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 ...
There is still a further conclusion to be drawn from all this, namely, that, according to the theory of the balance of trade, France has a quite simple means of doubling her capital at any moment. It suffices merely to pass its products through the customhouse, and then throw them into the sea. In that case the exports will equal the amount of her capital; imports will be nonexistent and even impossible, and we shall gain all that the ocean has swallowed up."You're just joking," the protectionists will say. "We couldn't possibly have been saying anything so absurd." Indeed you have, and, what is more, you are acting upon these absurd ideas and imposing them on your fellow citizens, at least as far as you can.
Frederic Bastiat, The Balance of Trade, First Series, Chapter 6, Sections 19-20.
dennisw are you confusing the trade “deficit” (imaginary) with the budget deficit and the national debt?
You know those are three separate things, right?
The annual deficit builds the national debt. Roll spending back to 2008 levels and hold it to no more than inflation plus the population growth rate and you zero out the deficit quickly, go to surplus and bring down the national debt.
Of course the analogy to individuals is like saying a guy with a $100K income has a $100K mortgage and that’s a menace to his lifestyle.
That’s ridiculous.
Free “traitor”, excellent.
Nothing like an ad hominem attack to establish the bona fides of your argument.
Good analysis. The problem isn’t our trade partners, but our free spending politicians.
The "USA" does not trade with China and does not borrow a red cent to buy their products. Individual Americans trade with China -- not the government. The government borrows to fund its out-of-control spending; that's a completely different topic and has nothing to do with trade.
And, by doing this, means that Free Trade does not work.
Since your premise is wrong, your conclusion is, too.
What exactly is the definition of a trade deficit?
Have you ever heard of mercantilism?
Medieval economics?
Well done and you got to him first.
People need to read and re-read Bastiat. The amount of economic confusion and ignorance on FR is astounding.
That people confuse our national debt, the imaginary trade “deficit”, and free trade stuns me.
Time is proving both Pat Buchanan and Ross Perot, right.
The Free Traders still cling to Al Gore over Ross Perot. Who can forget that Larry King show where Al Gore was pushing Free Trade and NAFTA...while Perot was arguing against
Free Traders went with Al Gore.
Just as Al Gore was wrong on Global Warming...he is just as wrong on Free Trade
“Free Traders went with Al Gore.”
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Bears repeating.
You have just stated exactly what happens when I purchase something from a Chinese company. I send it money and it sends me a product that I value more than the money. The company values the money more than it values the product it's selling.
The miracle of trade! And you're right -- there is no deficit. So what are you complaining about?
I’ve got my eyes open - economic isolationism doesn’t work. Never has historically. Ask the Brits
Actually, Free Trade and Globalism sunk the British economy in the late 19th-early 20th C...while the protectionist/isolationist Germans and Americans blew the doors off of the British in manufacturing and technology...with high protective tariffs.
Economists continually flunk history. History has shown repeatedly that Free Trade does not work....and that protectionist economies (Which, Communist China and the EU, are today) fare much better than Free Trade economies.
One of the greatest contributions the United States can make to the world is to promote freedom as the key to economic growth. A creative, competitive America is the answer to a changing world, not trade wars that would close doors, create greater barriers, and destroy millions of jobs. We should always remember: Protectionism is destructionism. America's jobs, America's growth, America's future depend on trade—trade that is free, open, and fair.Oops, did I say that was Al Gore? I meant Ronald Reagan.This year, we have it within our power to take a major step toward a growing global economy and an expanding cycle of prosperity that reaches to all the free nations of this Earth. I'm speaking of the historic free trade agreement negotiated between our country and Canada. And I can also tell you that we're determined to expand this concept, south as well as north. Next month I will be traveling to Mexico, where trade matters will be of foremost concern. And over the next several months, our Congress and the Canadian Parliament can make the start of such a North American accord a reality. Our goal must be a day when the free flow of trade, from the tip of Tierra del Fuego to the Arctic Circle, unites the people of the Western Hemisphere in a bond of mutually beneficial exchange, when all borders become what the U.S.-Canadian border so long has been: a meeting place rather than a dividing line.
--Al Gore
LOL, I was just typing up how people need to read Bastiat as you were pinging me.
Well done. We need a Bastiat thread. One chapter every week.
We really do live in a world of lost knowledge. We keep repeating the mistakes of the past because we forget or get disinformed.
I don’t discount the focused effort by communists/progressives to ruin liberty through economic lies. It’s sunk in. You get it from your union, television personalities and teachers.
I’m on the AP USGOV listserve and you’d be startled at how stupid teachers of AP are. They don’t get it and they cling to the failed policies of the Left as if they were true or ever worked.
Economic questions come up all the time. Here’s one:
“I would make the contrasting case that the top earners have the lowest MPC (marginal propensity to consume) and will therefore save most of the extra money that they get back in tax cuts. From a strictly stimulative standpoint, the smartest thing we could do would be to extend unemployment benefits since the unemployed will spend almost all of the money they are given. This money will then ripple through the economy and will expand the GDP to a greater extent.”
That’s from a veteran AP teacher. Our best and brightest are being educated by our worst and dimmest. It’s sad.
My reply to the above was blocked, BTW.
Came to see protectionists’ tears. Left satisfied.
We were hoping you would break away from the “George Soros Is God” blog and shed some insight as to why us “Protectionists” are so wrong.
“George Soros is God” blog? Where? Looks like it would be a lot of fun.
The blindness of the pro-Chicom ‘free trade’ cult, is that the Communist Chinese approach trade - the very same way that muslim fundamentalists approach religion.
There is no space between religion and government in muslim fundamentalism, and there is no space between trade and government, in Marxism/Leninist central planning.
We project our own values (which when facing an amoral adversary, become in many cases vulnerabilities) too often onto our adversaries.
So some actually see in communism, freedom.
Orwell would be stunned to see, how even conservatives can be so naive.
We disagree. What lost our manufacturing base - the usual boogeyman behind protectionism - is the socialist/fascistic regulations and taxes on our businesses to where it makes it more profitable to go elsewhere or be driven out of business by competitors foreign and domestic.
The Brit history goes back a bit further where they lost their tariffs and boomed.
FYI: protectionists are statists. ;-]
I mean do conservatives even realize that economic liberty is liberty? That’s it. If I cannot keep the product of my labor (efforts) or dispose of it as I see fit I don’t have liberty.
I also understand our Natural or God granted liberties, but I don’t draw a distinction between those and economic liberty.
I mean what do these guys think they’ll replace free trade with? Some body of “wise men”, another “brain trust” or what?
Are some of our trade deals crummy? Yes. Could they use revising? Yes. Do we benefit net, net, net from increased trade? Absolutely yes.
These guys would be better off spending their energy getting corporate subsidies and tariffs killed. That would really help the economy, reduce spending and the taxation that comes from subsidies and taxes.
I think we've always lived in a world of lost knowledge, but what has changed is the velocity at which knowledge is lost. There are few types of threads on FR where someone can confuse the budget and trade deficits, be corrected, and go back to confusing the budget and trade deficits the next day (or even on the same thread).
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