In response to my recent call for American ASEAN experts to be less focused on promoting a U.S.-ASEAN free trade agreement and more focused on having the ASEAN countries actually buy more from the United States, I received several queries about what exactly the United States has to sell aside from military hardware and systems.

This is an old question in the long running debate over the U.S. trade deficit and unfair trade in the Asia-Pacific region. Typically the discussion goes as follows. American commentators, business executives, and government officials claim the some market is unfairly closed or that exchange rates are being unfairly manipulated to the disadvantage of U.S. exports. This, they say, is exacerbating the already unsustainable U.S. trade deficit and will result in some dire consequence unless the offending countries stop cheating and start playing by the rules. The response from Asia is denial of any foul play and an assertion that American business doesn't try hard enough capped by the question, "aside from weapons and airplanes, what does American make that anyone in Asia could possibly buy?"

This has been an excellent debating technique for Asian officials and commentators because it has diverted attention from Asian policies to well known and glaring American weaknesses. In effect, this question has said: "Look, why don't you just forget about our policies and practices. The truth is that you have nothing to sell that we want to buy, and, therefore, even if we played exactly as you request there would be no change in the trade flows or in your trade deficit." 

While it was always an exaggeration of U.S. weaknesses, this argument contained enough truth that it was long hard to counter. Today, however, that is much less the case. Let's start with weapons and aircraft. Even its harshest critics have always acknowledged that the United States is very competitive in the weapons and aircraft markets. Yet, even its closest allies have striven to import only what was absolutely necessary from the United States while having most of the arms and aircraft made in their own factories within their own territories. Take the recent decision by Japan to buy the U.S. F-35 as its next generation fighter plane. Japan is not going to import that plane off the shelf from an American factory. Rather it is negotiating to have as much of the plane as possible made in Japan despite the fact that making it in Japan will dramatically increase the cost.

As for commercial aircraft, press reports this week noted that Airbus will take a larger share of global aircraft sales this year than Boeing. This strong Airbus showing reflects the success of a long running European industrial policy that has been aimed not only at avoiding as much as possible the procurement of U.S. made aircraft but also at displacing them in the world markets. Virtually every Asian economy including those of Japan, Korea, and China has some effort underway to promote the production of commercial jet aircraft or of aircraft parts, and procurement both of U.S. brand military and commercial aircraft is often made conditional on at least partial production of the plane within the home territory of the procuring body.

So a good first reply to the question of what the United States has to sell would be - arms and aircraft, if that would only be fully permitted.

But now the even better reply is that the United States is the most competitive locations for production and provision of a broad range of goods and services. Take autos as an example. Honda has just announced that it may increase its production in the United States by 40 percent and begin to use the United States as an export platform for some models. This is because the strong yen has made U.S. based production more competitive than Japan based production. Similarly, Mercedes Benz, BMW, Hyundai, and other global auto makers are added production capacity in the United States not only to supply the U.S. market but also for export.

This morning's New York Times reports that GE is returning production of some appliances to Louisville, Kentucky and a recent study by Booz & Co. emphasizes that about 90 percent of U.S. manufacturing industries are quite competitive in global markets. One of the most competitive is semiconductors which were the basis of the whole rise of Silicon Valley. Yet, as in the case of aircraft, a number of governments are promoting and subsidizing indigenous semiconductor production as part of efforts to displace the leadership of the U.S. based production.

So the answer today to the question, is that the United States has plenty to sell if the strategic industrial policies aimed at displacing such sales are abandoned or modified. And it is the lack of focus on such policies that constitutes my opposition to proposals for free trade agreements like that suggested between ASEAN and the United States. Free trade agreements that do not result in more trade in items in which it is well know that countries are competitive is not really free trade. Rather it is a charade.

My call is for less charade and more real trade, meaning actual sales and delivery.  

