Sep 25 2008

What’s Korea’s “beef” with the US on free trade?

40 responses so far

40 Responses to “What’s Korea’s “beef” with the US on free trade?”

1. # Alex Hanon 26 Sep 2008 at 8:31 pm

   I have seen the extent of how much the Korean population objects to the beef trade. During my visit to seoul this summer, the news was constantly showing images of tens of thousands of people crowding into the city centers with lit candles as a sign of protest to the government. Despite some obvious potential advantages of a free trade, the Korea seems to oppose it. However I think it is rather naive to consider the Koreans ridiculous because of economic reasons.
   I believe a great aspect which affects Korea’s opinion is the internal political condition. S Korea has recently reelected a president (President Lee Myoung Bak), who is known to be a pro-upper, rich class. This has affected his domestic policies (real estate for instance comes to mind). Many of his policies have disappointed the labor or lower classes, which make up a great percentage of the population. I believe the problem with mad cow desease has actually acted as a spark which releases all the harsh feelings toward the government. As a result, these people who have “beeef” with the government have been protesting for months. The government, which has to maintain a democracy and a “for the people” attitude is presumably having difficulties establishing a free trade when so many people are showing opposition.

2. # Alex Hewaton 27 Sep 2008 at 4:31 pm

   I used to live in Korea and I remember the huge news coverage this got. If I remember correctly, after the mad cow scare, Korea turned to Australia to import beef. It cost a ridiculous amount too, I remember my mum constantly complaining about it. The people who gain from the free trade in Korea are manufactures. This trade agreement should strengthen US-Korean ties even more. The Korean government has been urging the US to slowly withdraw troops from the country but even though peace efforts are strengthening (then they get set back again, latest was when NK fired at a South Korean woman who apparently overstepped the boundary lines) the US continues to want their presence within the country. This results in a tense relationship and hopefully the trade agreement will make it more secure.

3. # Jennyon 21 Nov 2008 at 9:30 pm

   The graph illustrates the economic effects of the tariff placed on the import of Korean cars into the United States. It thereby helps to demonstrate who the winners and losers from free trade will be. Consumers will benefit from free trade because they will have to pay a lower price for the cars. This is because, with the tariff in place, competition will be decreased for domestic producers and they can ask a higher price. It is for a similar reason that foreign producers can also be considered “winners”. With free trade, competition will increase and shift price down to Pworld and people will buy the cars from the most efficient producers (Koreans). The diagram clearly shows that the losers from the free trade of cars between the United States and Korea will be the American producers. The tariff makes it more expensive for Americans to buy Korean cars, so they will choose to buy the American cars, which now appear cheaper. However, society as a whole will benefit because there will no longer be domestic over allocation of goods or foreign under allocation of goods, which will then remove the dead weight loss that the tariff caused.
   Even though, if tree trade between the United States and Korea were to happen, society as a whole would be better off, there would also be certain “losers”. As stated, society would benefit because of the removal of the DWL, as would Korean car producers. To that, Korean consumers would also profit from the increase in competition. The losers, however, would be the Korean cattle farmers. This is because the with American beef producers now also competing in the market, there will be more competition and the prices will fall. Therefore, their total revenue would decrease.
   In the long run, it is possible for the free trade between America and Korean to create jobs in America. This is because, even though some jobs will be lost to more efficient Korean producers, American producers will be forced to allocate their goods to their best use.
   Politicians often oppose such deals because, in order to get elected, they only think about the effects that will be visible in the short run and tell the voters what they want to hear.

