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Diplomacy in Action

Conversations With America: U.S.-Korea Free Trade Agreement


Interview
Jose W. Fernandez
   Assistant Secretary, Bureau of Economic, Energy and Business Affairs
Cheryl Benton
   Deputy Assistant Secretary, Bureau of Public Affairs
Jeffrey Schott, Senior Fellow, Peterson Institute for International Economics
Washington, DC
April 27, 2011


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MS. BENTON: Hello. I’m Cheryl Benton, Deputy Assistant Secretary of State in the Department’s Bureau of Public Affairs. Welcome to the State Department and thank you for joining us for Conversations With America, a series of video discussions that enables you to watch and participate in live exchanges between top State Department officials and the leaders of nongovernmental organizations.

Today’s topic is the U.S.-Korea Trade Agreement. We will discuss how the agreement will bolster the U.S. economy and strengthen our relationship with South Korea and the next steps in the approval process. Our blog, DipNote, has received many questions and comments on today’s topics from all around the world. We have selected some of them for this broadcast.

Before we begin, however, let’s meet our guests. Jose Fernandez is the Assistant Secretary for Economic, Energy, and Business Affairs at the Department of State. He oversees and coordinates work on international trade and investment policy, international finance, development and debt policy, economic sanctions and combating terrorist financing, international energy security policy, international telecommunications and transportation policies, and support for U.S. businesses and the private sector overseas.

Jeff Schott is our Peterson Institute for International Economics Senior Fellow. He works on international trade policy and economic sanctions. Welcome, Jeff, and thank you for joining us. I’d like to invite you to please give our viewers your opening remarks and I’d like to start with Jose and ask him to begin.

ASSISTANT SECRETARY FERNANDEZ: Thank you. Thank you so much for having me here and it’s a pleasure to be here with Jeff as well. I think this is a conversation that’s worth having. It’s a conversation that I think will bring forth the point that the Korea Trade Agreement, which is soon to go to Congress, is an agreement that’s been tailored to increase American jobs, to create more trade opportunities for the U.S., and also to cement a strategic relationship with Korea that’s already quite strong. So we’re very, very positive about this agreement and we hope that it comes into force soon.

MS. BENTON: Good. Thank you, Assistant Secretary. Jeff, can you give us a few opening remarks?

MR. SCHOTT: Well, yes. Thank you very much for inviting me, and it’s a pleasure to be with Assistant Secretary Fernandez. His resume is so broad that I’m pleased that he has the time to join us.

The U.S.-Korea Free Trade Agreement is critically important for two reasons. First, it is the largest trade agreement that the United States has entered into since the NAFTA, the North American Free Trade Agreement, and covers more than a hundred billion dollars of two-way trade in goods and services. So it is vitally important for both economies. And second, as Secretary Fernandez said, it is critical to reinforcing one of the most important security relationships we have. South Korea has been a vital ally of the United States for the past six decades or more, and this contributes to cementing an already strong relationship.

MS. BENTON: Good. Thank you both. What I thought we would do this morning is to – I’d like to pose a question to you, Jeff, and get our conversation started with that.

KORUS has a number of provisions beyond the usual tariff reductions. What are your views on fair trade agreements as instruments of policy on labor and the environment?

MR. SCHOTT: Well, free trade agreements have evolved over the past four or five decades, and indeed, the KORUS FTA is now the state of the art in terms of what countries have done to put together, to advance the ultimate objective of any of these agreements, which is to promote economic growth in both countries.

But economic growth means you have to do it in a way that brings benefits to all the people in the region, and that it is done on a sustainable basis so that you don’t just get an immediate increase in trade that falls back because of either economic or political backlash. And so it is important to include provisions that provide transparency of government policies that promote economic improvements and employment across the economy, and do so in a way that safeguards the environment and provides protection so that workers as well as companies benefit.

And I think the KORUS FTA goes further than any trade agreement we’ve had in the past in meeting that, as it has been amplified in the past few years because of suggestions from members of Congress and from the private sector in the United States.

