China Trade: Myths vs. Reality

Townhall.com ^ | December 21, 2011 | Walter E. Williams

[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.

[sam_paine]

Free trade" is the equivalent of booting the patient out in the nearest jungle, with the explanation that competition with the bears and lions, will make the patient stronger, thus the patient will recover. The patient is being eaten.

Aha. Now we're having fun with analogies!

Protectionists want to make the patient a bubble boy then? Afraid that he'll catch a disease or eaten by the asian tiger if he sets foot in the front yard? Ooops. But the bubble boy has to import the plastic for his bubble because mommy won't let him build a plastic factory...too dangerous!

[Cringing Negativism Network]

“protectionist” again.

“protectionist”. It’s the new “homophobe”.

[central_va]

Using consumer-grade technology from Intel or Broadcom in Chinese military equipment would make it completely useless as soon as they launched it at 100G's. Do you understand that?

The point is the production facility doesn't do design work, I am an Electrical Engineer by training and education. So don't go there.

Here is the point for those with half a brain(unlike you it seems) I could convert a Chinese electronic toy factory , retool and retrain, into a electronics warfare production factory faster than you can build one from scratch in Arkansas.

[Utmost Certainty]

This point is continuously overlooked by all of those who worry themselves to death about the loss of "manufacturing jobs". It's not jobs we're after, it's output. Build me a machine that will totally automate building a car without human intervention and the price of cars will plummet. Now build me a machine that builds those machines, also without human intervention. That will cause massive unemployment in the automobile sector. But is that a bad thing? If anyone thinks so they should go to Washington DC and get loan to start up a buggy whip factory that will employ thousands of members of the Buggy Whip Workers Union.

Exactly.

And there is always plenty of work to do somewhere. If the government would just get out the way those seeking work would find those jobs that really need to be done. We don't need as many people making buggy whips these days and we don't need as many working in manufacturing. So are we out of work? I don't think so.

Yes. Humans are quite ingenious at coming up with new forms of work for themselves, as new kinds of products and services are constantly being invented or improved upon. So long as the government stays out of the way and lets entrepreneurs do their thing, we won't be running out of jobs anytime soon. The record of economic history is a demonstrable testament to this.

[Cringing Negativism Network]

You're sleeping.

All products that are currently being invented, are immediately sent to China to be produced.

No benefit for America. None.

SANTORUM 2012

[central_va]

Free Trade is a religion, no amount of common sense or facts will change these zealots. Scratch under the surface and most Free Traitors are also open border zealots too.

[sam_paine]

LOL. Yeah. All those chinese awls and electric flyswatters at Harbor Freight are going to knock down our limited F22 fleet.

We have listed the countries with most arms-producing companies as per below. Weaponry and military production and exports are amongst the top three most profiting industries for in world, while the top 10 most arms manufacturing companies are either American or European.

Note: arms sales are listed in US Dollars.

1. Boeing – United States of America

($28,050,000,000 in military equipment sales annually)

 

2. Northrop Grunmman – United States of America

($27,590,000,000 in military equipment sales annually)

3. Lockheed Martin – United States of America

($26,460,000,000 in military equipment sales annually)

4. BAE Systems – United Kingdom

($23,230,000,000 in military equipment sales annually)

 

5. Raytheon – United States of America

(19,800,000,000 in military equipment sales annually)

6. General Dynamics – United States of America

($16,570,000,000 in military equipment sales annually)

7. Finmeccanica – Italy

(9,800,000,000 in military equipment sales annually)

8. EADS – Europe

($9,580,000,000 in military equipment sales annually)

 

9. L-3 Communications – United States of America

($8,970,000,000 in military equipment sales annually)

10. Thales – France

($8,940,000,000 in military equipment sales annually)

---

Harbor Freight Tools

Type	Private
Industry	Retail
Founded	Los Angeles, California (1968)
Founder(s)	Allan Smidt
Headquarters	Calabasas, California
Number of locations	330
Area served	USA
Key people	Eric Smidt (Chairman & CEO) Robert Rene (COO)
Products	Tools
Revenue	US$1.5 billion (2010)[1]
Employees	8000
Website	www.harborfreight.com blog.harborfreight.com

