Trade Compliance

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The Free Trade Numbers Game

Posted March 19, 2015


A great deal of the discussion about free trade involves batting around lots of big numbers, many of which are rarely questioned as to their suspect nature or source. Numbers in this context are meant to inform and educate, to confirm that various claims being made are grounded in fact; or so we generally assume to be the case. Occasional scrutiny of such things however, as a couple of recent stories illustrate, suggests maybe they shouldn’t always be so casually taken for granted.

Last week, it was reported that the German industry federation BDI was forced to backtrack on figures it had published estimating the economic benefits for Europe resulting from the proposed Transatlantic Trade and Investment Partnership, or TTIP. On its website, the group had wrongly touted that the trade pact would provide a boost to European Union’s economy of about 100 billion euros a year.

In actuality, however, the figure used by BDI was the net economic benefit to the EU some experts have forecast the agreement will have over a decade. When its tenfold exaggeration was brought to light by a food safety watchdog organization following repeated questioning, BDI eventually acknowledged the error and said that it had taken “immediate” action to correct it.

Whether the mistake was an unintentional oversight by the group’s web development team is perhaps open to question, although it seems unlikely BDI would have deliberately inflated the positive economic impact of TTIP by a factor of 10, when such a claim would be so easily spotted as being wildly off the mark. Another case, again involving the anti-trade advocacy group Public Citizen, appears somewhat less uncertain about having been an honest mistake.

Public Citizen was caught capitalizing on the third anniversary of the Korea-US Free Trade Agreement (KORUS) this week to denounce the deal as having been a terrible economic bargain for America with the aid of jobs numbers that were “disingenuous, to say the least,” in the words of Forbes writer John Brinkley. “The post-Korea FTA decline in U.S. exports to Korea and a new flood of imports from Korea have resulted in a major surge in the U.S. trade deficit with Korea that equates to nearly 85,000 lost American jobs,” Public Citizen told reporters on a conference call.

Brinkley noted that Public Citizen had jacked up this figure by 10,000 workers when compared to previous statements about job losses the group had made in the previous month. This inflation, he suggests, may be intended to lead people into the belief that 15,000 people have suddenly lost their jobs in the last month as a direct result of the trade agreement with Korea. If so, Brinkley wonders: “Who are these people? Where are they? Why aren’t their job losses reflected in the most recent economic data?”

U.S. Labor Department figures show that unemployment has declined by 2.5% over the last three years, adding jobs and payroll earnings in each month, including a 400,000 boost in the number of people employed in manufacturing. Brinkley also notes that the government’s Trade Adjustment Assistance program which provides benefits to unemployed workers displaced by foreign trade, reveal that since KORUS took effect in 2012, of the 236,479 people certified as being eligible for the program, only 6,575 of them attributed their job loss to the free trade deal with Korea, a mere .03 percent of the total.

The problem here it would seem is that Public Citizen’s number is simply an estimate derived solely from the rise in imports and increase in the trade deficit with Korea, both of which have risen substantially during the past three years. The two things however do not always directly correlate as demonstrated by government employment statistics showing that less than 8% of the claimed 85,000 job losses actually appear to have materialized.