"It's on me. It's on me," GE CEO Jeff Immelt recently told the Wall Street Journal's John Bussey in response to a question about the wisdom of transferring technology and production to his new avionics joint venture with China's state-owned Aviation Industry Corp. (AVIC), a company that supplies both China's commercial and military aircraft industries.

Presumably, this was Immelt's way of saying that he would man up and take responsibility if anything went wrong as a result of the deal. That is, of course, an admirable sentiment, but the problem is that it's not a responsibility Immelt can take because he will never be in a position to actually have to pay for any damage resulting from the deal.

Three points have gotten mixed up in the ongoing discussion of this deal, and it is important to unscramble them. First is the issue of access to the Chinese avionics market being conditioned by Beijing on the transfer of technology and production to China. GE spokespeople keep saying that it was never told it had to make such transfers in order to get the business. This is disingenuous, and Immelt ought to tell his people shut up in order to save his own credibility. Sure, no Chinese official ever made such a direct statement to GE. But it is insulting to trade and industry experts for GE to keep denying what everyone knows to be true. Beijing's five-year plans and its Buy China policies along with its Buy Indigenous Technology policies have made it abundantly clear to all observers of the scene that China intends to develop its own cutting-edge aviation and avionics industries and that it intends to do so by insisting that production and technology development for the Chinese market be done to the maximum possible extent in China. GE is doing this joint venture because it knows it has no chance of getting the business without technology and production transfer, and every China and trade expert in the world knows this to be the case.

The second issue is whether the technology GE is planning to transfer could leak into China's military aircraft programs and thereby endanger U.S. national security at some future date. Related to this question is also that of whether the technology could leak out and be used by other Chinese companies to take business away from other U.S. aerospace companies like Boeing. GE says it has devised strict procedures that have been approved by the U.S. Departments of Defense and Commerce to prevent such leakage. Further, GE insists that technology is the heart of the company and asks rhetorically, "Why would we give away our future?"

When Immelt insists that "it's on me," this is what he means. In other words, he'll take responsibility if somehow the technology gets away from GE into places where it could come back to hurt GE or the United States.

Historical experience strongly suggests that leakage of technology in these kinds of circumstances is virtually impossible to prevent. Look, we couldn't prevent the North Koreans from getting nuclear weapons technology even though we made every effort to stop them and certainly were not doing joint ventures with North Korean state-owned companies. And while it's admirable for Immelt to be willing to take responsibility if something bad happens, as a practical matter, what price exactly is Immelt likely to have to pay? By the time it happens he and his top managers are likely to be long gone from the scene with bonuses and retirement packages in hand. And even if something bad happens sooner, what will "it's on me" really mean to the companies or the U.S. forces that have to face the consequences?

But let's assume for sake of the argument that nothing leaks out of the joint venture. So GE is cool. It continues to control the technology, and its joint venture gets the business. Earnings soar. The stock price skyrockets, and Immelt and his team and the shareholders all collect big bonuses and dividends. The deal will thus prove to have been good for GE. But what about the United States? This avionics technology is something in which U.S.-based production and workers are the world leaders. The United States has a competitive advantage in this stuff. These are jobs that Americans can claim a better right to than anyone else. Under normal market conditions, without the necessity of technology transfer in return for market access, there would be no need of a joint venture. All the technology development and production would be done in America and would be exported in exchange for something that is better done in China or elsewhere. So under circumstances of no leakage, GE may come out looking golden, but the United States would still take a hit.

Oh sure, you can argue, as GE does, that by getting the China business and doing part of the work in the United States, GE is creating new U.S. jobs as well as jobs in China. And there is some truth to this argument. But it ignores the fact that the United States is getting less than the full value of its competitive advantage while at the same time that national advantage is being whittled away with the full support of multinational GE. In other words, GE can and would benefit at America's expense. So nothing would be "on" Immelt. The cost would be on the American worker, researcher, and U.S.-based producer.

