Says the United States does not "trade as much as other developed nations."
Rob Portman on Thursday, January 20th, 2011 in a speech to the Toledo Regional Chamber of Commerce
Sen. Rob Portman says U.S. trade lags behind other developed nations
When a former United States trade ambassador wins a seat in the U.S. Senate, it’s a sure bet he’ll advance his pro-trade views when talking with constituents.
So Rob Portman, the freshman Republican senator from Ohio, surprised no one when he told the Toledo Regional Chamber of Commerce on Jan. 20 that the United States "should be aggressively promoting the reduction of barriers overseas to U.S. products." But Portman, a trade ambassador under President George W. Bush, added this nugget, according to coverage in the Toledo Blade: "We don’t trade as much as other developed countries."
That latter statement struck us as curious since the United States appears to export a massive amount of goods and services -- $1.8 trillion worth in 2008, according to Commerce Department data. Measured in absolute terms, few countries can match the United States when it comes to products shipped abroad, according to the World Trade Organization and the CIA World Factbook, both of which put United States exports of merchandise, the broadest category, behind only Germany and China.
But Portman’s communications director, Jeffrey Sadosky, told us that when Portman was comparing United States trade with that of other countries, he was measuring the value of exports as they relate to each country’s overall economy. Sadosky pointed us to the World Bank, which tracks the value of exports from all countries and rates them as a measure of gross domestic product, or each country’s output of goods and services. By that measure, the United States is a slacker.
World Bank data that we reviewed independently showed the United States to be near rock bottom: This country’s exports represented 13 percent of our gross domestic product (GDP) in 2008, equal to Haiti and barely better than Nepal and Tonga (12 percent) and Ethiopia (11 percent). We chose 2008, as did Portman, because it represented a year before economies were declining rapidly.
To make this easier to understand, consider this analogy about crime. A big city is likely to have more crimes than a small one, so in absolute numbers, the big city will seem a lot more crime-ridden. But if you compare the number of crimes against the number of people living in a small city, you get the crime rate, which can more accurately reflect the safety of a community.
Comparing trade numbers can yield the same kind of distortion. Looking just at absolute numbers, a large country like the United States can appear to be in the top tier of exporting nations. But if you compare exports to the GDP, you get a much different picture.
Here’s how some other nations compare with the U.S. export-to-GDP ratio of 13 percent:
- Japan, 18 percent
- Australia, 20 percent.
- France, 27 percent
- Russian Federation, 31 percent
- Canada, 35 percent
- China, 35 percent
- Germany, 47 percent
Economists say there are logical reasons for this disparity. The United States is rich with resources and largely self-sufficient. It borders only two other countries, whereas cross-border trade in Europe grew out of necessity as well as custom. Germany and China have developed economies that specifically promote and rely on exports. And as the World Trade Organization notes other factors, including the price of fuel and exchange rates, can affect the ratios.
Portman argues the United States could expand its economy and develop a lot more jobs if it followed a more aggressive export path. We’re not here to debate trade policy, but we checked with experts in academia and at the World Bank to see if Portman’s way of measuring trade -- as a percentage of GDP -- was valid.
Yes, they said.
"That way of measuring trade is considered to be appropriate, although, as you recognize, those small relative numbers mask very large absolute numbers," Donald Boudreaux," a professor and authority on the economics of international trade at George Mason University, told us in an e-mail.
Yet Alan Tonelson, a research fellow at the United States Business and Industry Council, a manufacturers’ group that focuses on domestic growth, took issue with the way Portman uses this export ratio. Portman left out a big part of the equation, Tonelson suggested..
That’s because if the United States accepts more trade agreements in order to expand exports, it is likely to result in more foreign goods coming into the United States, too. That’s the very problem with existing trade agreements, Tonelson and other critics say: The benefits of jobs supporting exports are outweighed by the jobs lost as companies move operations offshore to use their cheaper labor.
"Unfortunately, far too many of these free trade agreements have been structured not to expand net U.S. exports but to boost net U.S. imports," Tonelson said in a telephone interview. "In fact, they have been aimed largely at outsourcing, and we know this because so many of them in the 1990s were signed with very low-income, very export-dependent countries like Mexico and China."
We’re not going to settle that debate. Plenty of people, including Democratic U.S. Sen. Sherrod Brown of Ohio, also support going slow or applying the brakes on trade. But we’ll note that Portman has a lot fellow travelers, including President Barack Obama, who wants to double U.S. exports in the next five years. Even the administration of Ohio’s former governor, Ted Strickland, a Democrat, described exports as a bright spot in the state’s economy.
So we turn to the Truth-O-Meter.
Portman’s statement was made to bolster of a point of view. But economists say that Portman’s measure -- exports as a percentage of GDP -- is valid and useful. Dispute his goals if you wish, but Portman’s claim about the United States’ export rate is accurate.
On the Truth-O-Meter, we rate his claim True.