Busting US-China Trade Deficit Myths

Public opinion in the United States has turned against free trade. Donald Trump’s election win was tied to an aggressive campaign promising to address trade imbalances, with a particular focus on Chinese trade practices

Must Read

Stocks Rise After Trump Says Trade Talks Are ‘Moving Along’

Stock prices jumped on Dec. 6 following a positive U.S. jobs report and President Donald Trump’s comments that...

Integrating Australia’s security and economic policy cultures

Author: Brendan Sargeant, ANU The debate in Australia about China is intensifying and some of the optimism of a decade...

More Bank Runs Worry Chinese Regulators, Investors

News Analysis Warning signs are flashing all over China’s banking sector. Chinese regulators have seized or bailed out lenders at...

The ACCTS could be a catalyst for transitioning to a circular economy

Author: Giridharan Ramasubramanian, ANU On 25 September 2019, five countries — Costa Rica, Fiji, Iceland, New Zealand and Norway —...

Smarter strategies for sharing South Asia’s rivers

Author: Ashok Swain, Uppsala University South Asia is facing severe water scarcity. As the region’s population grows and its economies...

East West Bank CEO Dominic Ng sets things straight on trade figures that he calls outdated.

Public opinion in the United States has turned against free trade. Donald Trump’s election win was tied to an aggressive campaign promising to address trade imbalances, with a particular focus on Chinese trade practices.

On the campaign trail, Trump remarked that “China is responsible for nearly half of our entire trade deficit. They break the rules in every way imaginable.”

Without doubt, there are problems in the U.S.-China trade relationship. However, the current officially reported U.S.-China trade numbers are grossly inaccurate. They are based on outdated methods of data collection and calculation that were agreed to in the aftermath of World War II, and they have not been properly updated to reflect today’s global economy.

It is concerning that world leaders are primarily relying on these misleading trade figures to make major decisions that have the potential to damage economies and create ill will among nations that heavily depend on each other for their prosperity.

Businessman signing or writing a document in front Industrial Container Cargo freight ship
“It is concerning that world leaders are primarily relying on these misleading trade figures to make major decisions.” Dominic Ng

Traditional trade data are outdated and tell a distorted story

Let me explain why the trade data our leaders are using is problematic. Statistics traditionally used to measure trade flows do not fully reflect the globalization of production chains.

Currently, statistical agencies pin the entire trade value of a product to the last place it was exported from, even though the parts in the product come from many other countries. This method of data collection is based on the International Monetary Fund’s Balance of Payments Manual, which was first released in 1948, and never appropriately overhauled to reflect the new complexities of global value chains.

In the case of China, this means that commonly cited trade figures are distorted by the fact that China has become a final assembly point for many goods that contain a significant number of parts from other nations.

The classic example is the Apple iPhone

Apple takes care of design, development, marketing, and software creation for its phones in the U.S. High-value components of the iPhone come from different countries: Among the myriad iPhone 6 parts, displays are manufactured in South Korea, Japan, and elsewhere; processors come from the United States; touch ID sensors are made in Taiwan; and barometric pressure sensors come from Germany. 

(This is the first editorial of a three-part series on the misunderstandings of the U.S.-China trade relationship.)

Source : Busting US-China Trade Deficit Myths

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

Stocks Rise After Trump Says Trade Talks Are ‘Moving Along’

Stock prices jumped on Dec. 6 following a positive U.S. jobs report and President Donald Trump’s comments that...

Integrating Australia’s security and economic policy cultures

Author: Brendan Sargeant, ANU The debate in Australia about China is intensifying and some of the optimism of a decade ago has dissipated. This is...

More Bank Runs Worry Chinese Regulators, Investors

News Analysis Warning signs are flashing all over China’s banking sector. Chinese regulators have seized or bailed out lenders at an unprecedented pace amid a...

The ACCTS could be a catalyst for transitioning to a circular economy

Author: Giridharan Ramasubramanian, ANU On 25 September 2019, five countries — Costa Rica, Fiji, Iceland, New Zealand and Norway — announced a new initiative, the...

Smarter strategies for sharing South Asia’s rivers

Author: Ashok Swain, Uppsala University South Asia is facing severe water scarcity. As the region’s population grows and its economies develop, a lack of sustainable...

More Articles Like This

- Advertisement -
Thailand Business News