Harbor Freight Tools is an American privately held company that runs a chain of discount tool retail stores. The company was founded in 1968 by Allan Smidt, primarily selling through its mail order catalog, which still exists today. The Calabasas, California based company offers a large variety of tools through its Web site, mail order catalog, and retail stores. Harbor Freight was one of the largest employers in Ventura County until their relocation to Calabasas, CA. It also previously owned and operated former online retailer OneStopGardens.com.http://www.top10stop.com/wp-content/uploads/2009/10/EADS-CASA-C295.jpg

[central_va]

Yes, but I wonder how much of the manufacturing sector in specific is unionized

Stop wondering here is your answer.

2008, only one in 10 union members worked in manufacturing, down from nearly three in 10 in 1983. Five in 10 union workers were in the public sector last year, and the remaining four out of 10 were in the private sector outside manufacturing, according to the CEPR.

[sam_paine]

All those hardened iron [sic] manufactured goods made in factories now in China.

That you don't seem to know the difference between "iron" and "steel" tells us much of what we need to know about why modern Americans are having trouble competing in the world.

[1rudeboy]

You need to explain why an auto manufacturer chooses to locate in Alabama, Mississippi, Alabama, or Tennessee over Illinois, Michigan, or Ohio.

[sam_paine]

“protectionist”. It’s the new “homophobe”.

You write of '"Free Trade" pod people' and then complain that someone uses the term "protectionist?"

LOL.

[sam_paine]

I am an Electrical Engineer by training and education...

...but obviously not by profession.

[1rudeboy]

With Christmas right around the corner, ladies, this is good time to recommend Estwing hammers. Made in U.S.A. of steel made in the U.S.A.

[central_va]

You need to explain why an auto manufacturer chooses to locate in Alabama, Mississippi, Alabama, or Tennessee over Illinois, Michigan, or Ohio.

A trade agreement started by Reagan in the 80's. The Japs were eating our lunch some PROTECTION WAS NEEDED. Without Ronald's actions, NO CARS WOULD NOW BE BUILT IN AMERICA NOW. Thank God Reagan did that. I guess you were born yesterday.

[1rudeboy]

There is a substantial amount of irony in complaining about calling a protectionist a protectionist, after spending most of the year (if not more) calling free-traders “free traitors.”

[Utmost Certainty]

Stop wondering here is your answer. 2008, only one in 10 union members worked in manufacturing, down from nearly three in 10 in 1983. Five in 10 union workers were in the public sector last year, and the remaining four out of 10 were in the private sector outside manufacturing, according to the CEPR.

Cool, thanks for the stats. But that still doesn't address what I mentioned about the threat of unionization itself being a deterrent to potential manufacturers (for example, the recent debacle between Boeing vs. the NLRB).

Also, what about the other two factors I pointed out about incredibly high tax and regulatory burden US manufacturers are saddled with?

[Utmost Certainty]

There is a substantial amount of irony in complaining about calling a protectionist a protectionist, after spending most of the year (if not more) calling free-traders “free traitors.” LOL. So true.

[1rudeboy]

How did Reagan's decision to allow his own import quotas on Japanese cars expire in, what, the mid-1980's cause BMW, Mercedes Benz, and Volkswagen to build auto plants here now?

Don't get personal, just think.

[Grunthor]

“Republicans and Democrats, liberals as well as conservatives, have bought into anti-Chinese trade demagoguery.”

We’re getting hosed. Our manufacturing used to be the envy of the world and more than paid our expenses. Now most of the products that we seem to be able to purchase (affordably) are made in China, with American names and we are so poor the ChiComs are loaning US money.

That is how I see our trading with China is working.

[sam_paine]

With Christmas right around the corner, ladies, this is good time to recommend Estwing hammers. Made in U.S.A. of steel made in the U.S.A.

Waaaah!!! Not true! Not True! All manufacturing is in China! We are all going to die!