Free Trade Deal with Korea, Panama, and Columbis Is a Bust for the US.

Open e-mail to Rep. Neugebauer:

Randy,

SUMMARY

I am sorry to report that Congress has pulled another boner by confirming the free trade deal with South Korea, Panama and Columbia, which had been 3 years in hiatus.

DETAILS
The White House claims the free trade deal COULD increase exports by $13 billion a year and support 70,000 jobs. That seems rather far-fetched, as we look at some of the details.

Market Size
Let's take a look at the relative market sizes, which can be judged by each country's population since it is the individuals who purchase the goods.

COUNTRY POPULATION IN MILLIONS
South Korea 48.2
Panama 3.4
Columbia 46.2
United States 312.5

With the free trade deal, South Korea gains access to a market six times larger than its own; Panama 92 times, and Columbia 7 times.

Market Quality
We measure market quality by Gross National Product per person. This is a measure of the amount of money that each person in the country has access to directly or indirectly. The higher the GNP per person, the more money that person has access to for the purchase of goods.

COUNTRY GNP PER PERSON
South Korea $29,997
Panama $4626
Columbia $2292
United States $43,723

With the free trade deal, South Korea gains access to a market where each customer can buy 46% more goods than can be purchased by each South Korean. For Panama, it is 9 times. For Columbia, it is 19 times.

US Imports

At the free trade deal, we can import duty-free from each of the countries the products which those countries have available for export. These are as follows:

From Korea

Semiconductors, wireless telecommunications equipment, motor vehicles, computers, steel, ships, petrochemicals.

But we already manufacture all of these things ourselves. If we import, we lose manufacturing jobs.

Motor vehicles are a big item, but it is said that due in great part to Koreans' preference for locally made cars, there are no expectations that the new trade pact will result in dramatic increases in the number of American vehicles sold in Korea. S. Korea now imports 50,000 vehicles from all sources. It exports 600,000 (12 times as many) vehicles to the US.

From Panama

Bananas, shrimp, sugar, coffee, clothing.

Bananas can be imported from many Latin American countries. Bananas are already one of the cheapest fruits in the United States, with a retail price of $.59 per pound. Even local pears in season and on sale run $.99 per pound.

We already harvest our own shrimp at the Gulf Coast and could easily locally produce more clothing. Sugar and coffee are available commodities from many countries in Latin America and Africa at low prices.

From Colombia

Petroleum, coffee, coal, nickel, emeralds, apparel, bananas, and cut flowers.

We already have large supplies of petroleum and coal. Bananas and coffee are available from many suppliers at low prices. We can easily make our own apparel. Emeralds is innately a very small market. I'm not sure about the significance of nickel. Cut flowers are likely available from many tropical and semi tropical countries.

Special Factors

Chemical Industry

The Chemical industry has become global in nature. Petrochemicals are manufactured in whatever country raw materials are available and there is a favorable business climate, including taxes and regulations. Raw materials are generally petroleum and natural gas. The primary petrochemical products are monomers, from which polymers and other downstream products are made.

The monomers for bulk plastics are mostly ethylene, propylene and vinyl chloride. These are not easily shipped and usually are converted to bulk polymers on site and then shipped to processors for conversion into film, auto parts, doors & frames, etc..

However, some monomers are easily shipped, and conversion to polymers and subsequent downstream processing can be done away from the monomer production site. Monomers for paints and coatings generally fall into this category. A few examples are acrylates, methacrylates, methylene diphenyl diisocyanate (MDI), toluene diisocyanate (TDI), and terphthalic acid.

Dow Chemical

CEO Liveris of Dow Chemical had been strongly and personally promoting the free trade agreement. The question is "why"?

Dow Chemical's SEC 10 K Report shows a Dow Chemical subsidiary in Korea. Dow's effective ownership of Dow Chemical Korea Limited is 100%, of which Dow Chemical owns 85.82%
and Dow Europe Holding B.V. owns 14.18%.

An Internet search on the activities of Dow Chemical Korea brings up disjointed information, which still helps to form a picture of why Liveris was strongly promoting the free trade deal.

Dow Chemical Korea has activity with the following: Crude methylene diphenyl diisocyanate (MDI),diisopropanol amine, epichlorohydrin, epoxy resin, ethylene acrylic acid, ignition-resistant polystyrene resin (styron), ion exchange resin, low density polyethylene, magnesium ingot, methyl cellulose, polypropylene glycol, propylene glycol, propylene glycol ether, styrene acrylonitrile resin, synthetic rubber latex, trichloroethane, trichloroethylene, triethylene tetramine, and vinyl chloride monomer. The quantities of these materials, which will now enter the US duty free is not known. However, the custom duty aspect is not the significant point. The main consideration is that these materials are manufactured abroad, with a loss of investment and jobs to the US.

Some other miscellaneous but related reports are as follows:
1. Dow Electronic Materials is constructing a plant in South Korea to test and make advanced-chip-packaging metallization materials.
2. Dow Chemical Korea manufactures polyurethane with 50-100 employees.
3. Dow Chemical Korea imports products from Dow Chemical Canada in Vancouver, BC via Seattle, Washington.
4. Dow Chemical Korea Hong Kong Br exports products to Edow Chemical Company in Long Beach via Busan.
5. Dow Chemical Korea ships polycarbonate flake / resin to Long Beach, California.
6. Dow Chemical announced in April 1993 the acquisition of a methylene diphenyl diisocyanate (MDI) distillation plant from Sung-Hwa Petrochemical Industrial Company, Limited in Korea. The MDI plant located in Yocheon, Korea, had an annual capacity of 25,000 metric tons. The plant is a source of products for HD Polyurethane Company, a 50/50 joint venture recently formed in Korea between Dow and Hannam Chemical Corporation. MDI is used in a wide range of industries such as automotive, appliance and construction.

Randy, the next time something like this comes up, ask me to do the research for you, before you and your associates vote the wrong way.