Money & Politics | Daily Report

Jason Holmberg/FlickrCranes at the port of Long Beach.

As the campaign for a U.S.-Korea free trade agreement kicked off last week at the Port of Long Beach, so did the battle between California's business groups, unions and free trade critics.

A successful free trade agreement with Korea would be the biggest free trade pact the United States has reached since it entered into the North American Free Trade Agreement over a decade ago. The Obama administration is pressing Congress to ratify it before July, due in part to concern about the European Union's imminent trade pact. (The full text of the agreement is available here).

Southern California, in particular, would almost certainly be a major beneficiary, supporters contend. There are more than half a million Korean Americans with strong business ties to the homeland in the Los Angeles area. California's southern ports exchanged nearly $16 billion in goods with South Korea in 2009. But currently, slightly more container ships with Korean goods arrive through the ports of Los Angeles and Long Beach than travel there with American products.

The California Chamber of Commerce thinks the agreement will change that and has been pushing for speedy action.

"In 2009, we exported nearly $6 billion to Korea and this will certainly up those numbers, I think tremendously, when this goes into effect," said Susanne Stirling, vice president of international affairs at the California Chamber of Commerce. "If we don't implement the FTA we are going to lose market share because the EU and Canada now have free trade agreements with Korea."

If ratified, the trade deal would eliminate tariffs on major California agricultural exports, such as almonds, pistachios, frozen orange juice and wine. Korea is already a major importer of many California agricultural products and will likely import more in the future.

But the agreement is facing pushback. As a result of NAFTA, California lost about 800,000 jobs, according to the California Labor Federation, a group that represents roughly two million union members in manufacturing, retail, construction, hospitality, public sector, health care, entertainment and other industries.

"The manufacturing sector in California has really been decimated over the last two decades. A big reason for that is free trade agreements like NAFTA," said Steve Smith, communications director of the labor federation. "We don't want to see anything that would further erode jobs in California."

Two recent protests in San Francisco, one organized by the California Fair Trade Coalition and the other organized by labor advocate Steve Zeltzer, have challenged the agreement.

The UAW, a union which supports workers primarily in the auto and aircraft manufacturing industries, recently came out in support of the agreement after minor changes were announced in December 2010.

Some observers have raised concerns about the absence of labor and environmental standards.

"They’re not fair trade agreements," said Richard Walker, an economic geography professor at UC Berkeley. "If they were fair trade agreements, there would be clauses about labor, environmental quality and other social goods."

"We have a lot of examples that opening up the borders to all imports is not always beneficial," Walker added. "Goods may be cheaper, but if your industry closes down and people are unemployed, how are they going to buy those goods?"

Others think the debate about job loss is misplaced. "U.S. products are highly sought after around the world – for the unions to fight it, it just doesn’t make sense,” said John Leitner, president and CEO of W.J. Byrnes & Company, which helps businesses with trade logistics. "People say 'Buy American.' No, the emphasis should be 'Sell American.' Not having competitive trade agreements costs sales, resulting in lost jobs."

But it's not just concerns about job loss that have drawn critics.

Like NAFTA, the current agreement with Korea grants foreign corporations certain rights and protections and empowers them to sue the U.S. government in foreign trade tribunals if the government enacts regulations that could interfere with corporate profits.

According to Public Citizen, a nonprofit advocacy group that is critical of the agreement, there are 69 Korean firms [PDF] operating in California that would be granted such rights under the agreement, including large corporations such as Hyundai, Daewoo, and Samsung.

Even some supporters of the free trade agreement are critical of these protections. "It’s included mainly due to lobbying by multinationals that think they might be subjected to abuse, such as taxes and regulations of various kinds that may treat domestic firms more favorably than foreign firms," said Robert Stern, a visiting professor at the UC Berkeley Goldman School of Public Policy.

"Many of the cases that have come up in the NAFTA agreement really have been unjustified. It’s unfortunate that this provision has been included," Stern said.

Environmental groups are also concerned that this latitude will degrade environmental protections. "Policies designed to promote clean energy use and reward environmentally sustainable companies would be vulnerable to challenge in international trade tribunals, even if those policies were developed at the state and local levels," the Sierra Club said in a statement.