November 13, 2011
The Washington Post, which once told readers that Mexico’s GDP had quadruped between 1987 and 2007 to bolster its case for NAFTA (the actual increase was 83 percent), was in the exaggerated numbers again mode yesterday in discussing the impact of a trade agreement on Japan. In reporting the projections from a model, the article told readers that as a result of the trade agreement (inaccurately described as a “free trade” agreement):
“consumer prices would drop 39 percent.”
There is no model that would show this sort of effect for consumer prices as a whole. It is possible that it meant food prices, although even this impact would be quite dramatic. Food accounts for 13.7 percent of consumer expenditures in the United States. The narrower “food at home” category accounts for 7.8 percent. Since Japan has considerably higher food prices, both these numbers are presumably higher in Japan. If a trade agreement actually dropped food prices in Japan by 40 percent, this would imply a dramatic increase in the standard of living for most people in Japan.
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