4. # Pedro.ecsla.f09on 06 Jan 2010 at 5:34 pm

   1. The graph shows the effects of the tariff in the USA car market.
   2. In the graph is easy to easy how will win if the tariffs disappear (the consumer will have to pat lees, the Korean companies will be able to sell more and other companies which are not from this sector will be benefited by the money that the USA people has now to buy other things because the car is cheaper) and how lose with this (the USA car companies that has to decrease a lot their prices losing a lot of revenue.
   3. This free trade will destroy some jobs in the car sector but it will create other jobs (the civil servant that control the exports and all that new job that the companies of other sector in which the people spend more money because the haven’t spend it in the car)
   4. Because all that benefits that the people will receive are in the long run but all the problems are in the short run (and the democracy government do not like this because the election are in the short run)

5. # Pedro.ecsla.f09on 06 Jan 2010 at 5:37 pm

   To Jenny
   I think that all you say is very clever, you explain quiet well and I am almost totally agree with you, the only thing I am not totally agree is that you say that the looser will be the American producer but with the dates given we could only ensure that the USA car producer will lose with the free trade

6. # jiyoon.ecslb.f09on 07 Jan 2010 at 2:50 am

   These are very interesting questions and nice article to read of since I am South Korean and know little more about what I don’t know about Korean history and also economies.

   First of all, the graph illustrates the concepts of tariff in the USA car market. Therefore supports to prove who are the winners and the losers from the free trade. The graph shows that people will buy Korean cars more rather than Americans because it is cheaper for now. Therefore, it is beneficial for both sides who can receive money and who can buy a product with a cheap price.

   According to what I see, consumers are more likely to benefit from the free trade since they will have to pay a lower price for the cars. The reason why is that with the tariff in place, competition will be decreased for domestic producers and they could ask for a higher price. The diagram also represents that the losers from the free trade of cars between the US and Korea will be the American producers. Eventually, it seems that the tariff makes it more expensive for Americans to buy the Korean cars; therefore, American will prefer to buy more of their own productive cars rather than Korean ones.

   It seems to me that the free trade will destroy but also will benefit. I looked at both sides. It some jobs in the car sector might be abolished but it will create other occupations. On the other hand, there won’t be domestic over allocation of goods or foreign under allocation of goods anymore which means that this then removes the dead weight loss that the tariff caused. Although we know that if free trade between the US and Korea were to happen, society as a whole would be better off, which means there would be some “losers”. Hence, Korean consumers would also profit from the increase in competition. The “losers” could be the Korean farmers who are also starting to compete for the market.

   Politicians oppose free trade deals that would result in such improvements in efficiency because all of those benefits the people who will receive in the long run, but most of all the difficulties are in the short run. In the long run, it is quite possible for the free trade between America and Korean to make new occupations in US since although, some jobs will be gone more effectual Korean producers, American producers will be strengthened to assign their goods to their greatest use.

7. # Alison.ecslb.f09on 07 Jan 2010 at 11:36 pm

   1. How does the graph illustrate the concept of “winners and losers from free trade”?
   The graph illustrates the concept of “winners and losers from free trade” as it shows the effects of a tariff of the American car market. As the price of Korean cars decreases and the price of American cars remains stable, it follows that there will be an increased consumption of Korean produced cars. Thus, the Korean car producers and the American consumers will be the “winners” in this situation, while the American car producers will be the “losers”.

   2. Who gains and who loses from free trade with the US within Korea?
   Within Korea those affiliated with the production of cars/car parts would be the winners. Firms which receive a large part of their revenue from the importing of beef from more expensive countries will be the losers. These two statements can be explained by the fact that opening free trade between Korea and the US will serve to decrease the price of cars in the US and simultaneously decrease the price of beef in Korea.

   3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…
   In the short run the free trade agreement between Korea and America will serve to decrease the amount of jobs in the US; however, in the long run it can be said that the opposite will happen as a result of an increase in civil workers and other jobs increases due to the change in the allocation of the US’s resources.
   4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?
   This ties in to the answer of the previous question – short run vs. long run. Because politicians are only in office for a short period of time, they look at the short term results rather than the long run results. Even though these free trade deals have positive long range results such as improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers, they have negative short range results that would not be beneficial for their political careers.

8. # Alison.ecslb.f09on 07 Jan 2010 at 11:42 pm

   To jiyoon.ecslb.f09

   No offense, but I think you have it backwards in regards to the second question. The way I see it is that the tariff will result in a decrease in the prices of Korean cars in America, which will result in an increase in American consumption of Korean cars. These cars will be of slightly worse quality, but the quantity will be larger, and due to the lower price, they will be preferred over American produced cars.