That leads to the final point. The real problem here is not GE or Immelt. They are doing what is logical and best for them in the prevailing circumstances. As former Commerce Department official James Lewis told Bussey, "U.S. companies are making the right decision from a business point of view, but it might not be the right decision for the country. We've been passive (as a country) in deciding how to deal with China's aggressive industrial policies."

The real problem is the U.S. government or, rather, its absence from the discussion. China is conditioning access to its markets on technology and production transfer. There is no back pressure from the U.S. government. The CEOs are in a situation in which if they don't accede to China's pressures, they'll lose the business and they get no help from Washington in dealing with the pressures. So the rational thing to do under the circumstances is to play China's game. What is desperately needed is an American game in response. Washington needs to change the circumstances, level the playing field, give GE and Immelt a new set of incentives. The White House has to articulate an American economic interest, and that is not the same thing as the interest of GE or of any other particular company or set of companies.

So why focus so much on Immelt, you may ask. Well, it's true that in most respects he is acting no differently from any other global CEO and, let me make clear, no differently from how he should as the head of a global enterprise like GE. But there is one respect in which he is quite different. He is the chairman of the President's Commission on Jobs and Competitiveness and as such is the chief outside economic advisor to the president. He should be thinking of the American interest as well as the GE interest. He should recognize that the costs to the American economy and the American worker can't be "on" him, and he should be telling the president to change the game.

The plot of the story of the new made-in-China Oakland Bay Bridge has begun to thicken. Further digging has uncovered additional flaws in the rationale for having a major part of one of the United States' biggest infrastructure projects outsourced to China.

In the June 26 New York Times article that first broke the story, the claim was made that a major reason for having the fabrication of the bridge's major sections done in China was that American fabricators didn't have the capacity or capability to perform the work on such giant structures. Because of their supposed superior capabilities and lower labor costs, the Chinese were said to be providing the $7.2 billion bridge for $400 million less than U.S. fabricators who probably couldn't have done the work in any case.

But it turns out that the issue wasn't one of capability but of scheduling. U.S. fabricators had the capacity and the capability to do the work but argued that the project would take more time than the Chinese were proposing in their bid. Well, in the event, the Chinese have not been able to meet their own timetable, and the bridge is actually being built on the schedule originally proposed by the American fabricators. The first delivery of Chinese steel was more than a year late and the whole project is three years behind schedule and $5.2 billion over budget according to information provided by the National Steel Bridge Alliance.

So it looks like the Chinese low-balled their proposal in order to get the bid and then more than ate up the presumed savings by failing to meet their own timetable.

Read on

President Obama and his administration no doubt richly deserved the victory laps they took this week in the wake of their high stakes success in tracking down and doing away with Osama bin Laden. Now, however, they must quickly confront the fact that in a fundamental way he is still winning.

I don't mean that the terrorism and medieval brand of Islam he fomented are gaining support. Indeed, if anything, we have been over-estimating the terrorist threat posed by al Qaeda for some time. I even allowed myself briefly to wonder this morning if we might again be allowed to keep  our shoes on in airport security lines. But terror was only a tactic for bin Laden. His larger strategy, as he wrote to Taliban leader Mullah Omar shortly after 9/11, was to force the United States to over-reach in its reaction to the terror attacks and thereby to incur "great long-term economic burdens" that would "lead to further economic collapse." In that, the late al Qaeda leader continues to be only too successful.

The news of his demise is providing only a brief respite from a looming political clash over the United States' rising debt and how to cap and reduce it. Moreover, this debate is taking place in the context of an international flight from the dollar, slowing recovery from the recent Great Recession, stubbornly high unemployment, rapidly rising trade and current account deficits, and a Standard and Poor's warning of a possible downgrade of the AAA rating on U.S. sovereign debt. Over all this, bin Laden is smiling from his watery grave.

