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AIADA chairman's solution to economic woes: It's trade, stupid'

November 16, 2010

By Russ Darrow

For more than a year, Congress, the President, his administration, and every politician with a pulse in this country has been occupied with one challenge: how to fix our struggling economy.

As a small business owner, I have seen a lot of programs meant to fix our economy come and go; some more successful than others. Tax cuts and hikes, bank bailouts, TARP funding, TALF funding, and Cash for Clunkers all have passed us by. And yet, the silver bullet remains elusive.

But what if one of the real keys to ending this recession has been staring us in the face all along? To borrow a phrase, it’s trade, stupid.

As the economy has worsened, Congress has put the brakes on global trade, refusing to ratify three pending free-trade agreements and offering up more than 90 pieces of self-defeating "Buy American" legislation.

Meanwhile, the lawmakers have only made America’s economic problems worse. In October, unemployment reached a 26-year high of 10.2 percent. The dollar is at its weakest international value since 1967.

Our withdrawal from the global marketplace has coincided with an uptick in trade activity between other countries. We may have taken our ball and gone home, but the game has continued on. The rest of the world is powering forward with mutually beneficial trade pacts, and we’re missing out on real recovery opportunities.

Take, for example, the free-trade agreement the Bush administration negotiated with South Korea in 2007. It’s been 27 long months, and Congress still hasn’t gotten around to passing the accord.

If enacted, the agreement would eliminate tariffs on nearly 95 percent of consumer and industrial product trade and could add up to $30 billion in bilateral trade between our two countries.

Specific to the auto industry, the agreement would:

• Remove the U.S. 2.5 percent passenge-vehicle tariff in stages. Korea would immediately reduce its 8 percent auto tariff to zero. 

• Remove the 25 percent tariff on pickup trucks gradually over 10 years. Korea would implement an immediate reduction of its truck tariffs to zero. 

• Remove U.S. and Korean tariffs on all auto parts. This means there would be no tariff on about 60 percent of the parts used in many of the cars produced in Alabama. This also would apply to parts imported from Korea for aftermarket use.

While Congress has dawdled on this and other agreements, the European Union has struck a nearly identical pact with South Korea, Canada has done the same with Columbia, and Japan has sealed a $211.4 billion deal with the Association of Southeast Asian Nations.

In all, 12 bilateral or regional trade deals have taken effect this year. How many deals has the U.S. been a part of? None.

According to the U.S. Chamber of Commerce, this country’s failure to act while other countries form their own trade deals could cost us $40.2 billion in exports and 383,400 American jobs. That’s a loss we can’t afford.

As President Obama zipped around Asia this month (including visits to Japan, Singapore, China, and South Korea) I hope he got a good look at the humming economic exchange the U.S. should be a part of.

There are 168 trade agreements in effect today in Asia. The United States has made itself a part of just two—with Singapore and Australia.

Ultimately, bilateral trade alone will not end this recession. But it is becoming increasingly evident that trade must be considered a key component of our recovery.

If we continue to remain on the sidelines, paralyzed by indecision, we stand to lose out on billions. And we will continue to feel the impact of this recession long after the rest of the world has traded its way back to prosperity.

Russ Darrow operates 15 dealerships in eastern Wisconsin and is the 2009 chairman of the American International Automobile Dealers Association.