MS. BENTON: Very good.

ASSISTANT SECRETARY FERNANDEZ: Yes, that’s an excellent point. Trade agreements are really more than just about trade. One of the things that they need to do is to embody around these. Otherwise, they’re not sustainable. And one thing that the Korea Trade Agreement does, it really cements provisions on child labor, on recognition of unions, on the labor rights that are part of this nation and of our trade relations. It just so happens that Korea already has a very strong union movement and has pretty strong labor rights. But trade agreements, in general, have to include provisions that really comply with what we are about. We’re not simply going to do trade agreements on the backs of workers.

MS. BENTON: So they have to be in alignment with our value system --

ASSISTANT SECRETARY FERNANDEZ: Yes. Of course.

MS. BENTON: -- and our principles?

ASSISTANT SECRETARY FERNANDEZ: Yes.

MR. SCHOTT: In this regard, the agreement was already revised before it was signed because of suggestions from members of Congress back in 2007, and there were new provisions on labor that were added to the agreement that commit each country to implement and enforce obligations and commitments with regard to the fundamental principles and rights at work that were adopted at the International Labor Organization, and that is now embodied in the trade agreement and is enforceable under the agreements dispute settlement provisions.

MS. BENTON: I know that there’s a lot of emphasis on trade agreements creating jobs. What specifically does that mean for jobs in this country?

ASSISTANT SECRETARY FERNANDEZ: Well, this agreement is about jobs when you think about it. A number of organizations have estimated that the Korea Trade Agreement will increase our exports to Korea by $10-$11 billion. That’s – if you think about it – and Jeff mentioned that it was the largest trade agreement since NAFTA, if you look at our last nine agreements combined, they’re not as much as the Korean Trade Agreement. Ten to eleven billion dollars worth of exports means tens of thousands of jobs, and these are agreements that – in December of last year, when we went back and continued talking to Korea about changing some of the provisions, or adding some of the provisions that had been negotiated in 2007, the new provisions that were added were designed to help and level the playing field for automobile industry, for automobile workers, as a result, the UAW has come out very strongly in favor of this agreement as well as the Big Three car companies. And the reason for that really is that it will increase automobile exports and it will also increase, obviously, our labor situation in the U.S. with respect to the automobile industry.

MS. BENTON: And you see that the same way, similar?

MR. SCHOTT: Yes. When studies are done of the impact on exports on the economy, one finds that export jobs on average pay higher salaries, are more durable. So companies that export are usually the more competitive, the stronger ones, and so we get a big boost on the employment side. But interestingly – and governments and politicians, at least sometimes, don’t talk about this – we also get a boost from increasing our imports because we talk about two-way trade expanding. And when we increase our imports, it does create some competition for American workers, but it also creates new opportunities, because those imports often go into products made in America that are then sold all around the world and promote economic growth of the companies that then can invest more and expand their production and employment.

So a big boost comes in terms of economic growth from the expansion of our relations, both export and import and investment, and that benefits both the companies and the workers because, overall, we get a big boost in employment from the expansion of economic growth.

MS. BENTON: Well, that’s nothing but good news.

MR. SCHOTT: That is good news. There is a small downside that we have to be very –

MS. BENTON: Okay. Okay.

MR. SCHOTT: -- careful about, and that is that I mentioned that there is more competition in the U.S. marketplace, which overall provides benefits for the United States. But for individual workers and companies, there can be sometimes a downturn. And so it’s important that we maintain the programs that we have now to help the adjustment of workers and communities. And we have had a program of trade adjustment assistance. There are other programs in the government that provide retraining for workers, help for communities that are affected by global competition. We have to ensure that those programs continue. They were improved dramatically at the start of the Obama Administration in the stimulus package. The funding has expired, though, and is now under reconsideration in the Congress. And we have to be concerned that we make sure that our workers and communities have a chance to compete and retrain for this global competition.

