[CTC] Don't Be Fooled by Data Tricks: The Case of the Dueling Korea FTA Press Releases

[Arthur Stamoulis]

Begin forwarded message:

From: Eyes on Trade
Date: March 19, 2013 12:18:01 PM PDT
Subject: Eyes On Trade: Don't Be Fooled by Data Tricks: The Case of  
the Dueling Korea FTA Press Releases

Eyes On Trade: Don't Be Fooled by Data Tricks: The Case of the Dueling  
Korea FTA Press Releases

Don't Be Fooled by Data Tricks: The Case of the Dueling Korea FTA  
Press Releases
Posted: 18 Mar 2013 02:35 PM PDT
On Friday we sent out a press release exposing the export-chilling,  
deficit-expanding, job-eroding track record of the Korea Free Trade  
Agreement (FTA) on the first anniversary of its implementation.  That  
same day, the U.S. Trade Representative (USTR) sent out a press  
release singing the export-boosting praises of the Korea FTA.  What  
could explain this riddle of dueling press releases?

Some basic data tricks.  USTR’s press release relied on five sleights  
of hand to gussy up the unsightly Korea FTA data and generate some  
misleading, albeit rose-colored, conclusions:

Cherry-picking.  Overall U.S. exports to Korea have fallen 9 percent  
under the FTA.  USTR first tries to get around this inconvenient fact  
by simply “disregarding” particularly large exports that declined  
(e.g. corn) so as to produce a sanitized illusion of an increase in  
“total U.S. exports.” (By “total U.S. exports” they mean “some U.S.  
exports, excluding particularly important export sectors that would  
contradict our argument of a total export increase.”)  USTR saves most  
of its FTA-touting words for some narrow sectors that were export- 
increasing exceptions to the export-falling rule of the Korea FTA.   
For example, while total U.S. agricultural exports to Korea have  
plunged 29% under the FTA, USTR spotlighted export rises in specific  
agricultural products like soybeans and grape juice.  Such “soybean- 
picking” avoids the essential question: what has been the total effect  
of the Korea FTA on U.S. exports and jobs?  The inconvenient answer: a  
loss.
Using the wrong timeframe.  The USTR press release acted as if the  
Korea FTA was in effect for the full 2012 calendar year, though it  
only took effect on March 15, 2012 (hence the timing of the press  
release).  The agency errantly compared the full year of data for 2011  
with the full year from 2012, claiming the results to be due to the  
Korea FTA.  This timeframe starts and ends too soon.  An accurate  
assessment of the Korea FTA’s legacy would begin the data comparison  
with the first full month in which the FTA was actually in effect:  
April 2012 (vs. April 2011).  Also, the timeframe would not stop with  
the end of 2012, but with the most recent month for which we have  
data: January 2013.  Perhaps USTR decided to omit January because it  
marked the highest monthly U.S.-Korea trade deficit on record.   
Whatever their reasons, the timeframe mistake skews each starry-eyed  
data point that USTR presents in its release.
Ignoring imports.  As per usual, USTR has examined only one side of  
the trade equation.  The word “imports” doesn’t appear once in their  
press release.  But in the same way that exports are associated with  
job opportunities, imports are associated with lost job opportunities  
when they outstrip exports, as dramatically seen under the Korea FTA.   
Under the deal, the U.S. trade deficit with Korea has swelled 30  
percent, costing tens of thousands of U.S. jobs.  By ignoring rising  
imports, USTR claims a gain for auto manufacturers under the FTA.  But  
while U.S. auto exports to Korea have increased by $65 million under  
the deal, U.S. auto imports from Korea have ballooned by $2.3  
billion.  The resulting 18 percent increase in the U.S. auto trade  
deficit with Korea is a net loss for U.S. automakers, not a net gain.
Counting foreign-made “exports.”  USTR once again inflates the value  
of U.S. exports by counting goods that actually are made overseas –  
not by U.S. workers.  These “re-exports” are goods made elsewhere that  
are shipped through the United States en route to a final  
destination.  To assess what the Korea FTA has actually meant for U.S.  
jobs, our release eliminated re-exports in calculating the 9 percent  
drop in U.S.-made exports to Korea under the deal.
Forgetting about inflation.  It appears that USTR forgot to adjust its  
numbers for inflation, an omission that artificially magnifies the  
value of U.S. exports in 2012 relative to 2011.  All of the data  
contained in our press release is properly inflation-adjusted to show  
a truer picture of U.S. exports under the Korea FTA – a picture that  
unfortunately does not look too pretty without all of USTR’s cropping  
and airbrushing.
If we want trade policy that behooves the majority, rather than an  
expansion of the damaging Korea FTA model, then we have to look  
honestly at the Korea FTA track record.  If instead we twist the data  
to make mistakes look like successes, we are binding ourselves to the  
replication of failure.




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