9. # john.ecsla.f09on 07 Jan 2010 at 11:46 pm

   1. The graph shows the tariff’s effect on the car market.
   2. Consumers of American automobiles in Korea wll benefit, while the auto companies that make Korean cars in Korea will suffer, because revenue would go down as a result of a free trade agreement freeing up price levels.
   3. A free trade agreement could create jobs in the long run, but in the short run more jobs will be terminated then made.
   4. Politicians are trying to get elected in the short run, but effects of a free trade agreement are negative before they are positive. Because of increased competition, jobs will first disappear, but as the economy ges better, more jobs oculd be created. However, a politician trying to get elected when the free trade agreement is announced will be long gone before any positive effects are felt from the agreement.

10. # john.ecsla.f09on 07 Jan 2010 at 11:47 pm

    Pedro,
    What do you mean about the civil servant from qestion number 3? Wouldn’t there already be a civil servant in place controlling trade even before a free trade agreement was announced?

11. # jiyoon.ecslb.f09on 09 Jan 2010 at 12:35 am

    To Alison.ecslb.f09,

    Alison, thank you very much for reminding me of my mistakes. I see it now that the ‘tariff will result in a decrease in the price of Korean cars in America’. Yes, and also this will result that the American consumptions will increase of Korean cars. It was a little confusion that I was struggling of, yes, it is true that because of the lower price, they will prefer to buy American produced cars, as you said, the quality would be slightly worse but the quantity will be larger. I will look back again my mistakes and catch up with the right answer! Thanks! It is always good to hear more information about my country, which concentrates me more to learn about.

    JiYoon

12. # kerstin.ecslb.f09on 10 Jan 2010 at 12:09 am

    (1) The graph shows who would be “winning” with the tariff and who would be “winning” without the tariff. With, domestic producers would make a profit of PtQ2, while without they would only make a profit of PwQ1. With, foreign producers would make less profit, (Q4-Q2)Pw to be exact, while without, they would make a profit of (Q3-Q1)Pw.

    (2) In S Korea, many product producers (i.e. manufacturers) would make more profit, because they can offer their products at cheaper prices and so more Americans would buy their products. It is likely that S Korean service companies may suffer instead. S Koreans may find or think that American insurances (for example, as mentioned in the article) are more reliable and so they may trust them more.

    (3) Yes it is possible that they would create jobs in America. The Koreans may demand for products or (especially) services that they don’t produce themselves. In the article they mentioned insurance companies for example. If they need to insure more people, they will make more profit and hire more people to correspond to the increased demand, thus creating jobs.

    (4) I think that politicians firstly want to protect their own country and workers. They know American manufacturers may suffer. Also, they would make themselves more dependant on S Korea if they would trade with them. For example for cars; if more people buy S Korean cars, then American firms would reduce production. If S Korea would stop their trade for cars, then the American demand for them could not be satisfied. Also, I think politicians are against it out of fear; they think that diseases, like the Mad Cow Disease, could reoccur.

13. # kerstin.ecslb.f09on 10 Jan 2010 at 12:16 am

    To Alison.ecslb.f09:
    I liked reading your answers; I thought (4) was especially interesting; I had not thought of the matter in that sense. You’re so right in the sense that politicians most of the type try to “save the situation” in the short run;
    when the population sees that things are going well or getting better, they will vote or the politician again. If not, they won’t. That’s why everything needs to be good *at all times*. If the tariffs were taken off, then in the short run, the American economy would suffer, but in the long run it would benefit. However, the next political voting will most likely still be in the short run, so politicians have to fear not to be voted again.
    Good point!

14. # michael.ecsla.f09on 10 Jan 2010 at 6:29 am

    1) How does the graph illustrate the concept of “winners and losers from free trade”?
    The graph shows that if Korean car prices fall, Korean car producers and American consumers will “win”, while American car producers will “lose”.
    2) Who gains and who loses from free trade with the US within Korea?
    Car producers will win, as more consumers will buy their cars, but beef importers will lose, as the price of domestic beef will plummet.
    3) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…
    In the long run, more jobs will be created, as more negotiators, ambassadors and staff will be needed to handle the increase in American and South Korean diplomacy. In the short run, however, more jobs will be lost, as car manufacturers will close down due to being unable to compete with Korean prices.
    4) Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?
    Politicians care about the short run and about being reelected. In the short run, these agreements will be bad for America, thus hurting their chances of immediate reelection if they support them.

