Posted on 12/17/2010 3:35:41 AM PST by expat_panama
[snip]
"A distorted picture" is the result, they say, one that exaggerates trade imbalances between nations.
Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China's contribution is the last step—assembling and shipping the phones.
So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.
[snip]
If China was credited with producing only its portion of the value of an iPhone, its exports to the U.S. for the same amount of iPhones would be a U.S. trade surplus of $48.1 million, after accounting for the parts U.S. firms contribute.
Other economists say some aspects of the researchers methodology may have led them to overstate their case. The study, for example, assumes that companies such as Toshiba Corp. and Samsung Electronics Co. that make components for the iPhone wholly assembled them in their home countries.
[snip]
(Excerpt) Read more at online.wsj.com ...
This is a strawman. It isn’t the inaccurate accounting of trade imbalances between the US and specific countries that’s the problem. The problem is the total trade imbalance itself, which is real. Just because one country doesn’t make 100% of the iPhone does not mean it’s not an import.
That's another way people don't understand trade deficits, they think a weak dollar can bring it down. That's stupid because exchange rates don't affect the trade deficit.
The usually ignored fact is that when Americans buy things from foreigners, they have to exchange dollars for foreign money first before they buy. Foreigners then have to use those same dollars to buy American stuff, so it always balances. The only way we can have a deficit in goods'n'services is when it's paid by a surplus in capital goods like stocks 'n bonds.
Thank you for your post.
Thank you for your post.
Maybe I am naive, but I think we owe China so much because they have bought our country’s debt. I don’t begrudge them the opportunity, but I think it is naive to say that it is China’s fault. They have cheap labor and production costs. They also have a lot of mouths to feed. They are making products to use, not debt.
Our national debt is huge because our politicians spend too much. The Chinese have so many dollars and nowhere else to spend them. It fuels our debt more than it fuels any “trade deficits”.
It’s easier to have a boogyman than to hold those truly responsible out-of-control Congresscritters accountable. I am not promotingChina. I am just not ready to damn them.
You raise some good points
Yes, part of the problem with Free Trade is that politicians in both parties (Al Gore, George W Bush, Obama, The Clintons, Tom DeLay, Bob Dole, etc, etc) all have pushed and/or passed these bad Free Trade deals. The American politcians have been complicit with Communist China in this problem.
However Communist China does share blame. They devalue their currency to artificially lower the prices of their products...while artificially raising the prices of American goods in their country. Other countries do this too....especially with the VAT tax rebates (European Union)
The ChiComs end up having to loan the US money to keep the US buying Communist Chinese goods. It is a wicked game for both sides.
However, when the USA must borrow to purchase foreign made goods...it does not bode well for the future of the US economy. And, by doing this, means that Free Trade does not work.
The article contains this:
“So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total”
That’s not a full accounting of the money flows. For example, if China imports $100 worth of parts from America for that phone then that transaction would also be on the trade balance sheet and would reduce that $178.96 to a net of $78.96.
The question is, when everything is put on the balance sheet, what are the net flows.
I didn’t get much from the article.
???
I do not see the link you state. We buy Christmas decorations and iPods made in China. Our politicians borrow money (or just print it) and spend it to support unConstitutional expenditures. Where do you find any mention of a Dept of Ed or Energy? How did we get Health and Human Services? That is where the debt arises. China was just smart enough to hand us the rope. They probably made it...
That would depend on what we're talking about, do you mean say, total dollars per Iphone?
That’s not a full accounting of the money flows. For example, if China imports $100 worth of parts from America for that phone then that transaction would also be on the trade balance sheet and would reduce that $178.96 to a net of $78.96.
I doubt that any of the component parts were made in the USA. Most of that type of production was shipped to Communist China and other countries many years ago
That’s not a full accounting of the money flows. For example, if China imports $100 worth of parts from America for that phone then that transaction would also be on the trade balance sheet and would reduce that $178.96 to a net of $78.96.
I doubt that any of the component parts were made in the USA. Most of that type of production was shipped to Communist China and other countries many years ago
> Unless you gave the store $500 and got nothing in return...you do not have a deficit with a retailer.
uhh.. That was my point. There is no such thing as a ‘trade deficit’ in the way it is used.
> “...‘trade deficits’ with my grocery store, Walmart, Bushmaster, Smith & Wessen,”
—and you’re not bursting into tears? Amazing!
Yeah, I’m not Pat Buchanan or Ross Perot. lol
Time is proving both Pat Buchanan and Ross Perot, right.
Open your eyes.
Everything they said, is coming true around us. All of it.
>> I sell a $10 million design to China, get paid in gold, and the trade deficit goes down another $10 million.
The Chinese have mastered low-cost manufacturing whereas we have largely forgotten how to do it.
To truly master low-cost manufacturing requires combining stringent quality control with relentless downward pressure on manufacturing cost. It is not an empty exercise best left to uneducated third-world countries. It is one “skill engine” that drives an economy.
The country that focuses on manufacturing excellence will soon have an educated population that is motivated to excel at design, also.
The country that abandons manufacturing as unworthy of its talents? Not so much.
Congratulations on selling your ten million dollar design to China. Save a portion of it against the day when the Chinese design their OWN products. It’s coming.
I’ve got my eyes open - economic isolationism doesn’t work. Never has historically. Ask the Brits.
Oh, and by the way —
I’m a “level playing field” free trader. I’m not in favor of controlling imports via tariffs and such unless they are required to punish a country that is not playing on a level field. Like other freedoms, free trade should not be a suicide pact.
I am very MUCH in favor of improving the manufacturing situation in this country by removing the insane government restrictions that choke it off.
But I’m also not in favor of “whistling past the graveyard”, which is what this article is essentially doing. It is ignoring the real problems in our economy just as much as the protectionists tend to.
China is the land of ‘quality fade’ that puts plastic in baby formula and pet food, antifreeze in toothpaste and cough syrup, and large amounts of lead and cadmium in children’s toys and jewelry.
In addition they have access to ‘disposable’ workers, and are not constrained at all by minimal safety or environmental standards.
Came to see protectionists’ tears. Left satisfied.
Wake up.
No, you wake up. If our government didn't run trillion dollar deficits, the Chinese central bank wouldn't have trillions of dollars of debt to buy.
You protectionazis would rather put restrictions on where American citizens can spend their own money rather than focus on the federal government and the Fed that have both created the problem.
Trade deficits in and of themselves are completely harmless. Budget deficits and inflationary monetary policy are a different matter. You really should get your priorities straight.
That's the beauty of it. China's made our lives better by selling us real things in exchange for paper promises to pay.
We buy material goods and they buy our cash flow. Then they have to spend that "deficit" on our bonds.
That we owe the Chinese our debt is a wholly domestic spending problem. There is no trade deficit. It's imaginary.
There is a budget deficit and that's real, but it is an American problem, not a trade problem. Stop the government spending and it just gets better for us.
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