Thus, to really defeat him, President Obama must change his emphasis from geo-politics to geo-economics and revitalize the United States' flagging economic competitiveness. Here's how:

National security

Cut total U.S. national security spending (military and intelligence) in half over the next six years. Even at this reduced amount the United States would still have by far the largest, most powerful military forces in the world. Part of this could be achieved by rapidly drawing down U.S. force levels in Afghanistan and Iraq and by withdrawing U.S. ground forces that have now been stationed in Europe, Japan, and South Korea for well over half a century even as these countries have prospered and become powerful in their own right.

Spending and taxes

Get federal budget deficits under control by closing tax loopholes and adopting a combination of tax increases and spending cuts similar to those recommended by the Bowles/Simpson Commission. Marginal tax rates might actually be reduced if the tax base is broadened. In particular, the mortgage interest deduction should be substantially limited.

Adopt a Value Added Tax (VAT) similar to those of virtually all other advanced industrialized countries which rebate these taxes on their exports.

Reduce the corporate tax rate to the 25 percent levels prevailing in most of the world.

Gradually increase the age of eligibility for early Social Security to 65 and for full Social Security to 70.

Shift the medical payments system from pay for procedures to pay for care and adopt a national system of digitized, on-line medical records.

Trade/globalization policy

Set a target not just to double exports but to halve the trade deficit in the next three years. Because there can be no more stimulus spending and no further cuts in interest rates, this will be the only way to cut unemployment.

Adopt the Colombian and Panamanian Free Trade Agreements, but reject the Korea-U.S. Free Trade Agreement. The Korean deal will increase the U.S. trade deficit and impose a net loss of jobs as it is presently structured. It should be renegotiated to cover the items like currency policy that are the main drivers of our bi-lateral trade.

Establish a new template for free trade agreements with the Trans-Pacific Partnership by including coverage of currency manipulation, competition policy, investment incentives, and third party adjudication of intellectual property disputes.

Emphasize INVEST IN THE UNITED STATES. Establish a fund to match the investment incentives being used by many other countries to induce both foreign and domestic direct investment. Ensure that no business person leaves the presence of the President or any other top U.S. official without being asked about plans to invest in the U.S. Make it the top priority of the Commerce Department to maintain awareness of the investment thinking of the United States' and the world's leading corporations.

Embrace and lead global efforts to reduce the role of the dollar as the world's major currency. A system of several competing reserve currencies or of a global basket of currencies or of a global currency backed by commodities would place discipline on all global market participants to avoid chronic trade surpluses and deficits.

Self-initiate enforcement of U.S. and global trade rules to offset the impact of mercantilist policies on the U.S. productive base. Aggressively use the facilities of the World Trade Organization to challenge practices that tend to negate the intent of the global free trade rules.

American economic strategy

Recognize that the sum of regulatory, anti-trust, tax, government procurement, and a host of other policies greatly influences the structure and productivity of the economy. It is a de facto national economic strategy. Because it is never recognized as such, it is never analyzed in a coherent, comprehensive fashion. It should be the job of the National Economic Council to do this. At the same time, a Congressional Economic Strategy Office a la the Congressional Budget Office or inclusion of a strategy analysis as part of the budget office's remit would be advisable

I could go on, but have probably gone too far already. The main point is very simple. The top priority of Obama in the wake of the demise of bin Laden must be to reconstitute America's economic vitality.

Okay, so yesterday I explained not only that John McCain was wrong to say the iPhone is made in America (as you already knew), but also that most of you were wrong to think it is made in China. I went on to show that the phone is only assembled in China from high-tech parts that are mostly made in Japan, South Korea, and Taiwan. I further explained that production of these parts is not labor intensive, but capital and technology intensive.

In other words, these parts are just the kinds of products American economists, Silicon Valley venture capitalists and entrepreneurs, and Washington political leaders always say America is the best in the world at making. (That's probably why McCain just automatically said without thinking that the iPhone is made in America -- he couldn't imagine it being made anywhere else). Then I left you with the question of why, if America is so good at making this stuff, it doesn't.

All right, I know you've had a sleepless night over this, so I'll relieve the suspense.

