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An Unfolding Mystery

Here’s a letter to the Wall Street Journal:

Peter Navarro, Director of the new National Trade Council, calls your report on the administration’s proposal to change the practice of accounting for goods transshipped through the U.S. “misleading” (Letters, Feb. 24).  Yet Mr. Navarro mysteriously never explains just why your report is misleading.  Instead, he only hints that the proposed change differs from your report and what we’ve all so far been led to expect.

Initial reports were that the White House wants to stop counting goods transshipped through the U.S. as U.S. exports but to continue to count them as U.S. imports.  For example, in your report that sparked Mr. Navarro’s letter, you wrote that “The Trump team wants to exclude the value of re-exports from the U.S. export total because these goods aren’t manufactured in the U.S., while keeping them on the import side of the equation.”*  Yet Mr. Navarro’s letter now implies – but only implies – that the White House wants also to stop counting transshipped goods as imports.

Counting transshipped goods as being neither exports nor imports would indeed be a far less egregious accounting change than would continuing to count these goods as imports but no longer as exports.  And so if indeed the administration’s proposal includes also a provision to stop counting such goods as imports, why, in his letter, did Mr. Navarro not explicitly say so?  It would have been easy, and should have been obvious, for him to announce explicitly that the proposal is to also stop counting transshipped goods as imports.  The fact that Mr. Navarro could easily have explicitly corrected your alleged error but failed to do so gives the plausible impression that your report is, in fact, accurate – and that, as a result of now being exposed and roundly and rightly ridiculed, the administration is now trying to back-pedal into a less egregious position or, worse, to mislead the public about what it intends to do.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

* See also this report from The Hill; it’s one that Greg Mankiw linked to.  A slice from this Hill report:

People involved in the discussions told the [Wall Street] Journal that the leading idea is to count “re-exports” — goods that are imported to the U.S., and then exported to a third country unchanged — as imports, but not exports.


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