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September 16, 2008

Nerds v. Suits, 2-1

Last Friday, we did an analysis of the U.S. Chamber of Commerce's latest pro-FTA screed, and showed that their selective use of only 10 of the 14 FTA countries to make a point about export growth was seriously misleading. Stumo called "truthy" on 'em, which sounds about right.

The Chamber has responded, and they confirm that when all 14 countries are thrown into the mix, U.S. export growth to non-FTA countries is in fact higher than to FTA countries.

287 But they then attempt to make at another selective cut, this time including Jordan and Israel but still excluding Canada and Mexico (i.e. NAFTA). There is no clear reason for doing that, since, as they note, NAFTA is the biggest FTA. But it does weaken their argument, since export growth to NAFTA nations is the lowest of any of the FTAs. Hey, we didn't exclude Chile from our calculations - why should they exclude NAFTA??

Nerds, 1.

However, the Chamber scores a point for catching that we were not using the estimates of 2008 exports as our base for calculating growth trajectory for Colombia, Panama, and South Korea. Kudos to the Chamber's Brad Peck for catching my bubu.

Suits, 1.

However, because the export growth rate to the full 14 FTAs is still below that of non-FTA countries, there continues to be an "export penalty" under this exercise of $17.4 billion. That's a little less than our original export penalty calculation, but it's still a penalty.

Nerds v. Suits, 2-1.

Of course, the whole exercise is more than a little D&D. As we noted last week, making arguments about export growth without reference to import growth and the overall trade deficit is about as useful as using a halfling to fight a hell hound (err, or whatever). And is also sidesteps the issue of why one would promote an FTA, rather than just promote trade or tariff reduction more generally.

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Comments

ChamberPost

Todd - Using your numbers, including the 2008 projections for all 14 countries, I show 14.55% growth rate. Not much above the 14%, but still above. How are you getting the penalty? - Brad

Todd Tucker

Hmm, check out the reworked table at http://www.citizen.org/documents/chamber-charts.pdf . What I do is take the estimated 2008 exports to the the 3 FTA markets, and then have them grow until 2012 at an annualized 8% and 14% growth rate.

Recall that these correspond to the 14 FTA countries post-implementation 2003-08, and the non-FTA countries 2003-08.

You were right to point out that the 2008 estimated exports to the 3 pending FTA nations is a higher level than the 2007 reported export level. So the 2012 number is at a higher level as a result.

But the "penalty" is, as it was before, the difference between the 2012 export levels, calculated at 14% and 8% annual growth rates.

ChamberPost

Todd - I see that you are using the 8%, just don’t agree with it. A more accurate projection method for individual markets would be to look at the average on a market to market basis, not the group as a whole.

That gives us 18.5% for all 14, or 20.44% without Canada and Mexico. Both giving a surplus over the “non-FTA” countries. I propose that removing Canada and Mexico is valid to take into account market size.

FYI, both are below my original post, a number was double entered as I pasted in from your PDF. I will be issuing a correction on my end. - Brad

Todd Tucker

This comparability problem is bigger than I thought.

The Chamber is taking the average of average rates (only post-implementation), while I am taking the average rate of non-FTA countries as a group compared to FTA countries as a group (for 2003-08).

I feel like neither one of us is getting this quite right. The year-to-year growth rates for the FTA v. non-FTA exports as a whole produces an export penalty in every two-year period over 2003-08 except 2004-05. The penalty was -8% in 2007-08.

By contrast, the average of year-to-year growth rates on a country-by-country basis is a slight export premium in 3 of the 5 two-year periods. In 2007-8, it's +3%, for instance.

To be continued...

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