Here's the answer -- or perhaps I should say, answers:

The first is economies of scale. Take two economies, say the United States and the E.U. Take a product, say airplanes and especially commercial airliners. During World War II, the Germans, Japanese, British, and Americans all made very good airplanes. Europe was competitive with the United States in its ability to make airplanes. After the war, both the Europeans and the Americans had all the technology, resources, and skills requisite for aircraft production. And, indeed, it was Britain that actually produced the first commercial jetliner. Yet, it was the American companies -- Boeing, Lockheed, and Douglas -- that emerged in the post war period as the globally dominant aircraft makers, especially of commercial jetliners. This was because, as part of the post-war occupation policies, Germany and Japan were forbidden to produce aircraft. While the French and British faced no such prohibition, their national markets for jetliners were relatively small compared to the U.S. market. Aircraft production is an industry with enormous economies of scale.

If you build only one plane, the cost for that one plane is prohibitive. But if you build a thousand of the same model, the cost per plane falls dramatically because high fixed costs can be amortized over a large number of planes produced. With a big home-market advantage, U.S. producers were able quickly to reduce their costs far below the level of the British and French. Once that happened, the British and French producers could not sell at a profit to anyone and could not survive without major subsidies from their governments.

Of course, the E.U. governments decided to engage in what economists call "picking winners and losers" by heavily subsidizing Airbus to make it a viable competitor with the U.S. producers. Their policy eventually paid off and today, Airbus is the world's leading commercial aircraft maker. But it took great policy determination over a long time and hundreds of billions of dollars of subsidies to achieve.

The second answer is U.S. geopolitical and international economic policy doctrine. Since the end of World War II, America's highest priorities have been to assure access to military bases around the globe, to conclude and maintain alliances, and to engage in military intervention to assure a global balance of power deemed favorable to U.S. interests. To this end, Washington has continually been prepared to make economic concessions in order to obtain geo-political objectives. Thus, for example, Washington effectively responded to the Airbus subsidies for fear that doing so might upset NATO arrangements.

This geopolitical priority has long been rationalized and justified by an international economic policy that held free trade to be always and everywhere a win-win proposition. Indeed, it was believed that unilateral free trade (keeping one's markets open, even in the face of protectionism by one's trading partners) was a winning proposition. Thus, there was no need to be concerned about things like subsidization of key foreign industries or loss of capability in these fields, and hence no need for trade measures that might upset delicate geopolitical relationships.

This economic doctrine has been based upon the assumption of Anglo/American economics that economies of scale either don't exist in most traded products and industries or are relatively unimportant. That this assumption is dramatically and demonstrably wrong and not accepted by most of the non-Anglo world has not deterred its application to the making of much American and global trade policy.

A corollary of the free-trade doctrine was also the doctrine that governments cannot and should not "pick winners and losers" by favoring some industries with protection and subsidization.

The third answer is that the rise to dominance of the theory of Shareholder Value (the sole duty of the CEO is to increase relatively short-term returns to shareholders) in U.S. business schools. Beginning in the 1970s, business leaders promoted the off-shoring of production by American CEOs who aimed to increase returns by arbitraging labor costs between Asia and America.

In the 1960s and early 1970s, the U.S. consumer electronics industry was the world leader in virtually every dimension. But first Japan, and then the Asian Tigers, and then China were determined to catch up. Far from believing that  governments should not "pick winners" by subsidizing and protecting them, they saw that most of the major industries like steel, shipbuilding, aircraft, and electronics were characterized by economies of scale and that they had no chance of being in these industries except by dint of subsidies and protection. Governments, they believed, had an absolute duty to achieve rapid economic growth precisely by picking these kinds of industries to be winners.

Thus, Japan kept its yen undervalued (just as China is today keeping its yuan undervalued), provided preferential financing to consumer electronics producers, subsidized their exports, encouraged them to dump (sell abroad at prices below cost and/or below the prices at home) fiercely protected its domestic markets, and forced foreign producers to transfer technology to Japan as a condition of obtaining market access. The objective was to achieve high rates of production in order to obtain the economies of scale necessary to match the costs of American producers.

