Mendoza School of Business

Korea pact great for state, not so hot for rest of US

Published: May 27, 2013 / Author: Rob Hotakainen

The following is an excerpt from an article in The Olympian that quotes Finance Professor Jeff Bergstrand about the impact of the trade deal with South Korea. To read the entire article visit: Korea pact great for state, not so hot for rest of US

More than a year after it took effect, a highly touted trade deal with South Korea has failed to produce as expected for the U.S.: Exports are down, imports are up and the trade deficit with the Asian economic powerhouse has ballooned.

In Washington state, where global trade is now linked to 2 of every 5 jobs, trade backers are happy: Exports of aircraft and parts to Korea rose by more than 75 percent last year, and Koreans are gobbling up more of the state’s prized cherries and apples.
But across the nation, the picture looks far bleaker.

Jeffrey Bergstrand, a professor of finance and an expert on international trade at Notre Dame’s Mendoza College of Business, said Japan was still fighting a recession and that economic growth in China had slowed.

“That weighs heavily upon the Korean economy,” he said.

Income fluctuations can greatly affect trade statistics in a single year, he said, and it’s impossible to know how well-positioned firms were to take advantage of the new agreement. He estimated that it takes 10 to 15 years to fully understand the benefits of a new trade pact.

“It’s almost ridiculous to look after one year at the impact. It’s not revealing of the long-term impacts and benefits of these agreements,” Bergstrand said.


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