WASHINGTON, Dec. 5 (UPI) -- "No visibility" is what businessmen and economists say when they have literally no idea what even the near future holds for their companies or the U.S. economy. And they're saying it increasingly often. Unfortunately, this phrase also describes the view from the U.S. trade policymaking cockpit, thanks to the just plain lousy and/or outdated globalization statistics put out by the U.S. government.
Even the deeply divided U.S. Trade Deficit Review Commission created by Congress agreed that major reforms are urgently needed. But a full year after the commission published its report, and on the eve of a vital congressional vote on fast-track presidential trade negotiating authority, almost nothing has changed.
With accurate and timely data scarce, intellectual con artists have been free to sell Congress and the public a badly warped picture of U.S. trade and investment flows, and nowhere has the deception been greater than in discussions of U.S. exports to developing countries.
These exports loom especially large in the globalization debate. If developing countries are indeed turning into major consumers of U.S. and other First World products, then the reigning model of free trade and investment could benefit workers all over the world. This trend would show that Third World incomes, and thus purchasing power, are rising steadily, and that producers in advanced industrialized countries can prosper by reaching these potentially huge markets.
Although U.S. government trade data show that American exports to Third World countries expanded vigorously from 1990 to 2000 (by 133 percent -- more than twice as fast as the exports to the wealthy countries), these figures omit a crucial reality: Not all exports are created equal. As a result, not all U.S. exports have the same effects on the U.S. economy.
In reality, many U.S. exports -- and especially exports to developing countries -- consist of "producer goods." These shipments of parts, components, and materials that go into final products are often related to the flight of manufacturing from the United States. They represent shipments of products to foreign factories that used to be located in this country.
Many other U.S. exports to the Third World also are related to outsourcing. They consist of capital goods and infrastructure goods that serve as the building blocks of the factories, highways, ports, and utility systems that make up foreign exporting complexes. Inevitably, these complexes often compete with U.S.-based factories. When they do, unlike traditional exports of finished goods, exports of producer, capital, and infrastructure goods mainly depress employment and wages in the United States, not boost them.
Exports of producer goods alone are commonly estimated to comprise some 40 percent of all U.S. goods exports, and all students of the subject agree that this share is rising. In other words, as globalization cheerleaders keep exulting, corporate production chains continue to spread relentlessly around the world. Yet not only is this crucial fact impossible to deduce from the overall export statistics, it is also virtually impossible to deduce from U.S. trade figures that claim to classify exports (and imports) by "end use."
This classification scheme explicitly recognizes the producer/finished goods distinction by actually separating U.S. trade flows among consumer goods, capital goods, industrial supplies, and other categories. Unfortunately, even these categories are way too broad to distinguish between parts and components on the one hand, and finished goods on the other. In addition, the capital goods and industrial supplies categories don't distinguish between goods used to build up export bases and goods used to build production complexes aimed at domestic consumers in foreign countries.
Worse, the narrower the categories get, the blurrier the distinctions can become. For example, even the most detailed end-use data lumps together parts and finished products in sectors ranging from tractors to machine tools. Although the manufacture of few products has been globalized as completely as that of computers and semiconductors, U.S. trade statistics nonetheless combine parts and finished goods in these industries as well.
The deceptive potential of faulty trade statistics became clear during the big debate on NAFTA and its aftermath. Just remember how then Vice President Gore and others portrayed Mexico as a booming market for exports made in the United States by American workers. And even after Mexico's economy collapsed after the 1994 peso crisis, NAFTA boosters proudly noted that U.S. exports had held up relatively well.
Most U.S. exports to Mexico, however, were producer and capital goods, which were sold to the Mexico factories of U.S. multinational firms that used to be located in the United States. And the vast majority of the end products were sold right back to American customers. Because this kind of trade did not increase the total global demand for U.S.-made products and exports, it did not create more jobs and raise wages in the United States. Indeed, it encouraged more U.S. firms to substitute Mexican factories and workers for American. Far from helping to sustain real U.S. exports to Mexico, NAFTA simply made exporting American jobs over the border much easier.
This year, the U.S. International Trade Commission finally began publishing figures suggesting how much U.S. exporting to Mexico in particular amounts to exporting to ourselves. In 1999, the figure was nearly 55 percent. And the Commission had to rely heavily on Mexican government figures. These vital facts came seven years after NAFTA went into effect. Even now, moreover, the full significance such trade patterns can't be known because American data don't permit precise comparisons between U.S. trade with developed countries and developing countries.
Until better statistics provide better visibility for U.S. trade officials, holding off on further trade agreements and rejecting fast track trade negotiating authority is the only prudent thing to do. It's bad enough to give a blank check to the president in this area. It's even worse to give it to him when he's literally flying blind.
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Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