At the same time, the U.S. government, not wishing to upset the U.S.-Japan alliance with nasty trade issues and seeing no need to do so because it believed that trade is always win-win, took no action to counter the dumping, currency undervaluation, intellectual property theft, and subsidization of "winner" industries by Japan.

Also at the same time, U.S. CEOs at companies like RCA, Motorla, Zenith, and Ampex began to outsource the production of their television, radio, and VCR components to Japan while they kept the design, marketing, and distribution functions at home. By the mid-1980s there were virtually no U.S. consumer electronics producers left. The display technology for televisions, electronic watches, and video tape recorders had been taken over by Japan as had also much of the semiconductor production along with production of timers, lenses, and other key components.

In the past 25 years, the governments of Korea, Taiwan, Singapore, and other Asian countries have sought to wrest dominance in these and other key industries away from Japan by imitating its mercantilist, strategic export led growth strategies and its "picking of winners." Thus Korea heavily subsidized and protected companies like Samsung, Hynix, and LG while Taiwan actually founded Taiwan Semiconductor Manufacturing Company, now the second or third largest semiconductor producer in the world.

All of these players managed to achieve large scale production such that, even if a U.S. company like Apple had the requisite technology and resources, it could not hope to compete economically with the giant industry leaders. To do so would require that the U.S. government heavily subsidize and protect U.S. based production, a step that would require a revolution in American policy thinking and that may well no longer be affordable even if it were feasible.

That's why America doesn't produce iPhones or much of the other stuff it keeps saying it's good at. Maybe it could be good and maybe it should be good. But you know how that "coulda, shoulda, woulda thing goes.

In
yesterday's (Nov. 25) Financial Times,
my friend Claremont College professor Minxin Pei commented
that "China may choose to do nothing (with regard to trying to rein in North
Korea) just to prove that the west cannot bash it and beg at the same time."

It wasn't
the question of China possibly cutting off its nose to spite its face that
caught my attention. After all, China may really not consider North Korea to be
or any danger to it at all. Rather it was the use of the term "bash" and its
ascription of bashing to the "West." Let me hasten to say that my comments here
are not at all meant as a criticism of Minxin who I am sure used the term
simply as a repetition of current usage and without giving it much thought. But
that in itself is significant as a manifestation of how extant this powerfully
loaded term has become.

Ask yourself
what bash means or what people would be trying to say if they called you a
basher. The word suggests a vicious, even irrational and probably gratuitous or
perhaps racist, attack on someone or some group or some country. And let me say
up front that I know this and am sensitive to it, because in the 1980s and 1990s
when I was first a U.S. trade negotiator with Japan and then an analyst of
globalization at the Economic Strategy Institute, I was routinely referred to
in the press as a "Japan basher."

In the case
of yesterday's article, the comment was in relation to the fact that China has
been criticized over the past few years on a wide range of issues including its
claims of sovereignty over disputed isles in the South China Sea, the ramming
of a Japanese ship by a Chinese fishing vessel, refusal to relax its
intervention in global currency markets and to allow its currency to revalue
significantly, reluctance to accept some degree of responsibility for
rebalancing the current, massive global trade imbalances, as well as its
refusal or inability to do anything about its North Korean allies' nuclear
proliferation actions.

Now, no
doubt, there are two sides to all these stories and China has a right to voice
its claims and to act or not to act as it sees fit. But surely other countries
may have grounds for their criticisms. China no more than any other country
should be immune from legitimate criticism. But this is, in effect, what
happens when we use start using the terms bash, bashing, and basher. Because
they suggest irrationality, hatred, and racism, they inhibit and obviate
serious and necessary discussion of important differences and issues. Are there
no legitimate grounds for concern about China's territorial claims in the
Pacific or about its currency and trade policies? Certainly the Federal
Reserve's monetary policies and U.S. currency policies were subjected to
withering criticism at the last G-20 meeting.