ASSISTANT SECRETARY FERNANDEZ: We’ve just given you macro numbers, tens of thousands of jobs, but that doesn’t mean that there won’t be specific workers that will have to be retrained for these kinds of jobs. So overall, the benefits will be there. There are people that talked about there’s as much as 70,000 new jobs being created by the Korean Trade Agreement. But if you’re one of those who because of additional competition has lost your job, you’ve got to have an opportunity to be able to be retrained and to be able to look for other jobs. So it’s important, as Jeff mentioned, that the trade assistance, trade adjustment legislation under that funding, remain in place, because while the macro numbers will be good, you still need to worry about those who will, because of additional competition, have to be retrained.

MS. BENTON: Yes. That’s very true. With that comes retooling and training, and I think it really speaks volume that labor union supports it as well as the auto industry, because they see the upsides to this, I would imagine.

MR. SCHOTT: Well, in the auto industry, in part because of the difficulties encountered during the very sharp recession in 2008 and 2009, got a great deal of support from the government, and a lot of jobs were saved because of the financial support given to GM and Chrysler.

I think they understand – those workers understood the importance of having that temporary support to tide over a difficult period. And we have that more broadly across our economy with unemployment insurance, to tide over workers who are facing tough times, and it’s been a very tough time over the last couple of years with very high unemployment. We need to think about this as investment in people and investment in the growth of our economy, because it’s the workers who are going to contribute to that growth in the future.

ASSISTANT SECRETARY FERNANDEZ: There’s something that I think needs to be kept in mind here, and that’s that you see Korean automobiles all over the U.S. There’s a reason why Korean auto imports in this country are quite strong. What this agreement does, especially what was negotiated last December, is it levels the playing field for automobiles, U.S. automobiles in Korea. One of the things that it did is it cut in half Korean duties on American cars immediately. It also foresaw that you were going to have those tariffs that were already being cut in half eliminated in the next five years. There are provisions that talk about if there’s a surge in Korean imports into this country, there are safeguards that the agreement provided for to deal with that. So U.S. exports to Korea, automobile exports to Korea, are expected to increase because of this, because of this agreement, and that means jobs. That means jobs for America. And something to keep in mind, again, is that Korean automobile imports into this country are already quite strong. And what we’re trying to do is to level the playing field and create the same kind of opportunities in Korea.

MR. SCHOTT: Jose raises a very good point. When you look at the agreement in its broadest terms, U.S. trade barriers are already very low. Korean companies already have good access to the U.S. market, and Korean barriers are much higher. And so there has been, and indeed a big debate in Korea, saying, “We’re doing a lot to change and open up our market, and we’re only getting a little change because the U.S. market is already fairly open.” And there’s a method to that madness. And the reason the Koreans were so interested in doing this, even though it means a lot more competition for Korean companies in the Korean market from U.S. companies, is because they wanted that competition. They said we needed it. Otherwise our companies won’t be pushed to become more productive, to innovate, and to grow. And they needed that impetus, that competition to grow.

In the U.S. market, we have plenty of competition. U.S. companies, U.S. workers, know they have to meet the standards of the best in the world to compete, and they do that in most sectors of our economy. Korea was rather sheltered, and this was a way to push them, and you can see from the growth that they’ve had over the last few years, the new investment that’s coming in from abroad, that it’s a policy that’s succeeding. And we’ll benefit from their success because as the Korean market grows, we are already well-placed there, and we can expand our trade, and that’s one of the reasons for this deal.

MS. BENTON: Good deal. So you spoke about talking on the macro level. So I have a question on the micro level. If we signed this agreement in 2007, why are we just sending it to Congress now? How does the – how did that process – why did it take so long?

ASSISTANT SECRETARY FERNANDEZ: Well, that’s an excellent question. In 2007, there were very, very strong objections both from organized labor and from the automobile companies. They didn’t feel that the playing field had been leveled enough. And that was the objective of the additional negotiations that took place in December of last year. And what those negotiations did, as I mentioned before, cut tariffs in half –

MS. BENTON: Right.

