Lies, Damn Lies and Export Statistics
I. SUMMARY AND FINDINGS
President Obama’s goal to double U.S. exports over the next five years to create two million new American jobs is widely supported. How to accomplish it is a subject of considerable contention.
Proponents of President Bush’s “Free Trade Agreements” (FTAs) with Korea, Colombia and Panama claim that passing these pacts is the best way to expand U.S. exports and create jobs.
Obama administration officials have similarly argued that passing FTAs is a key component of the effort to double exports, especially in the context of the president’s recent announcement that he wants Congress to pass Bush’s FTA with Korea early next year.1
Yet, analysis of the actual outcomes of past U.S. FTAs show that the growth of U.S. exports to countries that are not FTA partners is as much as double the growth of exports to U.S. FTA partners. Moreover, with respect to Obama’s job creation goal, the United States has suffered trade deficits with most of its major FTA partners and with the group of FTA nations as a whole. Even as trade flows declined because of the economic crisis, as of 2009, the United States had a $54 billion trade deficit in goods with its 17 FTA partners, even when oil is excluded. And, contrary to the frequent claims made by proponents of the North American Free Trade Agreement (NAFTA) that U.S. farmers have benefitted from this model, the United States’ agricultural trade deficit with the bloc of 17 FTA partners increased.
This highlights why, especially now, an honest, data-based discussion about the economic impact of FTAs based on the NAFTA model is critical. People are entitled to their own opinions about NAFTA-style FTAs, but they’re not entitled to their own facts.
Among public concerns about job loss, the decimation of the U.S. manufacturing base, and the ballooning U.S. trade deficit, corporate lobbyists have unveiled a series of misleading and erroneous
studies and talking points, alleging all sorts of benefits from NAFTA-style pacts. It is impossible to know whether these are deliberate attempts to distort the truth, or simply sloppy economics.
At the June 2010 G-20 summit in Toronto, President Obama and Korean President Lee announced that they had agreed to prioritize addressing outstanding issues with the U.S.-Korea FTA signed in
2007 by President Bush.2 President Obama instructed U.S. Trade Representative (USTR) Ron Kirk to work with his Korean counterpart to “set a path” so that the Korea FTA could be submitted to a vote in Congress.
This is a “critical step towards the goal of doubling U.S. exports over the next five years,” said the Business Roundtable.3 Other longstanding proponents of the Bush FTAs repeated this mantra.
Similar claims are being made to promote negotiation of a Trans-Pacific Partnership (TPP) based on the NAFTA model.i The main premise underlying these arguments is an endlessly repeated claim that the past U.S. NAFTA-style FTAs with 17 countries4 have resulted in tremendous export growth.5
The Data Do Not Support the Spin
However, examination of the actual data shows that the United States has generally had substantial trade deficits with most of its major FTA partners and with the group of FTA nations as a whole. Even as trade flows declined because of the economic crisis, as of 2009, the
United States had a $54 billion trade deficit in goods, excluding oil, with the bloc of 17 U.S. FTA partners. This contradicts recent claims made by the NAM that “over the past two years FTAs have resulted in a U.S. manufactured goods surplus of nearly $50 billion.” As we show,
NAM’s “surplus” looks at “total exports,” a measure that includes billions of mere “re-exports” of foreign products that are passing through U.S. ports and were not made by American workers. In
contrast, the U.S. International Trade Commission (USITC), the independent, non-political agency responsible for producing independent studies on the effect of FTAs on the U.S. economy, uses data on domestic exports, removing the transshipments [i.e. re-exports] that NAM’s calculation included.
When the correct export measure is used, the opposite result is produced: the trade balance in non-oil manufactured goods with U.S. FTA partners over 2008-2009 comes to a deficit of $97 billion. We examine this and other claims made by NAM in Section IV of our report, and claims made by the Chamber of Commerce in Section III.
Moreover, a close look at trade data over the past ten years reveals that the growth of U.S. exports to countries that are not FTA partners has far outpaced the growth of exports to FTA partners.6 We examine trade data since 1998, consistent with the latest Chamber of Commerce report on FTA export growth that uses data from the period 1998-2008.We found that:
• Between 1998 and 2008, U.S. goods exports to FTA partner countries grew by an annual average rate of only 3.0 percent. Goods exports to non-FTA partner countries, by contrast, grew by 4.2 percent per year on average. (The 2008 end date is used to show the trend before the overall falloff in trade flows related to the global economic crisis.) For convenience, we call this phenomenon the FTA export growth “penalty.” We do not claim that there is a causal link
between export growth and FTA implementation, unlike proponents of FTAs. Rather, we simply report the actual outcomes with respect to exports of the past U.S. FTAs, given misrepresentations about them now figure prominently in arguments in favor of passing more
pacts based on the same model.
• The picture looks especially grim if one looks at the 1998-2009 period. Throughout this longer period, which includes the year in which the global economic crisis peaked, goods exports to FTA countries grew by an average of only 0.8 percent per year. This compares with a growth rate of 2.2 percent year for U.S. exports to non-FTA countries – double that rate.
• Defenders of the past U.S. FTAs regularly claim that these pacts’ existence helped avoid a worse falloff in trade related to the global economic crisis. In fact, in 2009, exports to FTA countries shrank 21.1 percent, while exports to non-FTA countries shrank only 18.4
• The FTA export growth “penalty” significantly impacts several sectors of the economy, with the rate of export growth in services and manufacturing with U.S. FTA partners taking a hit over 1998-2009. Manufactured exports to non-FTA partners grew by an annual average of 1.7 percent over 1998-2009, while manufactured exports to FTA countries grew by an annual average of only
While the U.S. government does not release detailed country-by-country services data, it does release numbers for 34 countries, including the most important U.S. services trade partners. When we compare the FTA countries to the non-FTA countries in this subset, we find that the FTA services export growth rate is 5.5 percent and the non-FTA export growth rate is 5.7 percent over 1998-2008. This considers data up to 2008 – the most recent
• If the difference between the FTA and non-FTA export growth rates for goods for each year were put in dollar terms, the FTA “penalty” would be as high as $33 billion in 2007, while the FTA “benefit” (i.e. where the FTA export growth rate was higher than the non-FTA export growth rate) occurred only in four of eleven years and would only reach as high as $24 billion in1999.
Summing these dollar differences in each year over 1999-2009 totals to a “penalty” of $72 billion.7 For manufacturing, agriculture and services, the comparable “dollar penalties” are $59 billion, $2.7 billion, and $6.9 billion, respectively.