Bloomberg News

Obama Iced Tea Toast Marks Republican-Backed Trade Deal Win

October 16, 2011

Oct. 16 (Bloomberg) -- President Barack Obama and South Korean President Lee Myung-bak were dining at a Korean barbecue restaurant in Northern Virginia when aides interrupted with news that had been more than four years in the making: the U.S. Congress had approved a trade deal between the two nations.

The leaders celebrated with a toast: iced tea for Obama and a Korean beer for Lee, in town for a state visit, according to an Obama administration official who spoke with the president about the meal. They talked about how their deal could serve as a model for future trade agreements.

The accord passed Oct. 12 as part of a broader package of trade deals with Panama and Colombia. Lawmakers also voted to renew assistance for U.S. workers displaced by outsourcing and exporting of jobs, a demand of Democrats and some Republicans.

“We said we believed in trade, but that we had to have a new approach, and that we couldn’t continue along the same path that many Americans thought was failing them,” Ron Kirk, the U.S. Trade Representative, said in an interview.

For the U.S., the Korea trade deal is the biggest since the North American Free Trade Agreement in 1994 and a chance to strengthen the U.S. foothold in Asia. Korean officials have told the Obama administration that the Korean national assembly could give its final approval in the next few weeks and the deal may be fully implemented in the first half of 2012, the official said.

Burdened by Unemployment

For Obama, 50, whose re-election prospects are burdened by 9.1 percent unemployment, his push for the trade deals over opposition from many fellow Democrats and the AFL-CIO, the biggest U.S. labor federation, reflects an evolution since his criticism of the accords as a candidate in 2008. It is also a calculation that voters will reward him for trying to create jobs rather than punish him for opening the U.S. to more foreign competition.

Obama used the trade agreements in his weekly radio and internet address to try and put pressure on lawmakers to move forward on his $447 billion jobs plan. The bipartisan agreement in Congress to pass the trade deals underscores Congress’s “lack of action” on the jobs proposal, Obama said.

In the address, taped Oct. 14 while the president and Lee were at a General Motors plant in Lake Orion, Michigan, Obama said House Republicans are “picking partisan ideological fights” over issues such as environmental protection.

Republican House Speaker John Boehner’s office said that, while the trade deals will help boost economic growth, they were delayed for months by the Obama administration.

Working Together

“This is an example of where the two parties worked together to get something done on jobs,” Brendan Buck, a Boehner spokesman, said in an e-mail. “We just wish it happened sooner because we ended up in the same place the speaker proposed eight months ago.”

The Korea deal may increase U.S. exports as much as $10.9 billion in the first year it’s in full effect, according to the U.S. International Trade Commission. It may increase imports from South Korea by $6.9 billion, the commission said. The accord with Colombia would raise exports as much as $1.1 billion a year. The U.S. Chamber of Commerce said the deal will prevent loss of 380,000 jobs.

Kirk told lawmakers after Obama took office in 2009 that the South Korea accord was unacceptable and vowed to renegotiate it. Obama spent the next two years working to win a scaled-back reduction on auto tariffs with South Korea that won support from the United Auto Workers union, Ford Motor Co. and Michigan Democratic Representative Sander Levin.

Republican Control

When Republicans won control of the U.S. House in November, Boehner and Senate Minority Leader Mitch McConnell of Kentucky said trade is an area where they could work with the Obama administration to boost the economy, according to a senior congressional aide.

Kirk in March told lawmakers the administration was ready to work with Congress on the Korea accord. Senators Orrin Hatch, a Utah Republican, and Max Baucus, a Montana Democrat, urged Kirk to focus on improving the accord with Colombia, which had been blocked by former Democratic Speaker Nancy Pelosi, and on Panama so all three could advance together.

By May, the Obama administration had won assurances on labor rights for Colombian workers and a tax-information exchange agreement from Panama that it said made the trade agreements worthy of congressional consideration. Then, on May 16, Gene Sperling, director of the National Economic Council, announced that the deals wouldn’t be submitted to Congress until lawmakers agreed to renew the worker-aid program.

Political Stalemate

A two-month stalemate took hold, with the Obama administration pushing lawmakers for a commitment to renew the program while Hatch and other Republicans opposed it as unaffordable and ineffective. The administration sought to attach the worker protections to the Korea deal, later backing away from that approach.

For Boehner, the delay seemed unnecessary and became frustrating, according to a congressional aide. The logjam was broken on Aug. 3, a day after Congress ended a separate impasse on raising the federal borrowing limit.

Lawmakers agreed when they returned from recess to vote on the trade agreements and scaled-back worker benefits negotiated between the Obama administration, Baucus and Republican Representative Dave Camp.

“The nature of the legislative process was somebody has to go first,” William Reinsch, president of the National Foreign Trade Council and a Commerce Department official in the Clinton administration, said in an interview. “At the end trust prevailed.”

Visiting Washington

On Sept. 13, the Obama administration announced that South Korea’s Lee would be visiting Washington this week. His trip helped spur Obama to submit the accords on Oct. 3 and push for final passage the day before a state dinner, according to the congressional aide.

The Korea trade accord was approved in the House 278-151, with 219 Republicans and 59 Democrats voting for it. Similarly, there were more Republicans than Democrats backing the other two treaties. The Korea accord passed 83-15 in the Senate. Panama was approved 77-22 and Colombia was the most controversial, passing 66-33 over the opposition of 30 Democrats.

“There were a lot of hands in this victory,” Buck said. “It starts with President Bush’s vision on trade. And while it could have been done a lot quicker, some credit goes to President Obama for not folding to his left flank.”

Workers Concerns

Thea Lee, deputy chief of staff at the AFL-CIO, a frequent Democratic ally, said that while the autoworkers supported the Korea deal, union worker’s concerns that trade agreements might cost them jobs may hurt Obama’s re-election prospects.

She said Obama “gave up on some of the concerns he had raised during the campaign” and the displaced worker assistance is “not an adequate tradeoff” for 159,000 jobs the group estimates could be lost to foreign competition.

“It’s something people will take into account when they decide” how actively to campaign, who to endorse and whom to vote for, she said. “A lot depends on what else he does between now and the election. The president has a lot of challenges in front of him and a lot of opportunities to do the right thing.”

--Editors: Jim Rubin, Ann Hughey.

To contact the reporters on this story: Margaret Talev in Washington at mtalev@bloomberg.net; Eric Martin in Washington at emartin21@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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