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China Trade: Myths vs. Reality
Townhall.com ^ | December 21, 2011 | Walter E. Williams

Posted on 12/21/2011 4:37:03 AM PST by Kaslin

Republicans and Democrats, liberals as well as conservatives, have bought into anti-Chinese trade demagoguery. Former House Speaker Nancy Pelosi suggested that tariffs against China are a "key part of our 'Make It in America' agenda." During his 2010 campaign, Senate Majority Leader Harry Reid, D-Nev., called his tea party-backed Republican challenger, Sharron Angle, "a foreign worker's best friend." In a recent news conference, President Barack Obama gave his support to the anti-China campaign, declaring that China "has been very aggressive in gaming the trading system to its advantage," adding that "we can and should take action against countries that are keeping their currencies undervalued ... (and) that, above all, means China."

Republican 2012 presidential candidates have jumped on the anti-China bandwagon. Mitt Romney wrote: "If I am fortunate enough to be elected president, I will work to fundamentally alter our economic relationship with China. ... I will begin on Day One by designating China as the currency manipulator it is." Former Sen. Rick Santorum, R-Pa., was even more challenging, saying, "I want to go to war with China."

Let's look at the magnitude of our trade with China. An excellent place to start is a recent publication (8/8/2011) by Galina Hale and Bart Hobijn, two economists at the Federal Reserve Bank of San Francisco, titled "The U.S. Content of 'Made in China.'" One of the several questions they ask is: What is the fraction of U.S. consumer spending for goods made in China? Their data sources are the U.S. Census Bureau, the Bureau of Labor Statistics and the Commerce Department's Bureau of Economic Analysis.

Hale and Hobijn find that the vast majority of goods and services sold in the United States are produced here. In 2010, total imports were about 16 percent of U.S. gross domestic product, and of that, 2.5 percent came from China. A total of 88.5 percent of U.S. consumer spending is on items made in the United States, the bulk of which are domestically produced services -- such as medical care, housing, transportation, etc. -- which make up about two-thirds of spending. Chinese goods account for 2.7 percent of U.S. personal consumption expenditures, about one-quarter of the 11.5 percent foreign share. Chinese imported goods consist mainly of furniture and household equipment; other durables; and clothing and shoes. In the clothing and shoes category, 35.6 percent of U.S. consumer purchases in 2010 were items with the "Made in China" label.

Much of what China sells us has considerable "local content." Hale and Hobijn give the example of sneakers that might sell for $70. They point out that most of that price goes for transportation in the U.S., rent for the store where they are sold, profits for shareholders of the U.S. retailer, and marketing costs, which include the salaries, wages and benefits paid to the U.S. workers and managers responsible for getting sneakers to consumers. On average, 55 cents of every dollar spent on goods made in China goes for marketing services produced in the U.S.

Going hand in hand with today's trade demagoguery is talk about decline in U.S. manufacturing. For the year 2008, the Federal Reserve estimated that the value of U.S. manufacturing output was about $3.7 trillion. If the U.S. manufacturing sector were a separate economy -- with its own GDP -- it would be tied with Germany as the world's fourth-richest economy. Today's manufacturing worker is so productive that the value of his average output is $234,220, three times higher than it was in 1980 and twice as high as it was in 1990. That means more can be produced with fewer workers, resulting in a precipitous fall in manufacturing jobs, from 19.5 million jobs in 1979 to a little more than 10 million today.

The bottom line is that we Americans are allowing ourselves to be suckered into believing that China is the source of our unemployment problems when the true culprit is Congress and the White House.


TOPICS: Business/Economy; Culture/Society; Editorial; Foreign Affairs
KEYWORDS: china; democrats; freetrade; jobsandeconomy; scc
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1 posted on 12/21/2011 4:37:07 AM PST by Kaslin
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To: Kaslin

I remember the good old days, when cozying up to the Commies was a bad thing.


2 posted on 12/21/2011 4:39:41 AM PST by Wolfie
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To: Kaslin
anti-Chinese trade demagoguery

B.S.

It's not anti-Chinese, and it's not demagoguery. It's patriotism. America first.

3 posted on 12/21/2011 4:42:51 AM PST by Cringing Negativism Network ("FREE TRADERS": Self-loathing Americans)
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To: Kaslin
The bottom line is that we Americans are allowing ourselves to be suckered into believing that China is the source of our unemployment problems when the true culprit is Congress and the White House.