15. # michael.ecsla.f09on 10 Jan 2010 at 6:32 am

    Kirsten.esclb.f09,

    You’re right. However, that won’t change a politician’s viewpoint; they care about reelection, not helping the country, and the majority of American citizens care a lot less about the long term than the short term.

16. # Celine.ecslb.f09on 10 Jan 2010 at 8:15 am

    1. The graph shows the affects of tariffs on the American car market. In this case the Americans will be the “losers” because their cars will get relatively more expensive and the “winners” are the manufacturers in Korea because the demand for their cars will increase because it is getting less expensive for American consumers to buy them.
    2. The free trade, without the tariffs, the Korean car producers will gain because the demand for their goods will increase because it isn’t so expensive for Americans to purchase their cars. However, the people working with the beef will loose because the price of beef that is imported into the country will lose.
    3. Whether it is possible or not that jobs are created in American depends on the time frame that is being viewed. In the short run, probably not. In the short run, American companies will lose revenue because American consumers are allocating their money to Korean cars, which are cheaper. However, in the long run, it is possible that there will be an increase in job opportunities in America because they are allocating their resources more efficiently into different fields where they think they can create profit.
    4. Politicians still oppose free trade deals even though they might result in the improvement in the country because these improvements would only happen in the long run. Many politicians think rather in the short term, and in the short term, the country would suffer with the resulting lose of jobs.

17. # Celine.ecslb.f09on 10 Jan 2010 at 8:20 am

    TO Alison:

    Regarding your answer to the fourth question, there is an aspect that you included that I thought was very true and well thought of. When you stated that politicians would still be opposed to free trade even if it helped a country, you also said that it is because politicians “are only in office for a short period of time, they look at the short term results rather than the long run results”. This shows how egoistic the politicians actions can be. The positive effects of the free trade would probably only start to appear after they left office making it not beneficial for them, but rather look bad on their profiles because they were essentially the “cause” of unemployment.

18. # Jack.ecslb.f09on 11 Jan 2010 at 3:29 am

    1. The graph shows the concept of winners and losers of free trade by the green and yellow boxes. The tariffs imposed will impede American consumers from buying Korean automobiles due to the raised price; however the Inland Revenue department would collect a large amount of tax from these items. Furthermore the graph also shows the decrease in demand of the domestic autos and the equivalent demand of imported cars can be added to the existing local demand of autos in Korea of the Korean companies.
    2. Obviously the Korean automobile industry would gain from the ability to sell in the American market; however other industries in Korea may lose due to an increase of American goods in Korea such as beef. Furthermore both governments would have an increase in tax revenue due to the increase in imports however there may be an increase in short term unemployment in the losing industries in both countries.
    3. In the long run, increased efficiency and lower prices in some areas would increase jobs in America as it would lead to increased disposable income due to lower prices and competition.
    4. In the short term some effects can be negative, therefore could create immediate adverse reactions from the public. Which as has been said, is politically terrifying, it seems no surprise that China seems to be one of the biggest supporters of free trade, certainly for their exports, as they seem more interested in long term efficiency and gain rather than short term boost, probably due to the lack of a democratic voting system.

19. # Jack.ecslb.f09on 11 Jan 2010 at 3:36 am

    On question 4

    Aside from the short-term loss vs long-term benefits argument for politicians not supporting free trade, there is also the possibility that certain lobbyists from Ford, GM and others could have politicians – if not on the pay roll, driving nice cars shall we say, and this could lead to politicians making adverse decisions for the country to protect a few companies. It is always revealing to look at the contributers to politicians campaign funds and their resulting policies.

