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Article Artículo

New York Times Misrepresents Falling Oil Prices to Push Protectionism to Benefit Rich

The promoters of "free trade" are feeling frustrated these days. Their trade deals are facing large-scale public opposition everywhere. This opposition almost derailed a trade deal between Canada and the European Union. In the United States, both major party candidates are openly opposed to the Trans-Pacific Partnership (TPP).

The NYT recognizes some of the problems in recent trade pacts, but still badly misrepresents the key issues in an editorial on trade. The misrepresentation picks up a recent theme of the selective protectionists (a.k.a. "free traders"). It claims that trade has been falling:

"The total value of American imports and exports fell by more than $200 billion last year; they’ve fallen by an additional $470 billion in the first nine months of this year. Sluggish growth is both a cause and a result of this slowdown."

Numbers fans everywhere know the trick here. As I pointed out yesterday, the reason that the value of U.S. trade fell last year was the drop in the prcie of oil and commodities. The real value of trade rose by $2.3 billion from 2014 to 2015. This is admittedly slow growth, but it is not the same thing as the advertised decline. (These data are available from Bureau of Economic Analysis, National Income and Product Accounts, Table 1.1.6.)

The editorial compounds the error by bringing in data from 2016. It's true the nominal value of trade fell by $163 billion (not the $470 billion advertised) in the first nine months of 2016, but if we adjust for falling prices trade actually rose by $63 billion.

But this aside, it's time to stop honoring the lies by the promoters of trade deals. These deals have nothing to do with free trade. They are designed to redistribute income upward.

CEPR / November 01, 2016

Article Artículo

Affordable Care Act

Washington Post Fact Check on Obamacare Is Not Entirely Right

The Washington Post had a fact check on Obamacare to explain some of the issues around the widely reported rate hikes for policies in the exchange. It gets a few points wrong in a generally solid piece.

First, it explains the problem of the exchanges as being one in which people are more willing to pay the penalty for not having insurance than signing up on the exchange:

"The feared individual mandate has not had the expected result of convincing people to buy insurance, with younger and healthier Americans apparently more willing to pay a $695-per-person fine than sign up for health care they think is too costly. So the mix of people in the insurance pools have tended to be people who have chronic illnesses and thus require more care and frequent doctor or hospital visits. The risk pools are also why insurance companies have sought higher premiums and the biggest deductibles."

While it is true that the mix of people in the exchanges are less healthy than expected, the problem is not that people are opting to pay the penalty rather than get insurance. This has been a frequent mistake in reporting.

In fact, the percentage of the population that is insured is running above the projections at the time the law was passed. This is in spite of the fact that a 2012 Supreme Court ruling allowing states to opt out of the Medicaid expansion provided for in the law. The reason that the exchange population is less healthy than expected is that more people continue to get insurance through their employer than expected. And, since the people who get employer provided insurance are healthier on average than the population as a whole (most are working full-time jobs), this means that relatively healthy people are being kept off of the exchanges.

CEPR / October 30, 2016

Article Artículo

Serious and Deliberate Confusion on Trade at the Wall Street Journal

Alan Reynolds had a column insisting that the U.S. need not fear trade agreements impact on the United States labor market. The context is an argument that the presidential candidates are wrong to oppose the Trans-Pacific Partnership. The piece argues that trade agreements have not led to increased trade deficits and that imports from China really have not had much impact on the manufacturing sector in the U.S. His argument doesn't quite fit the data.

The piece lays out the basic argument in its subhead:

"If trade agreements are so lousy, why are our largest deficits with countries that lack a U.S. trade deal?"

It then notes that the United States largest trade deficits are with China and Japan and that we have trade deals with neither. This might be a good rhetorical point at the Wall Street Journal, but it has nothing to do with the issue at hand. The question is the direction of change following an agreement. While the data on this point is not entirely conclusive, there is evidence that deficits have generally increased with countries following the implementation of trade deals.

To take some prominent examples, the U.S. went from a modest trade surplus with Mexico in 1993, before NAFTA went into effect, to a deficit of more than $60 billion in 2015. It went from a trade deficit of $13.2 billion with South Korea in 2011, the year before a trade deal went into effect, to a deficit of $28.3 billion in 2015.

It is also important to note that the composition of trade is likely to shift against U.S. manufacturing as a result of trade deals. These deals are quite explicitly designed to increase payments from other countries for licensing fees and royalties to U.S. pharmaceutical, entertainment, and software companies. The more these countries are forced to pay Pfizer for drugs and Disney for Mickey Mouse, the less money they have to spend on U.S. manufactured goods. In other words, the gains for these companies from trade deals imply larger trade deficits in other areas like manufactured goods.

CEPR / October 28, 2016

Article Artículo

Confusion on This American Life on Trade

The usually excellent radio show This American Life may have misled listeners in its discussion of NAFTA and trade this week. The piece misrepresents both some of the key issues on trade and also economists' attitudes towards trade deals.

On the key issues, the piece notes that deals like NAFTA have led to job losses. It uses the figure of 700,000 jobs. It then compares this to the gains to the economy that are projected from lower tariff barriers and therefore lower priced goods.

What this discussion leaves out of the picture is the fact that the jobs lost are disproportionately for non-college educated workers. This puts downward pressure on the wages of non-college educated workers more generally as the displaced workers crowd into retail, services, and other sectors of the economy. So it is not just the 700,000 displaced workers who suffer as a result of this pattern of trade, it is non-college educated workers more generally who see their wages fall as a result of the deal.

This issue of wage inequality is important to remember when the segment tells listeners:

"In fact, there's this survey that the University of Chicago did where they asked all these economists all across the political spectrum, are Americans better off, on average, because of NAFTA?  95% said yes. 5% said they were unsure."

This might be taken as meaning that nearly all economists think that NAFTA benefited the country. Whether or not this is true, that is not the question they answered. This question asks the economists whether American "on average" are better off because of NAFTA. The question does not ask about distribution. This means that if NAFTA gave Bill Gates $100 billion and cost the rest of the country $99 billion, then the correct answer to this question is that NAFTA made the country on average better off. Even economists who think NAFTA was bad policy might think that it led to gains on average.

CEPR / October 26, 2016