[Viewpoint] Long road ahead for Korea-U.S. FTA

The Korea-U.S. Free Trade Agreement is now almost three years old, but the road to passage in the United States this year still remains strewn with obstacles.

To understand the challenge ahead, it is worth recalling how the pact reached its current impasse. By the time negotiations concluded in 2007, the Bush administration’s ability to implement legislation had been seriously weakened. In the midterm elections of 2006, Democrats seized power from Republicans in both houses of Congress. Democrats then sought to repudiate many Bush administration policies, and foiled efforts by President George W. Bush to pass the three pending free trade agreements (with Korea, Colombia and Panama). Then, the onset of the global financial crisis, the near collapse of the U.S. auto industry and rising U.S. unemployment together worked to intensify Democrats’ traditional skepticism of trade deals.

Against this backdrop, then-Senator Barack Obama campaigned for the presidency with strong support from traditional Democratic constituencies like labor unions, who generally oppose free trade. He promised a departure from Bush administration trade policies and the adoption of new trade principles that would put American jobs first.

He also took the position that, while he did not oppose the Korus FTA, the deal should be revised to provide for better Korean market access for U.S. exports, particularly for U.S.-made autos. The agreement thus entered the Obama administration as an orphan with an uncertain future.

Its prospects worsened when Obama assumed the presidency in 2009. The new administration was immediately engulfed in a deepening global financial crisis, the most severe U.S. recession in 80 years, and a deteriorating security situation in Afghanistan. Management of these massive crises left no room for the Korus FTA.

Now, one year into the Obama presidency, the political landscape still does not bode well. Although the great financial crisis of 2009 has passed, continuing economic malaise, protracted unemployment and the approach of the November 2010 midterm elections will most likely keep the agreement on the sidelines. Indeed, the midterm elections are emerging as a make-or-break issue for the president’s domestic agenda in light of recent Republican electoral gains - most notably, the election of Scott Brown to the Massachusetts Senate seat long held by the late Democrat Ted Kennedy.

To preserve Democrats’ power in the midterm elections, the top goal for the party, President Obama must accomplish two major feats, both of which have important implications for the Korus FTA.

First, President Obama must sign legislation to implement the main pillars of his domestic agenda: health care reform and job creation. Without health care reform, Obama will be perceived to have failed in what was supposed to be a defining feature of his presidency. Such a failure after a year of intense effort will open his administration to criticism among voters that it is incompetent and will have a catastrophic impact on the midterm elections.

Similarly, Obama’s economic policies will also be seen as a failure if they do not succeed in stemming unemployment - now hovering near the important psychological threshold of 10 percent and, accordingly, a top issue for voters. To pass such legislation, Obama must unite all Democrats in Congress. Many Democrats, however, are strongly opposed to FTAs, and White House political advisors, fearing that pushing for the pending deals could splinter the party, are urging the president to delay action on the FTAs until after the November midterm elections to preserve unity among Congressional Democrats.

Second, Obama must energize the Democratic base to re-elect Democratic majorities to Congress in November because voters, particularly crucial independent voters, usually turn against incumbents during difficult economic times. But many Democrats are demoralized by the administration’s failure, to date, to deliver on key campaign promises such as closing the Guantanamo Bay prison and reforming Wall Street.

In particular, the labor unions - the Democrats’ most important constituency - are disappointed by Obama’s failure to introduce new policies that would make it easier for unions to organize and to renegotiate NAFTA, as he had promised during his campaign. At a time when Democrats need labor unions the most, both Obama and Congressional Democrats will find it virtually impossible to promote the FTAs, which the labor unions vehemently oppose.

Even if the deal’s issues were resolved and Obama were to send it to Congress this spring, a number of practical factors make it difficult to have a Congressional vote prior to the November midterm elections.

For one, the legislative calendar is already full to the choking point with bills on health care, jobs, financial reform, education, energy and climate change. And the already crowded legislative calendar for 2010 is likely to be truncated by the need felt by many Democratic members of Congress to begin their re-election campaigns earlier. So, the number of legislative days needed to consider and ratify the Korus FTA this year will most likely not be adequate.

To be sure, Obama supports the agreement and views its passage as part of a comprehensive plan to boost U.S. exports and re-engage Asia. But he is stuck between a rock - his genuine belief that the deal should be ratified - and a hard place - progress on his domestic agenda, which could be spoiled by insistence on passage. Also, unfortunately for the FTA, in the current political environment, Congress’ power to block trade deals is greater than the president’s power to push them.

Given this, the most realistic path forward for Korea might be to seek from Obama a firm commitment to press hard for the passage of Korus just as soon as the Congressional context permits after the November 2010 midterm elections. At a minimum, Korea should seek from the Obama administration a concrete work plan intended to remove all remaining impediments to U.S. passage of the Korean FTA in 2010.

Korea has been judicious and patient with the U.S., and is owed at least such a road map to U.S. ratification. Equally important, with such a work plan in place, the Obama administration will then have a way to put its own stamp on the deal, and to make this orphaned deal finally its own.

*The writer is a senior partner at the Washington, D.C. law firm Akin Gump Strauss Hauer & Feld LLP.

by Sukhan Kim