Phyllis Schlafly doesn't let facts get in the way of a good diatribe. Photo: Gage Skidmore

It is sometimes refreshing to see such economic illiteracy displayed – except that some poor souls might take it seriously, rather than as the joke it is. Phyllis Schlafly is often a source for such nonsense, and she exceeded herself last Friday with her commentary about the U.S.-South Korea free trade agreement. I will forgive her for the curiously ungrammatical headline, Cancelling Tariffs Are a Racket, since that was likely screwed up by a headline editor. But somebody could use a lesson in English grammar.

Schlafly’s diatribe is wrong in so many ways …

The alleged elimination of tariffs is a racket that allows the Koreans to subsidize their own exports to the U.S. while taxing all imports from the United States. South Korea simply replaces its tariff with a value-added tax (called a VAT), which gives Korean manufacturers a 10% rebate on all goods they export and imposes a 10% tax on all U.S. goods allowed to be sold in Korea. KORUS even limits our right to check contaminated food imports.

First off, the FTA does not allow Korea to “replace” its tariffs with a value-added tax. Korea’s VAT is a sales tax that is already in place and is rather low by world standards. Our exports to Korea have always been subject to the VAT, as are Korean and other countries’ products when sold in Korea. The FTA will allow many of our products to be sold duty-free in Korea. Period. Nothing is increased. Just as Korean products are subject to our sales taxes when sold in the United States.

As with most propaganda, there is a small kernel of truth. Yes, Korean exporters get a rebate of the VAT on the Korean products they don’t sell in Korea. This isn’t something nefarious on the part of Seoul, but in full accord with international trading rules in force for more than sixty years. Under the WTO, and before that the GATT, rebates of so-called indirect (e.g., sales or VAT taxes) are allowed for exports. This was done at the strong behest of the United States, which then – over the years – shot itself in the foot by choosing to depend more and more on direct taxes (e.g., income taxes) which do not get this rebate. Our stance was based on arcane economic theory at the time, but the truth remains that this is a self-inflicted wound, having nothing to do with South Korea, which wasn’t even in those old negotiations. Oh, and our exporters can also be exempt from our sales taxes on exports, if their states allow it.

As to limiting our right to check for contaminated food imports, what can I say. It’s a flat out lie, though I will assume that Schlafly is merely misinformed and chose not to check her “facts”. FDA rules and inspections, as well as those at state levels still stand and are not impacted by the FTA.

She draws on other curious arguments. To her way of thinking, the mere presence of Korean electronics in American stores is an indicator that Korea already has free entry into the United States. Uh, no. It is an indicator that Korea is offering products that American consumers want at a price they will pay, despite paying a 5% customs duty. Need I say it, a 5% tariff is NOT free trade. That’s what Schlafly gets for using Donald Trump as her expert source.

She then confuses the concept of “fast track” or “trade promotion” authority, which would limit Congressional ability to amend trade agreements, with the U.S.-South Korea FTA. The two are not related and I am not aware that the Obama Administration has even asked Congress for fast track authority. Apples and oranges.

What can one do when faced with sheer ignorance?