South Korea FTA: Reports of Exploitation are Greatly Exaggerated

Recently there's been more talk in Congress about the United States-Korea Free Trade Agreement (KORUS). As one would probably come to expect by now, the anti-globalizers are angrily shaking their fists and crying foul. Yet they do so for all the wrong reasons.

Check out the In These Times article "South Korea 'Free Trade' Deal: Another Funnel for Exploitation", which was re-posted today on Global Trade Watch's official blog. According to the article, KORUS opens the U.S. market to goods that are 35% "Made in Korea" (meaning that 65% can by low-wage labor in developing countries like China -- which the article equates to as "21st century slavery"). It basically argues that outsourcing to East Asia means exploiting labor abroad while impoverishing labor at home.

Scary stuff, right? What's actually scary here isn't the reality of the free trade deal, but the mish-mash of textbook fallacies and unwarranted anxieties that the article presents as its key arguments. Here's my take on these arguments:

(1) "Job Loss"
Trade doesn't unilaterally destroy jobs. Trade, by definition, involves quid pro quo -- you import something while exporting something else. It's funny how the article never mentions jobs that would be created in industries that would be supplying our exports to South Korea. These industries, according to the Brookings Institution, include finance, telecommunications, law, accounting, health care, and education. So while the ALF-CIO could potentially lose out as a result of KORUS, people in these industries stand to gain. This is on top of the fact that both American and Korean consumers would have access to better quality goods and services at cheaper prices.

(2) Social Safety Net -- "Shove 'em Off the Cliff"??
What the article lambasts as "ensure them a safety net, then shove 'em off the cliff" is actually a very responsible economic policy. The Heckscher-Ohlin Model of international trade shows that since the economy as a whole benefits from trade, the best way to help displaced workers is to promote freer trade and then compensate the workers through unemployment benefits or job retraining.

(3) "Exploitation"
The indictment that traded products will be produced in conditions equivalent to 21st century slavery is moralistic nonsense. As Nobel-winning economist Paul Krugman explained in his 1997 Slate article "In Praise of Cheap Labor", jobs in China or Myanmar at low wages and spotty working conditions (by U.S.-standards) is better than no jobs at all. By arguing for what is essentially "good jobs in principle, no jobs in practice" for workers in these countries, the "Funnel for Exploitation" article is effectively saying that the workers deserve to stay in abject poverty.

The fact of the matter is that KORUS is rather economically benign for both South Korea and the United States. Or to borrow from Mark Twain's immortal quip: the reports of exploitation are greatly exaggerated.