as "the lynchpin" of American policy in Asia — a comment that raised a few eyebrows in Tokyo.

The South Koreans passed this deal long ago and have refused to reopen it to address congressional complaints. But anxiety over what’s happening in North Korea will make it easier for South Korean President Lee Myung-bak to argue for compromise and better relations with the United States. The Obama administration assumption is that passage will become easier after the midterms have passed as enough pro-trade Democrats join Republicans to close the deal.

Forward movement on KORUS could add momentum behind other free trade proposals. House Majority Leader Steny Hoyer (D-MD) has argued that trade agreements with Panama and Colombia should move forward at the same time. The move also creates a possible opening for a U.S.-Japan trade agreement framework, something the president will consider more favorably now that new Japanese Prime Minister Naoto Kan is working to improve ties with Washington damaged during the turbulent tenure of Yukio Hatoyama.

The Doha round is going nowhere, but combine the latest moves with a reinvigorated U.S. push for Russia to join the World Trade Organization, and the Obama administration might finally have itself a trade agenda.