ASSISTANT SECRETARY FERNANDEZ: -- provided for protections in case there was a surge of imports of Korean automobiles. It provided for green technology, green automobile technology for U.S. exports of electric cars, also their tariffs came down. So there were a number of additional provisions that were agreed upon last December that basically dealt with the issues that were bothering the labor unions and were bothering the automobile companies. And as a result, the Korean trade agreement has pretty much bipartisan support these days both in Congress as well as with the American public.

MS. BENTON: Well, that’s good because if we can move this economic development along and the jobs issue along, then that will benefit all the – it’s a win-win for everybody.

MR. SCHOTT: Yes. And the sooner we get it done, the better. I have a little different perspective on the deal than Secretary Fernandez. I thought it was always a good deal, and I was a trade negotiator a long time ago, and I know that what comes out of a trade negotiation is never perfect and always can be improved. And indeed this agreement has been approved twice, first after the negotiators shook hands in April of 2007. Congress intervened, and there were new provisions on labor and environment and a few other issues added to the agreement before the deal was signed in June of 2007. More recently, last December agreement was reached, as Secretary Fernandez says, that expanded the provisions on autos and a few other issues that benefited both countries. So it’s a good agreement, and the sooner that it enters into force, the sooner that companies and workers can take advantage of it. So that I think it’s good that there is now bipartisan support.

MS. BENTON: Yes.

MR. SCHOTT: And that’s the one difference from 2007. In 2007, when there was discussion of moving forward with implementation of the Congress, it was going to be a very harsh partisan debate. And that inevitably would have raised comments and concerns about our broader relationship which would not have been helpful. Going forward now with broad bipartisan support in both parties and strong support from the business communities, strong support from important labor groups, I think it sends a very clear signal of our commitment.

ASSISTANT SECRETARY FERNANDEZ: There’s also an added point, and that’s that our timing couldn’t be better. The Koreans and others have not stood still. Korea has signed an agreement with the EU providing for the trade agreement. Japan is interested in the trade agreement, the Chinese, and others. Unless we’re able to get this thing passed quickly, at some point we’ll be at a disadvantage. And for example, our agricultural exports, where you have – today you have – even though we have a third of Korea’s agricultural import market, our agricultural exports pay more or less a 50 to 55 percent import duty in Korea. And if the Europeans are able to get their agreement in place before our agreement is in place, they’ll have a competitive advantage. So the timing is important as well. So even though we’ve waited three or four years, I think the time is now.

MR. SCHOTT: Yes. The irony is that when we signed our agreement almost four years ago, the Europeans got very concerned because they thought they would be discriminated against.

MS. BENTON: Right.

MR. SCHOTT: And so they took – the Europeans and the Koreans took the KORUS text and used it as the basis for negotiating their own bilateral free trade agreement.

ASSISTANT SECRETARY FERNANDEZ: Right.

MS. BENTON: Interesting.

MR. SCHOTT: And we waited – there has been such a long period of delay that the European agreement is scheduled to enter into force now on July 1st.

ASSISTANT SECRETARY FERNANDEZ: July 1st.

MS. BENTON: Oh, okay.

MR. SCHOTT: And so, hopefully, if Congress acts in the next – in the very near future, we will be – we will have that level playing field with the Europeans. But if they don’t, then European firms will get the advantage that had been expected for U.S. firms several years ago.

MS. BENTON: Okay. So if this agreement is signed and goes into effect – or when it does, not if – how long will it take to ratchet up and to get at peak under this agreement? Or is it just a process of once it’s signed, and then it automatically starts kicking in? I was just curious.

MR. SCHOTT: Well, there are a couple of factors. First, a lot of trade becomes duty free from day one. So that’s very important. But also the schedule on the more import-sensitive items sometimes are phased – the tariffs are phased out over three years or five years or in a very few cases ten years. But you have that sort of commitment.

MS. BENTON: Right. Right.