20. # theresa.ecslb.f09on 11 Jan 2010 at 5:52 am

    The U.S. Automobile Market (with Tariffs) graph illustrates the concept of “winners and losers from free trade”. In this situation, American automobile manufacturers are considered to be the losers; this is so because the quantity demanded in the automobile market is less than it would normally be without a tariff (demonstrated by Q4 rather than Q3). The domestic quantity demanded exceeds the domestic quantity supplied, indicating a weakness in American manufacturers and signaling that S Korea is the winner in the situation, as the difference between what American can produce and what America needs is supplied by imports of Korea. Another illustration of how America becomes the losers is exhibited by the loss of efficiency or a consumer surplus lost (demonstrated by the green triangles Y and X). This loss arises by the higher price paid by American consumers due to the tariff.
    The removal of tariffs on imports from S Korea will force American manufacturers to become more competitive and achieve greater efficiency, both which will result in a more efficient allocation of resources in both S Korea and the US. If Ford, for example, sells fewer cars because of in influx of high quality, affordable Korean automobiles, then Ford may be forced to shut down some of its plants in the US. This will lead to the loss of American jobs. However, manufacturers in the US will focus more on capital intensive goods such as industrial equipment, the manufacture of which requires highly skilled labor, which America has in abundance. In addition to industrial equipment and other high skilled manufactured goods, the US service sector should benefit from freer trade with S Korea. So overall jobs might decrease due to plants closing down and so forth but the amount jobs being created in the high-skill service sector of the automobile industry will increase.
    Politicians oppose free trade deals that would result in improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers because politicians are usually only concerned with short term effects which will influence the closest polls. For example, the situation presented is better for America in the long-run because manufacturers in the US will be able to focus solely on capital intensive goods requiring skilled labor, but in the short term, a plant or two might be forced to shut down due to the competition of Korean products. Politicians are only able to see the first steps and not the beneficial shift of focus that US manufacturing will make. But if a hundred people lose their job on a politicians watch, he might not be re-elected, it’s a risk most politicians won’t make.

21. # theresa.ecslb.f09on 11 Jan 2010 at 5:58 am

    Jack, your example of China’s opinion to free trade is interesting and insightful. Because they are not concerned with public interest and there is little direct influence on politicians, the shot term adverse effects aren’t the be all end all for a new plan. They are able to have the foresight needed to see a plan all the way through the first stages.

22. # derek.ecslb.f09on 11 Jan 2010 at 2:17 pm

    1. How does the graph illustrate the concept of “winners and losers from free trade”?
    In the graph, the government is obviously the winner of not having free trade as it has generate additional income. The economy is an example of losers of not having free trade as it has X and Y labelled as deadweight losses.

    2. Who gains and who loses from free trade with the US within Korea?
    The korean manufacturers will benefit as they can sell their products in a foreign country. The US manufacturers will lose as there are substitude goods with a lower price which affects the sales.

    3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…
    This is because as the most profit can be gained by making such product, more and more resources, including labour will be put into the production and hence creates job

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?
    It is because there is a chance that less jobs will be created in free trade. This is because as the level of production increases, the level of technology will tend to increase. This will improve the poductivity of each factor of production, which less labour as a factor of production is needed for the same amount of products produced.

23. # derek.ecslb.f09on 11 Jan 2010 at 2:23 pm

    To Jack

    I agree that in the short run ifree trade is bad for the economy but it will gradually improve overtime.

24. # raphael.echl.f09on 11 Jan 2010 at 6:58 pm

    1. The graph on its own is hard to understand but it does show the winners and loosers like explained below it.
    2. the winners of in South Korea will be the manufacturers and the looses will be those offering service like banking and insurances.
    3. Yes I thinkt that jobs could be made especially in sectors like banking and insurances as they would be the winners.
    4. The politicians probably do not see enough benefits from the free trade agreement so they do not think it would be good to change.

25. # raphael.echl.f09on 11 Jan 2010 at 7:02 pm

    To derek.ecslb.f09

    In the second question it is asking what will the Skorean loosers be and you talked about the american ones. ANd I agree with your other answers as it was interesting to see how you saw it.

