Extra!

November/December 1994

Trade Reporting's Information Deficit

[Sidebar: "Workers on NAFTA: Missing or Marginal"]

It would be hard to imagine more inaccurate and biased economic reporting than the coverage of international trade issues. Those who get their information on trade issues solely from the major media outlets are almost certainly more misinformed and confused than those who never pay any attention to trade issues at all.

This is not a situation where reporters can claim that the complexity of the underlying issues makes it difficult for a non-expert to follow the debate. Mainstream reporting has failed due to outright deceptions (by either reporters or their sources) and insufficient familiarity with arithmetic and simple logic.

The most basic problem with coverage is the choice of sources. News stories on trade rely almost exclusively on administration and business sources. The information provided by these sources is almost always taken at face value, even when the individuals have an obvious interest at stake.

For example, a front-page Washington Post article (5/22/94) on the impact of revoking "most favored nation" status with China relied almost exclusively on business executives of firms that trade with China. Their unsurprising conclusion was that the loss of exports to China would cost the U.S. hundreds of thousands of jobs. Remarkably, there was absolutely no discussion of the possibility that reduced trade with China might increase the number of jobs in the U.S., since the U.S. currently runs a trade deficit with China that exceeds $20 billion.

The Post story also made the implausible claim that imposing tariffs would cost consumers more than $13 billion dollars a year. Only if the government collected a huge amount of money in the form of tariffs could prices go up that much. If the scare stories of the importers were true, the government would reap approximately $50 billion in additional revenue over the next five years. This is 10 times the size of the alleged "pork" in the crime bill, and more than four times as large as the amount that Clinton's welfare reform is slated to cost. But the windfall implied by the importers' figures went unmentioned.

The coverage of GATT displays a similar uncritical acceptance of absurd numbers from partisan sources. For example, U.S. trade representative Mickey Kantor has been regularly saying that GATT will increase U.S. economic growth by between $1 trillion and $2 trillion over the next 10 years. That is between 10 and 20 times larger than estimates from even very pro-GATT sources, such as the multinational Organization for Economic Cooperation and Development.

Yet this projection has been regularly repeated in the media without question. Thomas Friedman of the New York Times (4/14/94) repeated a tax revenue projection based on this growth estimate without ever noting that this number was in dispute.

Similar numerical tricks were played to make the case that NAFTA has been a huge success. The New York Times (5/12/94) ran charts showing imports of cars from Mexico and exports of cars to Mexico to make the point that "G.M. [Is] Coloring Mexico with Chevys". In fact, car imports from Mexico have increased more than exports to Mexico since NAFTA went into effect. But the Times printed the charts on two different scales, making it appear that the opposite was the case.

USA Today went through similar gyrations to make the pro-NAFTA case. A front-page story headlined "Exports to Mexico Soar After NAFTA" (5/25/94) was illustrated with a chart labeled "Exports Soar". The chart shows, however, that the growth rate of exports to Mexico has fallen off considerably in the last year, so that in 1993 exports to Mexico were only slightly higher than in 1992.

Peter Behr of the Washington Post tried to make the case for the benefits of NAFTA with innovative arithmetic in "NAFTAmath: A Texas-Sized Surge in Trade" (8/21/94): "The trade figures bolster the administration's argument that NAFTA is a net job creator, [Commerce Secretary Ron] Brown noted. Based on the calculation that each $1 billion in new exports generates 20,000 jobs, a $2 billion trade surplus this year with Mexico should create 100,000 jobs." Aside from multiplying correctly, Behr might have pointed out that the U.S. trade surplus with Mexico has shrunk, not grown, under NAFTA.

There are many other examples of total nonsense passing as trade reporting. Washington Post economic columnist James K.Glassman claimed in a 1991 column that "the engine that's been driving the U.S. economy for the past decade is exports." But it is net exports (the volume of exports minus the volume of imports), not exports taken in isolation, that stimulate economic growth -- and from 1984 to 1993, the U.S. ran a cumulative trade deficit of $858 billion.

Another Washington Post economic columnist, Hobart Rowen (8/21/94), lectured union leaders that they should be humbled by the fact that car exports to Mexico had increased so much after the passage of NAFTA. He either didn't notice, or didn't bother to mention, that car imports from Mexico had increased more.

Reporting on trade issues is so far from meeting minimal standards of accuracy and balance that it is usually best ignored. The quality of the media's coverage of trade issues is probably best captured by the first paragraph of a front-page news story written by Peter Passell in the New York Times (12/15/93): "Free trade means growth. Free trade means growth. Free trade means growth. Just say it 50 more times and all doubts will melt away." This straightforward cheerleading is somewhat more concise, but not significantly more biased, than the bulk of the media's coverage of trade issues.