US may change trade deficit calculation

A Donald Trump "Wind of Change" float at a parade during the Nice carnival in France over the weekend. Economists are watching the US' use of government data as President Trump bids to promote his economic policies. He and his advisers see the US goo
A Donald Trump "Wind of Change" float at a parade during the Nice carnival in France over the weekend. Economists are watching the US' use of government data as President Trump bids to promote his economic policies. He and his advisers see the US goods trade deficit as an indicator of the country's economic weakness.PHOTO: AGENCE FRANCE-PRESSE

New method will boost argument to rework trade deals: Report

WASHINGTON • President Donald Trump's administration is considering changes to how it calculates United States trade deficits in a way that would likely help bolster political arguments to renegotiate key trade deals, the Wall Street Journal has reported, citing people involved in the discussions.

The main idea being discussed is whether to exclude "re-exports" from the calculation of US exports, sources told the newspaper. Re-exports refer to goods that are imported into the United States, then transferred to another country.

Mr Trump has been highly critical of trade deals, including the North American Free Trade Agreement with Mexico and Canada, saying they have cost jobs at home. By using a metric that widens the trade deficit, it could give him political leverage to make sweeping changes, the paper reported on Sunday.

If the government adopted the new method, the deficit with Mexico would be nearly twice as high.

The Journal also reported that career government employees at the US Trade Representative's (USTR's) office objected to a request to prepare data using the new methodology. Although they complied with the request, the staffers explained why they disagreed with the approach.

In a statement to the newspaper, deputy chief of staff Payne Griffin of the USTR's office said its officials are not close to a decision yet on whether to adopt a new approach. "We had a meeting with the Commerce Department, and we said, 'Would it be possible to collect those other statistics?' " he was quoted as saying.

A spokesman for the Census Bureau, which calculates the trade deficit numbers, told the Journal she was not aware of discussions about changing the data.

Economists are watching the Trump administration's use of government data as the President bids to promote his economic policies.

Last week, the Journal reported that the administration had drafted preliminary economic growth forecasts for federal budgeting that rely on far rosier assumptions than most projections.

The Journal said those who support considering a new approach on calculating the trade deficit say they are seeking a more accurate picture of the value of products produced in one country and consumed in another. With their focus on domestic manufacturing, Trump administration officials want to measure exports of products made in the US, not items shipped from abroad and re-exported.

Several economists interviewed by the Journal said they were uneasy with fully excluding re-exports from exports but not imports.

Mr Trump and his advisers see the US goods trade deficit as an indicator of the country's economic weakness.

He has repeatedly cited the US$63.1 billion (S$89.4 billion) trade deficit the US had with Mexico last year, the Journal reported.

Under the new approach the trade deficit with Mexico would be nearly twice as high, at US$115.4 billion. The difference is mostly due to the treatment of re-exports.

Re-exports are currently included in the "total exports" figures most frequently cited and used by the Census Bureau to calculate the trade balance.

On the imports side, US officials are also exploring switching to "imports for consumption", a slightly narrower way of measuring imports that would make less of a difference in the overall balance.

A version of this article appeared in the print edition of The Straits Times on February 21, 2017, with the headline 'US may change trade deficit calculation'. Print Edition | Subscribe