Wednesday, December 15, 2010

Faulty Trade Statistics Exaggerate And Double US Trade Deficit With China

From The Wall Street Journal article,"Tech Supply Chain Exposes Limits of Trade Metrics" by Andrew Batson:
There's a growing belief that the practice of assuming every product shipped from one country is entirely produced by that country no longer reflects the complex reality of global commerce.

"What we call 'Made in China' is indeed assembled in China, but what makes up the commercial value of the product comes from the numerous countries that preceded its assembly in China in the global value chain," Pascal Lamy, director-general of the World Trade Organization, said in a speech in October. "The concept of country of origin for manufactured goods has gradually become obsolete."

Mr. Lamy said that if trade statistics were adjusted to reflect the actual value contributed to a product by different countries, the size of the U.S. trade deficit with China—$226.88 billion, according to U.S. figures—would be cut in half. That means, he argued, that political tensions over trade deficits are probably larger than they should be.

"The statistical bias created by attributing the full commercial value to the last country of origin can pervert the political debate on the origin of the imbalances and lead to misguided, and hence counterproductive, decisions," Mr. Lamy said in his speech to the French Senate in Paris.
Read more here.

1 comment :

  1. There is a lot of work to be done in re-setting the U.S./China trade relationship. The Chinese economy seems to be receding away from open markets to greater government control at the national, regional and local level as its trade surpluses grow.
    US China trade imbalance