The Chamber of Commerce Continues to Distort Record of Failed Trade Policies
The Chamber of Commerce is at it again, once again misleading the public on the factual record of our flawed trade policies. In a report released today, the Chamber makes claims of massive export and job gains from our “free trade agreements” (FTAs).
But the actual data show that these pacts, currently in place with 17 countries, have been a dismal failure. On the whole, the U.S. has a $54 billion non-oil deficit with these countries, including a trade deficit with Mexico and Canada that has grown 848 percent over the period.
To repeat, this growth is not caused by oil, but by a loss of competitiveness in the U.S. manufacturing and agriculture sectors vis a vis our two most significant FTA partners. There are many ways to calculate the job loss from these trends, but any honest method comes up with a negative job impact from our FTAs in the millions of jobs.
An honest analysis of the data show that actually U.S. export growth to our FTA partners has been slower than with non-FTA counties – between 1998 and 2008, total goods exports to non-FTA partners grew 47.0 percent faster than exports to FTA partners. Translated into dollar terms, this FTA export penalty amounted to $25 billion in lost potential exports for 2008 alone. And utilizing the job multiplier assumed by the Chamber, this penalty accounted for 302,585 jobs that could have softened the blow of the Great Recession. (See after the fold for more detail.)
Our own Lori Wallach responded to these points in our official statement on the Chamber report:
I suspect that more Americans are likely to believe reports of UFO sightings than Chamber of Commerce claims about trade agreements creating millions of jobs for them, given many Americans have personally experienced the damage wrought by the job-killing trade deals pushed by the Chamber on behalf of their serial-offshoring multinational corporate members. It’s high time that corporate lobbyists stopped lying to the U.S. public about job and export gains from FTAs that never materialize.
If the Chamber supports trade expansion, then instead of serving up another batch of improbable numbers trying to defend the damaging trade agenda of the past that most Americans fiercely reject and that is dead in Congress, the Chamber should help promote the TRADE Act, which rebuilds consensus for trade expansion by providing new trade terms that can benefit more people.
American public opinion polling systematically shows bipartisan opposition across numerous demographics and regions to U.S. trade agreement regime characterized by NAFTA. Already in the 2010 election cycle, opposition to the very pacts the Chamber is a prominent feature of Democratic and GOP House and Senate races. During the 2006 and 2008 election cycles, 72 representatives and senators who supported the status quo were replaced by those who campaigned on trade reform.
It’s high time that corporate lobbyists stopped misleading the U.S. public about job and export gains from FTAs that never materialize. It’s time to come clean: the real reason they want to pass NAFTA-style deals is to impose hundreds of pages of binding, deregulation-promoting international legal obligations on other countries.
(To take just one example. Under the Central America Free Trade Agreement (CAFTA), a company called Pac Rim Cayman LLC is challenging El Salvador’s non-discriminatory mining legislation, and demanding millions of dollars in compensation from poor Salvadoran taxpayers. As the name suggests, the company was incorporated in the tax-haven Cayman Islands from 1997 to late 2007. In December 2007, the company conveniently reincorporated in Nevada, and claimed U.S. investor status under CAFTA. These rights are the real reason that corporate lobbyists want FTAs, and they use fictitious job creation numbers to try to mislead the public.)
DETAIL ON METHOD
This Chamber report replicates the flaws of previous Chamber studies, comparing the “average” FTA country export performance to the “aggregate” non-FTA country performance.
The soundest method is to compare aggregates to aggregates, in other words to compare the inflation-adjusted, total increase in exports to FTA versus non-FTA countries, on a year to year basis, only considering the FTAs that are in place in any given year.
Using this method, it’s clear that FTAs have penalized U.S. exports severely. Between 1998 and 2008, total goods exports to FTA partners grew by 31.3 percent and total goods exports to non-FTA partners grew by 46.7 percent. In other words, between 1998 and 2008, total goods exports to non-FTA partners grew 47.0 percent faster than exports to FTA partners.
However, if one chooses to consistently employ the Chamber’s method of taking the average export growth to FTA countries, and then instead comparing that with the average export growth to non-FTA countries, the “FTA penalty” is even more startling: Exports to non-FTA partners grew 152 percent faster over 1998-2008 than exports to FTA partners.
In other words, an honest rendering of even the Chamber’s methods show an FTA penalty of at least 50 percent.
The Chamber study incorrectly groups together years. For example, its Table 2 calculates "average annual growth of U.S. merchandise exports to FTA partner countries" in the three years prior to the FTA, and then since implementation. The problem? These FTAs were implemented in different years, under different global economic conditions. To calculate an "average of average" that groups together Israel (FTA implemented in 1985), with Dominican Republic (FTA implemented 2007) is to compare apples and oranges.
A better method would look at the immediate post-implementation era for each FTA country, and compare the U.S. export growth over the three years after FTA implementation for each country to the average of the U.S. export growth rates to non-FTA countries during an identical period. U.S. export growth rates to only three out of the 16 FTA partners were higher than the average of the growth rates to non-FTA countries in the three years after FTA implementation. (Canada dates from 1990, and Israel is excluded, due to data availability.) Put differently, 13 out of 16 FTA countries (including Canada, Mexico, Jordan, Singapore, Australia, El Salvador, Guatemala, Honduras, Nicaragua, the Dominican Republic, Costa Rica, Oman, and Peru) did not beat the non-FTA rate even in their first three years after implementation – when we might expect the greatest gains.
Other Chamber and corporate studies that claim an FTA export benefit have not including all FTA countries, failed to adjust for inflation, incorrectly calculated rates of growth, and included “re-exports” that pass through U.S. ports but were not made by U.S. workers. Closer examination of the latest report may find similar errors.
(Endless thanks to Travis McArthur for research help, and Bryan Buchanan, Kate Titus and Lori Wallach for their help!)
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