26. # Laith.ecslb.f09on 12 Jan 2010 at 4:53 am

    The graph illustrates the revenue generated from the tariff, the Korean car sales are hindered by this tariff making them the losers and the winner is the Government collecting the tariff. The Government win because they minimize leakage from their economy by limiting the sales of Korean cars and collecting a tariff from any sales that are made abroad. American industries lose from free trade due to higher competition while the Korean industries win from more sales. Tradition economics means that when money leaks from the cycle the flow of cash becomes less meaning that less people can be funded by the money in the cycle. Leakages lead to less jobs. Free trade increases competition for American producers, considering American companies sponsor the candidates for government the corruption present causes tariffs preventing free trade.

27. # Alan.ecsla.f09on 12 Jan 2010 at 6:48 am

    1. This graph shows what the effect of the tariff would have on the car market with Korea. It shows who would be the “winner” of such a tariff
    2. Korean car companies, as well as other firms that would plan to import goods into America would benefit from this free trade agreement. Domestic companies, however, would suffer because consumers would begin to buy more from foreign companies, rather than the ones they were buying from before.
    3. The only way a free trade agreement could create American jobs in the long run is if the agreement gave the american companies incentive to improve their products. If they lose too much money, and in turn, make the good they produce more efficient and effective, consumers may demand more of it, leading to more jobs.
    4. Because of the short run of each politician, politicians are trying to do whatever they can to get results in the short-term. Because these free trade agreements take a lot of time to start showing benefits, the politician would suffer by putting one into place.

28. # Alan.ecsla.f09on 12 Jan 2010 at 6:49 am

    To raphael

    For question 4, I don’t think its that politicians really don’t see the benefits of free-trade, since its pretty clear what they are, they just don’t think they would be able to stick around long enough to see them through.

29. # Olajumoke.ecslb.f09on 12 Jan 2010 at 9:27 pm

    1. How does the graph illustrate the concept of “winners and losers from free trade”?
    This graph shows that without the use of tariffs, even though efficiency will be increased, either wages in the automobile industry will fall or jobs will be lost. Though it seems like it will help the overall economy, there is no account for the many new people who will then be requiring unemployment benefits due to this new, more “efficient” economy. In India, they continue to refrain from many modern innovations because it would leave too many people jobless in the country, according to the teachings of Gandhi, they would rather have many people working and happy than an industrious nation with unhappy people who are likely to then commit transgressions against the law.

    2. Who gains and who loses from free trade with the US within Korea?

    Those who gain are the other complimentary industries to the automobile industry who would now receive free entrance into the S Korean market. Also, the US consumers would also win because the automobile industry would just become more competitive and more efficient. The main loser would be the automobile industry, they would be forced to think more competitively and become more efficient, this means they would have to work harder to maintain their profit and this is not so desirable to firms.

    3. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Well it is possible that a free trade agreement with Korea would create some jobs, but they would be higher level management jobs and for those with higher educations who would understand how to make deals and understand trade agreements and such. Any of the work which can be done by the uneducated will probably be done in Korea, where labour unions are less evident and people are willing to work for less.

    4. Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Many countries are opposed to this because the loss of jobs in the USA would actually override the gain. The government’s surplus money would then be used for the unemployed, and many government officials have more to gain from the less efficient style of an American based company with little competition than from an actually efficient economy.

30. # Olajumoke.ecslb.f09on 12 Jan 2010 at 9:46 pm

    1.
    This graph shows that without the use of tariffs, even though efficiency will be increased, either wages in the automobile industry will fall or jobs will be lost. Though it seems like it will help the overall economy, there is no account for the many new people who will then be requiring unemployment benefits due to this new, more “efficient” economy. In India, they continue to refrain from many modern innovations because it would leave too many people jobless in the country, according to the teachings of Gandhi, they would rather have many people working and happy than an industrious nation with unhappy people who are likely to then commit transgressions against the law.

    2.
    Those who gain are the other complimentary industries to the automobile industry who would now receive free entrance into the S Korean market. Also, the US consumers would also win because the automobile industry would just become more competitive and more efficient. The main loser would be the automobile industry, they would be forced to think more competitively and become more efficient, this means they would have to work harder to maintain their profit and this is not so desirable to firms.