MR. SCHOTT: And businesses can plan their trade and investment strategies. So those actions taken by private companies already begin to accelerate the benefits, even before the full liberalization has been implemented over time. And so that announcement effect, the legal obligation imposed by the agreement, creates a certainty which businesses can better plan their investment, and that spurs economic growth.

MS. BENTON: That’s perfect.

ASSISTANT SECRETARY FERNANDEZ: There are some duties that are eliminated immediately. There are other duties that are eliminated halfway and then have – you have a five-year period.

MS. BENTON: Okay.

ASSISTANT SECRETARY FERNANDEZ: For example, the electric car import duties that I was mentioning before. You cut them by half immediately upon entering into force of the agreement. And then over five years they go down to zero. So there’s a phase-in.

MS. BENTON: Okay.

ASSISTANT SECRETARY FERNANDEZ: But the more important piece is what Jeff mentioned. You give investors – you give U.S. companies that are looking to export to Korea you give them the certainty that that agreement will be there and that they can make investments and they can plan.

They can build factories in the U.S. in order to sell to Korea because they know that agreement will be there, and they know that the U.S. market will be an important market for Korea and that they won’t have to compete in an uneven playing field with the Europeans, the Chinese, and others.

MS. BENTON: So we already have a pretty robust economic relationship with Korea, total trade nearly $90 billion.

ASSISTANT SECRETARY FERNDANDEZ: Right.

MS. BENTON: So you’ve talked a little bit about how this will benefit. Is there really going to be an impact? I mean, will it change that dynamic, because it’s already $90 billion?

MR. SCHOTT: It – well, it’s because it’s already $90 billion, that’s just merchandise. One of the things that the agreement does is expand opportunities for U.S. service providers for insurance companies, for air express delivery, for financial services, a range of companies where U.S. firms are world-class and competitive. So they’ll be a lot of gains in that area. But in agriculture, we have a strong, strong base and a great opportunity to expand already one of our largest markets for agricultural – U.S. agricultural exports. So there is a great opportunity.

And look at it very simply: If you have $100 billion in trade and trade increases by 20 percent, you’re talking about $20 billion just from one trade agreement, so that’s – that means a lot of opportunities there.

MS. BENTON: Yes, yes. Exactly.

ASSISTANT SECRETARY FERNANDEZ: Yes. Something just to build on what Jeff mentioned, the Korean services market is one of the world’s largest. You’re looking at a market that’s about, on an annual basis, about 600 billion U.S. dollars. I think it’s one of the top seven or eight in the world.

MS. BENTON: Okay.

ASSISTANT SECRETARY FERNANDEZ: We have virtually zero of that market, in the sense of no law firms can set up offices in Korea, no accounting firms. What this will allow or for those kinds of businesses, the services businesses -- which, by the way, is 80 percent of the employment in this country, 80 percent of our workers today -- are in the services sector.

MS. BENTON: Well, we’re strong – that’s a strong sector.

ASSISTANT SECRETARY FERNANDEZ: And yet, we’re virtually shut out of that market in Korea. So that’s a whole – leave aside the automobile sector, and look at the services sector. That’s unexplored territory, and we’re at $88 - $90 billion in trade today. The experts tell us that exports will increase by $10 billion. But as Jeff mentioned, they’re looking at goods. The whole services industry is something that we’re very excited about, and we believe it’s a good opportunity there.

MS. BENTON: Right. I mean, the service sector is our bread and butter.

ASSISTANT SECRETARY FERNANDEZ: That’s right.

MS. BENTON: And we are – we have such American ingenuity and creativity, and it’s been stifled because we haven’t had the ability to compete globally.

MR. SCHOTT: And what’s so important about the KORUS FTA, particularly in this area of services, is it sets an opening for U.S. firms in Korea, but it also sets a precedent for the types of opportunities that we are seeking and promoting throughout Asia and, indeed, around the around. And so the KORUS FTA has become really the model for this – as I said before, the state of the art of trade agreements. That can expand opportunities for trade and investment in other markets, and we’re negotiating now in the transpacific partnership with countries that, eventually, as that expands to the broader membership of the Asia Pacific region, will account for almost 50 percent of global output. So it is a wonderful model to provide new opportunities for U.S. firms and workers around the world.

