On President Obama’s Hypocrisy

This is an election year, and President Obama and his allies have arrived at a strategy for attacking Republican challenger Mitt Romney. They have drawn attention to Romney’s years working at Bain Capital. Bain Capital is an example of the principle that if a group of investors is wealthy enough to do so it can break small firms and strip them of their assets. And, once it is shorn of its assets, the small firm will cease to exist.

The purpose of this essay is not to condemn Romney but to point out that President Obama is equally complicit in these sorts of destructive practices. To make this case, it is enough to point out that the president signed a Free Trade Agreement with South Korea. This agreement, which had originally been drafted by the Bush administration, had bipartisan support. As noted in USA Today, House Speaker John Boehner (R-Ohio), issued a statement in support of the signing, saying that "years of perseverance have been rewarded today as American job creators will have new opportunities to expand and hire as they access new markets abroad (source).” I’ve learned to pay close attention to any legislation that has bipartisan support (like Keystone XL), or suffers from bipartisan neglect (like campaign finance reform). And I've learned that the phrase "job creators" usually means "job destroyers."

Even supporters of the South Korea FTA admit that the deal will result in U.S. job losses. A U.S. International Trade Commission report notes that the following industries will suffer the “greatest declines” in employment: “Textiles, wheat, wearing apparel, and electronic equipment (source).” The report stresses that these lost jobs are nothing to be concerned about, because the displaced workers will simply move on to other jobs. The same argument had been made in favor of NAFTA, and yet hundreds of thousands of jobs lost through NAFTA were never replaced.

Critics of the South Korea FTA point out:

“We have felt for many years that our government isn’t supporting the idea of keeping manufacturing alive in the United States,” said Ruth A. Stephens, the executive director of the United States Industrial Fabrics Institute, a trade group that represents companies with domestic factories

Critics also see little evidence that American workers are moving on to better jobs. The main benefit of the deals, they say, is that corporations can make goods more cheaply for consumption in the United States (source). 

Other observers believe that the South Korea FTA may be even more destructive than NAFTA. Under this agreement, "made in South Korea" means 35% or more of the product's "value" is created in South Korea. The other 65% can be manufactured in China, Myanmar, or remarkably enough North Korea. The predicted increase in the U.S. trade deficit is nearly $17 billion (source).

In 2007, Obama's campaign flyers touted his opposition to NAFTA (source).

It is widely understood that politicians who can create jobs in their home states will become more popular with the voters. If the South Korea FTA will result in a loss of American jobs, why would a politician be in favor of it? The answer is fairly simple: a politician wouldn’t vote in favor of eliminating American jobs if all of the job losses occurred in his or her home state. But as it stands, these job losses are spread out across the country, and can be blamed on the weak economy. This doesn’t entirely explain the situation, though. To understand why politicians in Washington are motivated to vote in favor of fewer American jobs, one need only look at a couple of large campaign contributors.

The South Korea FTA was signed on October 21^st, 2011. In November of the same year, a company called TenCate Protective Fabrics formed a partnership with the South Korean firm Samil Spinning Company to increase its production in South Korea (source). Since TenCate has a history of acquiring and downsizing firms (source), one may speculate that increased production in South Korea will mean layoffs here in the United States. Out of all firms in the textile industry, TenCate ranks first in terms of money spent on government lobbyists (source).

Going down the list, the second highest spender on lobbyists is a firm called Gibbs International. This firm’s specialty is liquidating textile companies. Gibbs sells pre-owned textile equipment, and their largest customers are Asian textile firms.

And then there is the Korean car company Hyundai. Hyundai spent $260,000 on lobbying in the third quarter of 2011 -- right about the time that the South Korea FTA was signed. The amount of money spent during this quarter is close to what they spent for the entire year back in 2008 (source). One of the most vocal supporters of the South Korea FTA was Congressman Vern Buchanan. When he is not representing the people of Florida in Washington, he is running his Hyundai dealership (source).