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Home Publications Blogs Beat the Press Sanctions Against Iran Lose the U.S. More than 40 Percent of the Exports Supported by the Export-Import Bank

Sanctions Against Iran Lose the U.S. More than 40 Percent of the Exports Supported by the Export-Import Bank

Friday, 18 July 2014 08:26

Regular readers of Beat the Press know that putting numbers in context is one of my main beefs with economic reporting. News stories, especially about government budget items, routinely throw out big numbers that are completely meaningless to almost everyone who reads or hears them. That is not serious reporting. Reporting is about informing your audience. (This is why I use the term "frat boy reporting" to refer to the use of big numbers without context. It conforms to a ritual among reporters, but it does not provide information.) 

To his great credit, Glenn Kessler, who runs the Washington Post's Fact Checker section, does believe in putting numbers in context. He did so in a piece today that examined the claims that sanctions against Iran had cost the United States $175 billion in exports. (The original study is here.) Kessler pointed out that this number sums estimates of lost exports over 18 years, and therefore it is deceptively large. He points out that this sum amounts to just 0.5 percent of U.S. exports over this period. 

This analysis is very helpful in giving readers a better sense of how much these lost exports mean to the economy. It is also possible to compare the lost exports to another item that has been in the news lately, the Export-Import Bank whose current authorization ends on September 30th. According to the Bank, its loans supported $37.4 billion in exports in 2013. By comparison, the study on the impact of the sanctions calculated that the United States would have exported $15.4 billion worth of goods and services to Iran in the absence of sanctions in 2012 (the last year covered), an amount that is equal to 41.2 percent of the exports supported by the Export-Import Bank.

This comparison should give readers an indication of the relative importance of the sanctions and Ex-Im Bank. Of course, the volume of exports supported by the Ex-Im Bank exaggerates its actual importance since many of these exports would take place even without the Bank's support. For example, if the Bank supports $15 billion in exports from Boeing, then perhaps $10-$12 billion of these exports would still occur even without the Bank's support. Boeing would simply earn a smaller profit on these exports since it would have to pay the market interest rate on its borrowing.

If we say that between 10 percent and 30 percent of the exports supported by the Bank would not occur without access to its loans or guarantees then it added between $3.7 billion and $11.1 billion to U.S. exports in 2013. This is between 24.0 percent and 72.0 percent of the amount of exports lost in the prior year due to the the sanctions against Iran, according to the study. 

Comments (5)Add Comment
A Two Headed Coin?
written by Larry Signor, July 18, 2014 9:21
There seems to be an assumption that the US would not have imported any goods from Iran over this same time period, ex-sanctions. This does not seem to be a credible assumption, implying sanctions have an even lesser impact on the current account balance.
written by Ryan, July 18, 2014 9:56
Remember the time in Austin Powers when Dr. Evil planned to hold the world hostage for $1 million? Remember when his henchmen laughed? Why? Context was missing, that's why! A million dollars was no longer a really big number.

This situation is similar...
Good positive post
written by Dave, July 18, 2014 10:12
Good positive post. Show them how to do it! That is what this is about.

I have a friend in this business that I would like to help bring back from the brink. I'd like to show him how to make good money by being on the right side, the factual side.

The business of the press is awful! Reporters, who generally make little money, are asked to make some of the most important morality judgements for society.

One way to reform this business is to demand that reporters are paid more!
Sock Puppets Convert Marginal Analysis Into Unmentionable Counterfactuals
written by Last Mover, July 18, 2014 11:58

Imagine that. Dean Baker advancing marginal analysis. The increment itself. The essence of neo-classical economics. That cost incurred, or avoided.

Entirely separate from unavoidable sunk cost. Entirely separate from costs already incurred, already avoided, or that would have been either going forward.

It used to be called common sense from all political sides, used as a nickname for (micro) economics. It wasn't in dispute, nor were the assumptions which can still apply today.

Then gradually sock puppets of the 1% took over mainstream media and began the slow but sure brainwashing of journalists in general.

Counterfactuals in the form of "what would have occured" as opportunity costs are essential to any economic interpretation. Yet mainstream journalists routinely leave out counterfactuals or set them apart as total conjecture.

One, because it usually comes from the "left" and two, it goes flatly against their training to "report the facts and only the facts" - never, ever speculate on a counterfactual to get the economics right.

There are exceptions of course. Look! Over there America! Ice glaciers melting everywhere! Oh wait, here we have a denier who says it would have happened anyway, so the marginal effect is actually of no significance at all.
Sanctions Smanctions
written by John Parks, July 18, 2014 4:36
While the results of Mr. Kessler's breakdown of a one-sided promotional blurb can be expected, a more interesting and real investigation awaits.

Many ships leave the ports of Dubai heading for Iran on any given day. Their manifests will not show the US or any close American ally as the country of origin for any of the goods.

If Mr. Kessler wants a Pulitzer he should track the shipments of the Dubai corporations back through the labyrinthine documents hiding the true origins of many of those goods.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.