<<does anybody know if part of this high trade deficit takes into account if say as my friend asked..if GE has a lightbulb made in China
and then sold it here for much higher price..is that lightbulb part of the trade deficit even though GE would make a lot more money selling it here rather than making it here and selling it here?>>
The answer is yes. It is a part of the trade deficit. The following article is from China's point of view. And it tells why there is such a huge difference bet. the US figure and Chinese figure. In terms of 1998, the US figure of trade deficit with China was $59+ billion, while China's figure was $21+ billion. ============================================
chinadaily.com.cn
US figures distort trade imbalance
APPROPRIATE appraisal of the Sino-US trade imbalance will promote healthier economic ties between the two countries on the Pacific Rim.
According to statistics from the Chinese General Administration of Customs, China's trade surplus volume with the United States was US$16.4 billion last year; the imbalance hit US$49.7 billion if measured by US statistics.
In recent years the buzz from some US governmental officials, Congressmen and business people is that there are barriers inhibiting US investment in China, such as transparency, limits on the scope of business, high tariffs and excessive taxation.
The talk reached a new peak recently, just before US President Bill Clinton's nine-day China visit, which starts today.
"The influence of economic globalization upon trade statistics based on country of origin should be carefully examined before we come to a conclusion," said Chen Baosen, a research fellow from the Institute of American Studies under the Chinese Academy of Social Sciences.
Chen explained that the US figures for China's exports to the United States were excessive because of the irrational US method of calculating trade statistics, based on country of origin.
Due to the US Government's exaggeration of its import volume from China and undervaluation of its exports to China, statistics provided by the two countries have always differed from each other by a wide margin.
China's statistics indicate that a bilateral trade imbalance favouring China began in 1993, while the US side claims that since 1983 Washington has suffered an annual trade deficit with China.
Transit trade via Hong Kong and processing trade are two major features dominating Sino-US bilateral trade, said Chen.
Chinese Customs statistics indicate that last year, 43 per cent of US-bound Chinese exports and 27 per cent of Chinese imports from the United States were conducted by transit trade via Hong Kong. Processing trade in the same period, surging 23 per cent to reach US$28.4 billion, accounted for 58 per cent of total Sino-US trade.
These days, a large proportion of the processing trade has been moved to China by companies from neighbouring countries and regions. These firms imported most of the raw materials from areas close by and exported the products to US and European markets.
When the United States insists that trade statistics be compiled based on country of origin, the total volume of this processing trade gets counted as imports from China.
It is very clear that China's profits from the processing trade are small, with economic returns of only 11 per cent from the exports, said Chen.
Furthermore, trade imbalances among countries and regions get blurred around the edges with the intensifying economic globalization, which has greatly changed the fundamental meaning and traditional characteristics of international trade, Chen added.
The most vivid example of the suspicious nature of US statistics on its trade imbalance with China was given in a front page story on baby dolls, published in the Los Angeles Times on September 22, 1996.
The average retail price of a doll, a fondly cherished toy to many Western girls, is US$9.99, though its imported price is US$2. According to US statistics, China is credited with US$2 for the export of each doll to the United States.
Actually, China earns only US$0.35 for each doll, the rest of the US$2 going towards imported raw materials, transportation and management fees, according to the newspaper.
Many sober-minded US scholars have also challenged Sino-US trade statistics compiled by the United States.
Fred Bergsten, director of the Washington-based Institute of International Economics, estimated the US trade deficit with China would be lower than US$10 billion if the transit trade via Hong Kong were more carefully calculated.
The careful analysis of bilateral trade imbalance completed in 1996 by Nicholas Lardy, a senior fellow on Foreign Policy Studies at the Brookings Institute, helps make clear the distortions inherent in the US statistics.
Lardy said in his article, "China and the WTO," that the Sino-US trade imbalance was distorted by US statistics, which are based on country of origin.
"Although this year (1996), as firms sell about US$6 billion to China via Hong Kong middlemen, the Department of Commerce insists on calling these transaction sales to Hong Kong," reads Lardy's article.
"But the department counts as imports from China all Chinese products re-exported from Hong Kong to the United States," the article added.
Unfortunately, the department also includes the value added by Hong Kong companies as part of the total value of imports from China, Lardy pointed out.
The US economist concluded that as a result of these factors, US officials overstated imports from China in 1996 by US$7 billion.
The upshot is that the real US trade imbalance with China in 1996 was, most likely, one-third less than the projection based on US Government data, said Lardy.
Li Changjiu, a research fellow with Xinhua Centre for World Affairs Studies, urged the US Government to lift its limits on high-tech exports to China to lower the Sino-US trade imbalance.
The two countries boast a huge potential for co-operation in such fields as energy, information industry, financial sectors, agriculture and environmental protection, said Li.
Both sides believe that President Clinton's ongoing visit to China will further boost Sino-US economic ties, and promote an overall bilateral relationship based on a constructive strategic partnership.
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Date: 06/25/98
Author: Bian Hongwei
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