ASSISTANT SECRETARY FERNANDEZ: The Asia Pacific region – it’s no secret, it’s one of the fastest growing regions in the world.

MS. BENTON: Right.

ASSISTANT SECRETARY FERNANDEZ: We used to be Korea’s top trading partner. Today we are the third. We’ve got to get on that bandwagon soon, because that train is leaving the station. That region is going to continue to grow, and others aren’t standing still. So we’ve got to get back to being number one with respect to being Korea’s top trading partner. This is one way of doing it.

MS. BENTON: So we have to seize every opportunity and every moment available to us because it has such an impact on our domestic –

ASSISTANT SECRETARY FERNANDEZ: Well, I mean, President Obama has been clear.

He’s told every person in government that we’ve got to double exports in the next five years and we’ve got to do so while creating 2 million new American jobs. If we’re going to do that, exports are going to be critical, and markets such as Korea are markets that we need to be able to exploit to the last penny.

MS. BENTON: And the President has his National Export Initiative, which I assume just feeds right into that.

ASSISTANT SECRETARY FERNANDEZ: That’s right.

MS. BENTON: It is kind of baseline for us. Right?

ASSISTANT SECRETARY FERNANDEZ: That National Export Initiative – well, we’ve been told that we’ve got to do everything we can to double exports, American exports, in the next five years. And that’s – the NEI, the National Export Initiative, is something that we all work every day on trying to promote. This is one way of doing it.

MS. BENTON: All right. Good. So we’ve thrown down the gauntlet.

ASSISTANT SECRETARY FERNANDEZ: We have.

MR. SCHOTT: Well, it’s – in a sense, it’s something that makes perfect sense. You look at the fastest growing economies in the world – many of them are in Asia, some of them are in Latin America – and you say these are wonderful opportunities for U.S. firms to expand their trade and investment that will benefit our workers at home. And we have these unexploited opportunities, as Secretary Fernandez said, and a growing, growing demand for U.S. goods. In the U.S. economy, we have a large, large economy, but it’s growing at two, three percent.

MS. BENTON: Right.

MR. SCHOTT: Here you look at China, you look at India, you look at Korea, you look at Brazil and many other countries, and growing between five and 10 percent, and you say well, this provides a much more dynamic situation where U.S. firms can get in and grow very quickly.

MS. BENTON: So we’re at this juncture. What’s the next step in the approval process for the KORUS agreement?

ASSISTANT SECRETARY FERNANDEZ: Well, the KORUS agreement is ready to be submitted to Congress.

MS. BENTON: Okay.

ASSISTANT SECRETARY FERNANDEZ: In some ways, it depends on when they want to take it up. We are prepared to start briefing Congressional staff.

MS. BENTON: Oh, perfect.

ASSISTANT SECRETARY FERNANDEZ: And it’s ready to be considered, and it’s really – at this point, it’s their call as to when they want to do that. But from the Administration’s point of view –

MS. BENTON: We’re ready.

ASSISTANT SECRETARY FERNANDEZ: We’re ready. We’re ready to move.

MS. BENTON: Okay. Yeah. Good.

MR. SCHOTT: One of the benefits of the KORUS FTA was that it was signed before the expiration of so-called fast-track implementing procedures.

MS. BENTON: Right.

MR. SCHOTT: And so the Congress instituted this 37 years ago to provide a better way for trade agreements to be considered and implemented by the Congress.

MS. BENTON: And (inaudible).

MR. SCHOTT: And so these procedures require that the Administration and the Congress work very closely together to draft a bill that will then be considered on an expedited basis without amendment.

MS. BENTON: Gotcha.