    3.
    Well it is possible that a free trade agreement with Korea would create some jobs, but they would be higher level management jobs and for those with higher educations who would understand how to make deals and understand trade agreements and such. Any of the work which can be done by the uneducated will probably be done in Korea, where labour unions are less evident and people are willing to work for less.

    4.
    Many countries are opposed to this because the loss of jobs in the USA would actually override the gain. The government’s surplus money would then be used for the unemployed, and many government officials have more to gain from the less efficient style of an American based company with little competition than from an actually efficient economy.

31. # Olajumoke.ecslb.f09on 12 Jan 2010 at 9:50 pm

    Response to Raphael,

    For question 2, wouldn’t bankers and such actually benefit considering this would open up more opportunities for people and companies to actually invest and take out loans? And the article does say that some people in insurance are actually pushing to have the tariffs dropped. This is due to the fact that they actually do benefit from the lack of tariffs

32. # Katharine.ecsla.f09on 13 Jan 2010 at 5:21 am

    1. The graph illustrates the concept of “winners and losers from free trade, ” as it shows how the government would gain in the amount of the tariff collected, and the American consumers would end up paying a higher cost due to the tariff.
    2. The winners in Korea would be the manufacturers and workers in Korea, as there will be more jobs and more benefits for them. The losers in Korea would be those would were trying to sell Korean cars in Korea, as the revenue would decrease due to the opening of free trade. The beef producers will lose as well, as the opening up of free trade will allow American companies to export their beef cheaply and gain more.
    3. It could be possible that a free trade agreement with Korea could create jobs in America, however in short terms, more jobs are more likely to be lost due to car manufacturers leaving the country as it would be cheaper in Korea. However, long term could mean that America reallocates their resources and creates more jobs here in different fields, that we are not exporting to other countries. It really depends on how well the situation is handled and how much time has passed.
    4. Politicians oppose free trade deals because they care about their political careers, which usually means how the public views them in the short amount of time that they are in office. Therefore, looking at the big picture is not always ideal for their own benefits, and they feel that manufacturers within America would suffer, and also they could lose political influence if the free trade deal meant loss of jobs during their term in office.

33. # Katharine.ecsla.f09on 13 Jan 2010 at 5:26 am

    Response to Olajumoke.ecslb.f09,
    I agree that politicians often feel that they must act in a way that is best beneficial for the short run, as that is how long their terms in office are. I think your reasoning that the loss of jobs could override the gain is very probable, and therefore, politicians feel that they must act in a way that benefits people the quickest way possible, which often means not agreeing to free trade deals. It definitely is possible that a free trade agreement with Korea would create some jobs, and I agree that these jobs would require higher educations, for management jobs and the like. It does make it hard on those who cannot afford those advancements in their education, and they are likely to lose their jobs.

34. # Leyre.ecslb.f09on 13 Jan 2010 at 2:08 pm

    0. How does the graph illustrate the concept of “winners and losers from free trade”?
    The graph shows ‘’tarrifs on koreans automobiles’’. It shows how the pices of American cars remain the same and the prices of Korean cars decrease.

    0. Who gains and who loses from free trade with the US within Korea?
    Korea is benefited in terms of not having to pay taxes for trade. The prices of cars in the US will decrease because they won’t be paying taxes for trading with Korea.

    0. Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…
    In a way this will create but will also decrease the amount of jobs. Because, it may need more people working between the relations between Korea and US, but will also affect the car manufacturers who will have to close.

    Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers

    Because this would affect the economy of their country, since the taxes would not flow as well.

35. # Kenneth.ecsla.f09on 23 Jan 2010 at 9:34 pm

    1. The graph shows the concept of winners and losers by showing the supply and demand with and without the tariff. With the tariff the demand for the domestic product is greater. With free trade the tariff will be removed, making the demand for the domestic product to drop. The winners with free trade are the foreign companies and the consumers, since the price is dropped.
    2. With the free trade agreement, car companies in Korea will increase sales. Also with this agreement, the beef industry in Korea will lose, since the ban on American beef will be removed and have no tariff.
    3. It is possible that free trade with Korea will create jobs for America. With the new products for Korea needing repairs, the service industry in America will increase. Also if Korean imports force American companies to condense, the people who are left without jobs could be used for other jobs, making it a better allocation of resources.
    4. Politicians oppose free trade deals because in the short term it is harmful to American companies, as it will cost people their jobs.