Ding ding. Misguided protectionists making boogeymen out of free trade are only distracting from the real problem.

4 posted on 12/21/2011 4:49:32 AM PST by Utmost Certainty (Our Enemy, the State | Gingrich 2012)
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To: Utmost Certainty

Wrong.


5 posted on 12/21/2011 4:50:31 AM PST by Cringing Negativism Network ("FREE TRADERS": Self-loathing Americans)
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To: Utmost Certainty

The very word “protectionist” is a boogeyman.

I notice so-called free trade Williams also uses a lot of inflammatory rhetoric.

A lot like the way gays name call those who are against their lifestyle.

“homophobe”, is used much the same way “protectionist” is. To squelch discussion of real issues, and make anyone who disagrees with your lifestyle choice, the issue.

In this case, that lifestyle choice is firing Americans and sending our jobs to a communist nation.

Not a lifestyle I aspire to.

Just saying.


6 posted on 12/21/2011 4:56:51 AM PST by Cringing Negativism Network ("FREE TRADERS": Self-loathing Americans)
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To: Cringing Negativism Network

Nah. If US manufacturers didn’t have the life choked out of them by insane tax rates, senseless regulatory burdens, and gangster labor unions, then we wouldn’t have to rely on China so much. Free trade isn’t the enemy here.


7 posted on 12/21/2011 4:59:25 AM PST by Utmost Certainty (Our Enemy, the State | Gingrich 2012)
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To: Kaslin
Former Sen. Rick Santorum, R-Pa., was even more challenging, saying, "I want to go to war with China."

Dr. Williams, that is informative.

I had no idea Santorum was pro-America in regards to trade. I believe I just found a new candidate to support. Thank you.

SANTORUM 2012


8 posted on 12/21/2011 5:04:12 AM PST by Cringing Negativism Network ("FREE TRADERS": Self-loathing Americans)
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To: Cringing Negativism Network

Protectionism is just another tool for statists to monopolize their power. Demonizing free trade is just a means to distract people from the reality that the statists themselves are the problem.


9 posted on 12/21/2011 5:04:20 AM PST by Utmost Certainty (Our Enemy, the State | Gingrich 2012)
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To: Utmost Certainty
Protectionism is just another tool for statists to monopolize their power. Demonizing free trade is just a means to distract people from the reality that the statists themselves are the problem.

Free trade is just another tool for globalists to fire as many Americans as possible and weaken our nation.

Two can play that rhetorical game.
10 posted on 12/21/2011 5:08:16 AM PST by Cringing Negativism Network ("FREE TRADERS": Self-loathing Americans)
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To: Kaslin
A total of 88.5 percent of U.S. consumer spending is on items made in the United States, the bulk of which are domestically produced services -- such as medical care, housing, transportation, etc.

Williams now considers services "items". He's stretching it quite a bit as usual.

11 posted on 12/21/2011 5:08:22 AM PST by raybbr (People who still support Obama are either a Marxist or a moron.)
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To: Kaslin
Today's manufacturing worker is so productive that the value of his average output is $234,220...

While he gets paid about a fifth of that.

12 posted on 12/21/2011 5:09:31 AM PST by raybbr (People who still support Obama are either a Marxist or a moron.)
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To: Cringing Negativism Network
Wrong.

You really need to back that up with some facts. Prove your case.

13 posted on 12/21/2011 5:15:38 AM PST by InterceptPoint (TIN)
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To: InterceptPoint
A quarter TRILLION dollars a year bilateral trade deficit is a lot of facts.

SANTORUM 2012


14 posted on 12/21/2011 5:19:27 AM PST by Cringing Negativism Network ("FREE TRADERS": Self-loathing Americans)
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To: raybbr
Williams now considers services "items". He's stretching it quite a bit as usual.

That's true but there is still an important message in the claim. The message: The clear trend in American consumption is away from manufactured goods and toward services. How much are you spending on TV and Internet connections for example. Those are services not manufactured goods but are, in my case, a better way to spend my bucks compared to buying more "stuff".

Why is this important: Because it is very difficult to offshore services. The Chinese are not going to go into the ISP business in the U.S. Shoes, clothes, some electronics yes. But not services.