MR. SCHOTT: The essence of it is a gentleman’s agreement that there is close cooperation and consideration. So while the legislation says the agreement – that the legislation should be provided by the President to the Congress, what happens in order to ensure cooperation is that members of the Administration and the congressional committees work together and draft it.

MS. BENTON: Right.

MR. SCHOTT: And when they are satisfied that they’ve covered their political bases, then they officially put the legislation forward, the fast-track clock starts, and – but that essentially means the deal’s going to go through very quickly. And I think they’re very well advanced now in --

MS. BENTON: Okay, good.

MR. SCHOTT: -- that stage, particularly since there is such strong bipartisan support --

MS. BENTON: Yes.

MR. SCHOTT: -- for the agreement.

MS. BENTON: Well, and we know that’s the key. If you don’t have the bipartisan --

MR. SCHOTT: Right.

MS. BENTON: -- support, it’s just definitely not going to happen. And I think we’re at a critical juncture where jobs, jobs, jobs are what’s so important in our economy today.

Well, this has been a great conversation from my perspective, and I wanted to go to some of our questions from the viewers who have submitted them from via DipNote, the State Department’s blog. And so I think we’re ready to take some questions.

MR. SCHOTT: Sure.

MS. BENTON: Ron F. in California writes: “There are pending trade agreements with South Korea, Panama, and Colombia. Why not send all three to Congress for passage? Why are we delaying action on trade agreements? And when do you expect to present those other trade agreements to Congress?”

ASSISTANT SECRETARY FERNANDEZ: Well, look, you send agreements to Congress when they’re ready to be sent.

MS. BENTON: Yes.

ASSISTANT SECRETARY FERNANDEZ: The Korean Trade Agreement has been negotiated, it’s ready to go. There’s still some issues with the Colombian in the sense that there’s an action plan that’s been agreed upon by the Administration and the Colombian Government that provides for certain things to take place. When those things are completed, then we’ll take action on that. But think about Korea and the Korean Trade Agreement. You’re talking $10-11 billion worth of new exports. That dwarfs both the Panama Trade Agreement and the Colombia Trade Agreement. So if the Korean one is ready to go, we’re going to move now.

MS. BENTON: Right, right.

ASSISTANT SECRETARY FERNANDEZ: Panama is also ready to go as well. We’ll move on that. And as soon as Colombia is ready, we’ll do that. But there’s no magic in sending all three of them together. You send them when they’re ready. You also don’t put yourself in a situation where you’re negotiating against a deadline.

MS. BENTON: Right.

ASSISTANT SECRETARY FERNANDEZ: That’s not a good way to negotiate to buy an automobile and that’s not a good way to negotiate a trade agreement. Korea and Panama are ready, and we’re going to move on those.

MS. BENTON: So there is an orderly process --

ASSISTANT SECRETARY FERNANDEZ: Yes.

MS. BENTON: -- which is great.

MR. SCHOTT: Well, I think what you’ve seen is that Korea came to the fore because the additional supplemental deal was struck last December. It’s very important for economic and for security reasons. So is Colombia for security reasons. We have a very, very strong partnership with the Government of Colombia. There have been additional negotiations that have yielded very constructive additional commitments, and I think all three will move forward before the summer break.

MS. BENTON: Okay.

MR. SCHOTT: There has been some debate – why not package them all together – in part to ensure that they all move quickly. But also, some people only would like to take one vote on trade as opposed to three votes on trade.

MS. BENTON: That’s true.

MR. SCHOTT: I don’t think that’s legally possible under the fast-track provisions, but I think there’s a desire in the Congress and in the Administration, as Secretary Fernandez said, to move all three as quickly as possible.

MS. BENTON: Right.

MR. SCHOTT: And I suspect that they will be rather tightly sequenced. Korea’s preparations are well advanced, but Panama and Colombia would probably follow soon after.