36. # Kenneth.ecsla.f09on 23 Jan 2010 at 9:40 pm

    To alan,

    Question 2 is right on, since the free trade agreement is not just based on cars, all other firms will be effected, including the beef industry of korea.

    i dont agree with you regarding question 3 however, i think that if the american people loss jobs do to this agreement, that their resources will be needed in another area, and will potential create jobs.

37. # diana.ecsl1.f09on 25 Jan 2010 at 9:03 am

    1) How does the graph illustrate the concept of “winners and losers from free trade”?

    The countries imposing the tariffs are losers while the exporting countries are the winners. This is due to the fact that quantity demanded decreases when import taxes need to be paid. According to the graph, “the removal of a tariff on Korean automobiles will result in a decrease in output by American firms from Q2 to Q1, an increase in imports from Q4 – Q2 to Q3 – Q1, and an increase in consumer surplus, efficiency, and better overall allocation of resources in America.”
    –

    2) Who gains and who loses from free trade with the US within Korea?

    If there is greater demand for imported automobiles, US workers will suffer because there will be a decrease in production of American automobiles. However, consumers will benefit as they will not have to pay as much for their cars. Korea also benefits because they gain revenue from the automobile exports.
    –

    3) Is it possible that a free trade agreement with Korea would actually create jobs in America? Explain…

    Yes it is possible. In the short-term jobs will be lost as there will be a decrease in output by American automobile industries. Thus workers will be laid off. In the future however those lost jobs may be relocated in another industry, perhaps relating to car sales or control of exports. So over time it will all balance out and in the long-term jobs will be created.
    –

    4) Why do politicians oppose free trade deals that would result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers?

    Politicians fail to see the bigger picture and think long-term. The first thought that pops in their minds is that jobs will be lost. That immediately dissuades them from accepting free trade deals. Politicians tend to not be well informed when it comes to economics which tends to be a problem since they can have such influential impacts on the economy. Because they simply do not understand the specifics of economic policies, politicians miss opportunities that result in such improvements in efficiency, allocation of resources, and even in the employment opportunities for American workers.

38. # diana.ecsl1.f09on 25 Jan 2010 at 9:07 am

    Michael that is an excellent point you made regarding question 4. As you said, many politicians solely care about re-election hence why they focus on the short-term only. This is the sad but simple truth.

39. # diana.ecsl1.f09on 25 Jan 2010 at 9:09 am

    Alison, great job answering all the questions. You really understand what this article is all about. I love how you outlined questions 3 and 4. Again, it all comes down to short term vs. long term.

40. # Serafin Kaldis and Rustyon 20 Apr 2010 at 9:04 pm

    South Korea and America have been struggling to reach a free trade agreement for many years. Since 2003, Korea has stopped all imports due to the Mad Cow disease affecting them from America. However, the beef ban was lifted in 2008, creating some hope for a free trade agreement being reached. It seems like there were other reasons though keeping the agreement from being reached. Apparently the Democrats were afraid that a free trade agreement with South Korea would cost Americans their jobs. If the trade agreement would’ve been reached, the manufacturers in South Korea and the service industries in America would’ve been the winners, while the American manufacturers would have been the losers. However, a free trade agreement would have been a good thing, because it would have forced the American manufacturers to become more competitive and efficient. Even though some jobs would’ve been lost, in the long run America should’ve been better off in the long run. The free trade agreement would’ve done more for improvements in efficiency and resource allocation than it would in harm for a few American workers that were impacted by the greater demand for imported automobiles.

    The removal of the tariff in the graph would create a decrease in output from American firms from Q2 to Q1, an increase in imports to Q3-Q1, and an increase in consumer surplus, efficiency, and resource allocation.

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