15 posted on 12/21/2011 5:23:06 AM PST by InterceptPoint (TIN)
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To: Cringing Negativism Network
A quarter TRILLION dollars a year bilateral trade deficit is a lot of facts.

$250 billion is Chump Change to Obama. We are about to borrow half that much to finance the SS shortfall for another year. And compare that to the $3700 billion in U.S. manufactured output.

Keep things in perspective and consider the advantages to the U.S. in having a cheap source of manufactured goods. You can always shop at Nordstrom's for clothing but I will tell you there are a lot gals picking out their clothes these days from the racks at Walmart. I think they have every right to do so.

16 posted on 12/21/2011 5:28:41 AM PST by InterceptPoint (TIN)
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To: InterceptPoint
With all due respect to you, and all due respect to Obama...

(that's not saying the respect due the two of you is similar) :D

When Obama spends $250 billion dollars, it doesn't go to build up the PLA. Which we had better start paying attention to.

The world does not revolve around Ayn Rand.

The world revolves around factories, and military power.

SANTORUM 2012


17 posted on 12/21/2011 5:33:10 AM PST by Cringing Negativism Network ("FREE TRADERS": Self-loathing Americans)
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To: Kaslin; ding_dong_daddy_from_dumas; stephenjohnbanker; DoughtyOne; calcowgirl; Gilbo_3; NFHale; ...
RE :"Hale and Hobijn find that the vast majority of goods and services sold in the United States are produced here. In 2010, total imports were about 16 percent of U.S. gross domestic product, and of that, 2.5 percent came from China. A total of 88.5 percent of U.S. consumer spending is on items made in the United States, the bulk of which are domestically produced services -- such as medical care, housing, transportation, etc. -- which make up about two-thirds of spending. Chinese goods account for 2.7 percent of U.S. personal consumption expenditures, about one-quarter of the 11.5 percent foreign share. Chinese imported goods consist mainly of furniture and household equipment; other durables; and clothing and shoes. In the clothing and shoes category, 35.6 percent of U.S. consumer purchases in 2010 were items with the "Made in China" label.
Going hand in hand with today's trade demagoguery is talk about decline in U.S. manufacturing. For the year 2008, the Federal Reserve estimated that the value of U.S. manufacturing output was about $3.7 trillion. If the U.S. manufacturing sector were a separate economy -- with its own GDP -- it would be tied with Germany as the world's fourth-richest economy. Today's manufacturing worker is so productive that the value of his average output is $234,220, three times higher than it was in 1980 and twice as high as it was in 1990. That means more can be produced with fewer workers, resulting in a precipitous fall in manufacturing jobs, from 19.5 million jobs in 1979 to a little more than 10 million today.
"

This last point is the most important, that US manufacturers can produce more and more with less labor and that trend will continue as time goes on. Our best future will being able to export products (like energy) and services to other countries and less and less workers will be needed regardless.

I am amazed that kids out of college say we shouldnt drill our own oil because it might be sold to those in other countries. Clueless!

18 posted on 12/21/2011 5:54:12 AM PST by sickoflibs (You MUST support the lesser of two RINOs or we all die!)
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To: InterceptPoint
That's true but there is still an important message in the claim. The message: The clear trend in American consumption is away from manufactured goods and toward services.

True. But, isn't wealth measured in tangible assets? Can we really have a prosperous and sustainable economy based on services? That's sort of like looking forward to profit from the multiple sale of derivatives, isn't it?

The Chinese are not going to go into the ISP business in the U.S.

Why not? What's to stop them?

19 posted on 12/21/2011 5:55:57 AM PST by raybbr (People who still support Obama are either a Marxist or a moron.)
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To: raybbr
Can we really have a prosperous and sustainable economy based on services?

Not completely of course but Americans are choosing to cut down on "stuff" and increase spending on services. It's their choice. It's mostly not forced with Obamacare and healthcare in general not quite meeting that criteria.

I'm just observing the trend not trying to justify it. It just seems that I buy more books that are ones and zeros (not much manufacturing content there) and less of the manufactured printed versions. That moves bucks from manufacturing to services but I still read the same content. And furthermore, that example clearly shows how it is easy to mix up services and manufactured goods. The distinctions in some cases are being blurred.

20 posted on 12/21/2011 6:04:58 AM PST by InterceptPoint (TIN)
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