Nerds strike again!
Folks may remember the exchange we had with the Chamber of Commerce a while back on their distortions of the export record of FTAs.
Well, it ain't over yet.
After The Hill published a piece by Lori on Obama's policy opportunity, the National Association of Manufactures responded with a highly misleading op-ed on export stats. Today, The Hill published a piece of mine responding to some of the factual claims, or lack thereof, in the NAM piece. Enjoy!
Facts are stubborn things when it comes to Trade
By Todd Tucker - 05/07/10 11:06 AM ET
We're all entitled to our own opinion about NAFTA-style trade pacts,
but we're not entitled to our own facts. In this vein, it's hard to
know whether the "data" presented in National Association of
Manufacturers (NAM) official Frank Vargo's op-ed in The Hill ("Free
trade pacts have been good for U.S.", 4/19) is intentionally misleading
or just sloppy. Vargo's representations will be familiar to Hill
denizens: In recent weeks the Chamber of Commerce and other defenders
of the trade status quo have been blasting the same "data" far and wide.
the most peculiar claim is that the U.S. has trade surpluses with its
"Free Trade Agreement" (FTA) partners, when in fact the data show we
have a deficit. Vargo wrote, "over the past two years FTAs have
resulted in a U.S. manufactured goods surplus of nearly $50 billion."
The way Vargo comes up with this "surplus" is to include billions of
"re-exports" – those are foreign products passing through U.S. ports,
but were not made by American workers. When the correct measure is used
(the difference between "domestic exports" and "imports for
consumption"), the opposite result is produced: the trade balance in
non-oil, manufactured goods with U.S. FTA partners over 2008-2009 was a
deficit of $97 billion.
Vargo also argues that NAFTA was a U.S.
job-creating success, noting that, "for almost a decade after NAFTA,
the United States gained nearly a half-million manufacturing jobs."
That statistic actually highlights NAFTA's damage. As the population
grows, the number of manufacturing jobs should grow, all else being
equal. But in the period after NAFTA and onto when Congress voted to
admit China to the World Trade Organization (WTO), manufacturing jobs
as a share of total U.S. nonfarm jobs steadily shrank. A cursory
examination of the Bureau of Labor Statistics data shows that
manufacturing employment share began falling even in NAFTA's early
years, as the trade deficit with Mexico and Canada exploded. This was
exactly the opposite of what NAFTA's proponents, such as the NAM,
predicted. Then, starting in the late 1990s, even the total (not just
relative) number of manufacturing jobs started to precipitously
decline. Only in the twisted world of Beltway lobbyists is the net loss
of 5 million American manufacturing jobs during the NAFTA-WTO era a
vindication for a failed policy.
Vargo claims the trade deficit
is all oil imports. He writes: "The manufactured goods deficit with
NAFTA barely budged after 2001 while nearly doubling with the rest of
the world. Jobs displaced by imports from NAFTA were offset by the jobs
gained from exports. True, the overall deficit with NAFTA has soared
since 2001 – again, the result of oil imports, not manufactured goods.
Aside from energy imports, the deficit is virtually unchanged."
to begin? The inflation-adjusted trade deficit in non-oil manufactured
goods (NOMG) with NAFTA countries shows an increase of 16 percent from
2001-07, before global trade collapsed. And, looking at the longer
period, the NOMG deficit with NAFTA countries went from a $5.8 billion
surplus in 1993 to a whopping $45 billion deficit in 2009. Meanwhile,
it is hard to understand how NAM concludes that U.S. jobs lost to
imports were offset by those gained from exports, when the United
States suffered a NOMG deficit that peaked at $663 billion during the
period in question, accounting for millions of lost U.S. job
Vargo also praises the Peru FTA, saying "The
U.S. has moved into a surplus with Peru." Actually, the U.S. already
had a NOMG surplus with Peru before the pact's 2009 start date. A year
later, the NOMG balance (or net export level) is only $0.000498
trillion. To put this in perspective, Obama's export drive will require
$1 trillion in increased exports over the next five years. At the rate
of the Peru FTA, the U.S. could sign FTAs with all 192 members of the
United Nations, and still only be a tenth of the way to the goal.
Vargo is not alone in misrepresenting the U.S. experience with FTAs.
Widely cited "data" published by the Chamber of Commerce also is used
to make outlandish claims about trade gains. A review of the relevant
Chamber study shows that the data touted as evidence of exciting export
gains is not adjusted for inflation. The Chamber study also includes
other basic arithmetic errors. When the Chamber's own method is cleaned
up, for instance by inflation adjusting, it shows an export penalty
from FTAs. In other words, it shows that export growth rates to U.S.
FTA partners were slower than with non-FTA trade partners.
Vargo makes factually incorrect claims about the Trade Reform
Accountability Development and Employment (TRADE) Act to argue it would
undermine President Obama's export initiative. Given the TRADE Act is a
vehicle to rebuild consensus for trade expansion and is supported by a
majority of House Democrats including twelve chairs, fifty-five
sub-committee chairs and large blocs of New Democrats and Blue Dogs,
one might expect NAM to seize on the legislation as a means to obtain
new trade agreements that can expand exports. Alas, it appears that the
NAM data errors also extend to vote counting.
Todd Tucker is
research director with Public Citizen's Global Trade Watch division,
and co-author of a forthcoming study "Lies, Damn Lies and Export
Statistics: How Corporate Lobbyists Distort Record of Flawed Trade