There are two key data points in the report, reflected in the quote highlighted above:
- “From 1995 to 2012, the U.S. sacrificed between $134.7 and $175.3 billion in potential export revenue to Iran.”
- “On average, the lost export revenues translate into between 51,043 and 66,436 lost job opportunities each year. In 2008, the number reaches as high as 214,657-279,389 lost job opportunities.”
But what does this mean?
The report relies on a gravity model of trade, which aims to predict trade between countries based on measures such as the gross domestic product and the distance between countries. The writers of the report, which included Parsi, relied especially on research done by Gary Hufbauer of the Peterson Institute for International Economics.
Hufbauer said the methodology in the report is sound; Parsi shared an e-mail in which Hufbauer wrote that it is a “very good report.”
But there is the issue of how the report is framed, as illustrated in the news release.
First of all, note that the report carefully refers to “job opportunities,” not jobs. (Parsi’s quote in the news release is less careful.) That’s because one cannot assume that that people remain unemployed, year after year. You certainly cannot add up the job numbers over time, though that’s what some reporters did — perhaps misled by Table 4, which lists “job losses” year by year, though it correctly does not offer a total.
“The U.S. economy has lost more than $135 billion in export revenues and hundreds of thousands of potential jobs because of stringent economic sanctions against Iran,” an article in al-Monitor said.
Parsi said the report very carefully referred to “job opportunities” but The Wall Street Journal, meanwhile, missed that nuance. “Losing out on selling to Iran has cost the U.S. an average of between 51,043 and 66,436 jobs for every year between 1995 and 2012,” its article said.
There’s also a problem with the headline number of $175 billion in lost exports. Hufbauer says that this really should be expressed as an annual figure, or at the least make clear that it is over an 18-year period. (The report instead says “from 1995 to 2012.”)
“The authors are trying to get as high a number as possible,” but he said an annual figure provides more context.
NIAC here is playing a game with “big numbers.” While $175 billion sounds like a lot, it is only 5/1,000th of the total U.S. exports over that 18-year period. In other words, it’s barely a rounding error in the trillions of dollars of U.S. trade over nearly two decades. Yet the report asserts that “the negative impact of sanctions to the U.S. economy has been staggering…the human cost has been even greater.”
Moreover, the number assumes that American businesses simply sat on their hands when they lost access to the Iranian market—rather than search for other markets for their products. “What do companies do when a market is cut off?” said Hufbauer. “They look for new markets.”
“We never claimed that it [sanctions on Iran] will collapse the U.S. economy,” Parsi said. He said the purpose of the report is to highlight an impact of sanctions that is often neglected, since the focus is usually on the country being sanctioned. “It would be unfair to say we have taken anything out of context,” he added.
The Pinocchio Test
The impact of U.S-led sanctions on the United States might be worthy subject for inquiry, but NIAC is gilding the lily here. The report does not do enough to make clear that there is a difference between “lost jobs” and “lost job opportunities” – and should have expressed the export number on an annual basis, with a clear explanation of what that number means in the overall U.S. economy.
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