trade barriers

Public Citizen’s Global Trade Watch is up to its tricks against trade again.  Noted for its past expertise in destroying the Seattle WTO negotiations, the group is now taking a new stance against free trade agreements (FTAs), though not by their usual rhetoric that they cost jobs and a “race to the bottom.”  Their new approach is that FTAs actually lower exports. The group just published a “study” purportedly showing that exports to countries that have free trade agreements with the U.S. showed less export growth than did exports to countries that don’t have FTAs.

I guess they are saying that even though these pacts lower tariffs and other trade barriers on many goods and services–making U.S. products and services cheaper for trade partners to import–they have a negative effect on U.S. exports.  A bit counter-intuitive, but theirs is not to reason why — Public Citizen states that quite clearly — but to show that past and, of course, future trade agreements will harm rather than help the U.S. economy.

“It is beyond the scope of this paper to explore in detail why the United States has had lower export growth with FTA partner countries: the central point is that the claim that export growth to FTA partners has been higher than export growth to non-FTA partners is not supported by the actual U.S. government trade flow data.”

In a quick perusal of the 42-page report, what I found most interesting is that the FTA countries were listed in numerous charts and graphs, but nowhere could I find a listing or a mention of which non-FTA countries were included in the analysis.

Isn’t that a somewhat basic analytic flaw — to have specifics about one group you’re analyzing and to use aggregate numbers for the group you’re comparing?

Here are a few more quick observations on the study.  Nowhere do the authors discuss other factors that might explain lower exports than expected in FTA countries.  What was happening in the specific countries?  Could the fact that Mexico had a devastating currency crisis in 1994 — right when the North America Free Trade Agreement went into effect — have anything to do with their diminished ability to import goods and services from the U.S.? After all, Mexico’s GDP declined approximately 7% in 1995.

Also, is China included in the non-FTA countries? If so, then that country’s phenomenal growth over the past 10 years would almost by itself affect the results.  In 2009, China had an 8.7 percent GDP growth rate and imported $69.6 billion of goods and services from the U.S.  The global financial crisis affected U.S. exports to China much less than those to other important markets feeling the brunt of the economic downturn.

In addition, of the top ten countries in terms of U.S. exports, only two have free trade agreements with the U.S. But, of course, since we don’t know which countries Public Citizen used for its “non-FTA” group, there’s no way of knowing if some or most of the top ten were in the list or of analyzing their economic conditions.

Despite what I consider are considerable problems with this report, it’s bound to be used by the anti-trade forces arming themselves for future battles on the pending FTAs with South Korea, Colombia, and Panama.  Betcha too the report will be used in the lead-up to the November elections, as trade-bashing seems to be becoming one of the defining Democratic issues.