But this
only underlines another interesting element of phenomenon. "Bashing" is
something that apparently can only be done by the West, and really only by the
United States. No one calls China a U.S. basher when it criticizes Ben Bernanke
or the U.S. banking system. No one calls Germany a U.S. basher when it levels
criticism at U.S. economic policies.

The term
basher was first popularized by Washington
Post columnist Hobart Rowen in the 1980s when, in his passionate advocacy
of free trade, he used it to undermine the legitimacy of any U.S. response to
or even criticism of Japan's mercantilist, export led growth strategy of the
time. His tactic proved so effective that it was quickly adopted by the
officialdom and media of Japan and other countries wishing to deflect and halt
U.S. pressure on them for change.

It's
time to stop using this term in reference to debate with or about our
international partners. We should be speaking of "criticizing" rather than of
"bashing."

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.  

Napoleon always said he liked lucky generals. He would have loved Barack Obama. The president is so lucky that he now has the South Koreans doing the dirty work of saving him from committing political suicide by signing a Free Trade Agreement (FTA) that would likely further increase both the U.S. trade deficit and the U.S. unemployment rate.

Reports from Seoul yesterday said the deal was essentially done and that Obama and South Korean President Lee Myung-bak would meet their self-imposed deadline by inking the deal today (Thursday). But no, the Koreans, who have been relentlessly promoting this deal as essential to both Korea's future economic well-being and its national security, suddenly said they couldn't agree to a small increase in imports of U.S. beef or a slight relaxation of emissions rules for imports of small numbers of foreign auto imports.

Since, like China, South Korea already manipulates its currency and imposes a myriad of subtle bureaucratic regulations and informal agreements that make the Korean market one of the most closed in the world, one might wonder why Seoul couldn't agree to these two U.S. requests which would in no way result in any significant increase in Korean imports from the United States. But Obama should really thank his lucky stars for South Korea's economic paranoia because it may save him from his administration's own worst instincts.

I know we're all supposed to be free traders and that opposition to anything labeled free trade is strictly taboo. But really, does anyone truly believe that we have anything like free trade with South Korea? This is a country that, as a matter of policy encourages the infringement of foreign intellectual property, and whose courts routinely annul the Korean patents of foreign based companies.

Yes, the proposed deal would significantly reduce Korean tariffs and facilitate foreign investment in Korea and contains strong language on the protection of intellectual property. But if the courts won't enforce the language what is the point? And tariffs are not the real barriers to foreign penetration of the Korean market, especially since the Korean government can and does manipulate its currency to offset the effect of any tariff reductions. As for facilitating foreign investment in Korea, why do we especially want to do that when we need investment in the United States? Moreover, the proposed deal on investment as presently constituted actually allows the U.S. branches of Korean companies to take disputes over U.S. regulatory rulings and impacts out of the American legal system by appealing to the World Bank and the International Court.

Isn't that something? The United States has consistently refused to join the International Criminal Court on grounds of protecting national sovereignty, but was just on the verge of signing a trade deal that would enable foreign companies to evade the sovereignty of the U.S. legal system in certain disputes. I wonder if the Republicans who have been promoting the deal understand that.

But sovereignty is not really the main point; that would be jobs. Here, the deal fails utterly. Of course, there are lots of studies by the various think tanks around Washington. Not surprisingly they only prove that while figures don't lie, liars figure.

If you are for the deal, you can easily find a computer model that will confirm your view and vice versa. So let me put it in the words of one of the Korean negotiators whom I know and to whom I posed the question of whether, honestly between friends, he thought the deal would significantly increase U.S. exports to Korea or U.S. employment. His answer was an immediate "no." And no one who knows anything about doing business in Korea believes otherwise.

So let's hope Obama's lucky streak keeps holding, at least until he gets out of South Korea.

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.