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To: Bobby Yellin who wrote (37516)	7/22/1999 11:11:00 AM
From: Jim S	Read Replies (1) \| Respond to of 116790

I thought you were following the trade deficit conversation. Ok, I'll try to recap. Zhang says that an item he is familar with consumes $1.65 in materials, much of which are imported to China, and they export the item to us for $2. The US importer sells the item for $10. This process add $8.00 to our GDP (10-2), and adds $2 to our trade deficit. Zhang's point is that our trade reps want to use the $2 figure to equalize our trade relations, but since China only makes $0.35 profit, they don't feel they can equalize the trade using those calculations, because their currency isn't accepted by the countries they buy their raw materials from. What I'm saying is that if they strengthen their currency so it WILL be accepted by other countries, we wouldn't have to subsidize their economy with a net outflow of our dollars. Maybe 'strengthen' is the wrong word -- maybe 'become more universally accepted' would be a better term. jim