ASSISTANT SECRETARY FERNANDEZ: Yes. I mean, Colombia is one of our strongest allies in South America. We are working very, very hard to finalize that agreement, to get it in place to move it forward. There’s some things that need to be done, but we are moving forward as fast as we can. And when that’s ready, we’ll submit it. Colombia – as I said, it’s a critical ally, as well as Panama.

MS. BENTON: Right. I’d like to take another question from Melissa in Maryland. She writes: “What provisions for workers have been included in the trade agreement?”

ASSISTANT SECRETARY FERNANDEZ: Well, as Jeff mentioned, there were provisions in the Korea Trade Agreement on child labor, on recognition of labor unions, on collective bargaining. And those are all in there. Those are provisions that are enshrined in the ILO Convention, in the International Labor Organization Convention. Those are in there and those were put in. And in some ways, the Korea Trade Agreement became the gold standard --

MS. BENTON: Okay.

ASSISTANT SECRETARY FERNANDEZ: -- for these kinds of provisions. It also happens that Korea– as I mentioned– has a pretty good record, a very good record on labor rights. So that really wasn’t a great issue in – on the Korea Trade Agreement.

MS. BENTON: Very good. Another question comes from Kyle in California. He writes: “I think it is important for the U.S. to maintain and create free trade agreements with countries in other regions, especially the East Asia region, since there is strong regionalism such as ASEAN that the U.S. is not a part of. Do you believe U.S. fair trade agreements in the region are necessary to keep China from obtaining regional hegemony?”

ASSISTANT SECRETARY FERNANDEZ: How was that?

MS. BENTON: (Laughter.) You like that one?

ASSISTANT SECRETARY FERNANDEZ: We’re alternating here. That’s --

MS. BENTON: Yeah, that’s right.

MR. SCHOTT: Well, I think the U.S. trade initiatives with those countries are extremely important. We have to maintain our engagement in the region for both economic and security reasons. And I think this was a major theme of President Obama’s first trip to Asia back at the end of 2009. One of the ways that we are doing that besides the – implementing the KORUS FTA is proceeding with new negotiations for transpacific partnership.

MS. BENTON: Okay.

MR. SCHOTT: And that includes, right now, eight other countries, several members of ASEAN, as well as some other countries that we have trade – existing bilateral agreements with. And that agreement, which will draw, I think, at the end of the day, extensively on the KORUS FTA as a state of the art, will help cement our closer economic relations with countries like Malaysia, Vietnam, in the future, hopefully Indonesia and Thailand. Singapore is in that agreement. So we will get many of the key economies of ASEAN together, and I think that will provide a great foundation for strengthening our overall relations, both economic and political in the region.

MS. BENTON: Good deal.

ASSISTANT SECRETARY FERNANDEZ: And we have very strong relations with the ASEAN countries. We just named an ambassador to ASEAN, and as Jeff mentioned, the TPP negotiations. Korea is a piece of that puzzle. It’s a way of reinforcing a very strategic and very important relationship. Korea has been a great ally of the U.S. in places like Haiti, in Afghanistan, in Iraq, in Lebanon. So it’s – you do one thing at a time, and Korea is one piece of that puzzle. The TPP negotiations are part of that as well. But – no, it’s – ASEAN is a – as I said before, it’s a growing region. It’s an important commercial target for U.S. companies, and then we’re going to continue to do everything we can to strengthen our position there.

MS. BENTON: Good deal. Well, this has been a good one. I really, really enjoyed it, and I want to thank you, Secretary Fernandez, and Jeff, thank you for making the trek over here to sit with us today.

ASSISTANT SECRETARY FERNANDEZ: My pleasure.

MS. BENTON: And I’d like to thank each of you for joining us. And to our viewing audience, I would like to note that the video and the transcript will be available on state.gov very, very shortly. And we hope that Conversations with America will continue to inform citizens about the Administration’s efforts to address the challenges of the 21st century. We look forward to engaging with you again very soon and thank you for joining the United States Department of State in Conversations with America. Thank you.

ASSISTANT SECRETARY FERNANDEZ: Thank you.



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