Steve Preston <steveophonic@yahoo.com> wrote:
> Jon,are you sure??
Yep. :-) Its another one of those funny things in life that we
all "know" but it just is not so. :-) It really does seem like
everything in the US is made in China, and although China is one of
our largest importers, they only make up a small fraction in the grand
scheme of things. Many thanks to Dustin for that US Census link; I
had not come across that particular one myself, I was working off of a
couple of other Census reports (China to US exports and total US
imports) and extrapolating the 7% figure. The link that Dustin posted
shows that the 2007 (through November) imports from China were just over
12% as opposed to my calculation of just over 7%, the reason for the
difference is the import numbers I was using were for both goods and
services, and the 12% is for goods alone.
Had I not done the research, I wouldn't have thought it true
myself. I stumbled across a statement a year or two ago while reading
an economics book that said China only accounted for about 10% of
total US imports, and I thought there was no way - I HAD to check that
out. However, using the US gov't data, it is pretty easy to verify.
My assumption is that most of what China is exporting to us are the
everyday type of consumer goods which have a great deal of constant
visibility, and hence create the illusion of a larger than actual
percentage.
> I thought that we keep running trillions of dollars in trade
> deficits with China? I keep hearing that.
Its true that we are running a large trade deficit with China,
though it isn't trillions yet. For 2007 (through November), its just
under $240 billion. (We exported about $60 billion to them and they
exported about $300 billion to us. http://tinyurl.com/34hxq7)
However, this once again is one of those things that people like
to wring their hands over but is actually not a problem in the least.
It may be helpful to compare it to your own personal life. You have a
huge trade deficit with your local grocery store or car dealership.
Think about all the money you spend in a grocery store, and when was
the last time your grocer purchased an item from you? How much stuff
have you sold to your car salesman over the years? Lets say you are a
farmer and you buy a $30,000 truck from the owner of the local Dodge
dealership. He might buy a hundred dollars worth of tomatoes or bacon
from you over the course of the year, but you don't worry about your
personal trade deficit with that one party do you? Of course not,
because many other people are purchasing your goods or services, and
they are all trading with each other. (Or in the case of working for
a company, that one company is purchasing your services, and you have
a huge trade surplus with them.) It all equals out and the money you
spend eventually comes back to you. Some actually say that a 100%
trade deficit with every other country would be the best possible
scenario. This would be like buying goods and services from another
country, and they never purchased any of your goods and services,
ever. You get all of the goods and services that you need, without
having to give your own goods and services in return, all you have
given the other countries are little scraps of paper with pictures of
dead presidents on them, which are really cheap to produce. If that
country never buys any of your goods and services, you never have to
send anything of material value outside your border. You've got the
benefit of the other country's goods and services, and you get to keep
all of your own too!
The reasons for a trade deficit or surplus between the US and any
other country is simply that some countries produce a lot of items we
want to buy while not really needing a lot of what we produce, while
other countries want a lot of what we produce but we do not need much
of what they are selling. This is actually a good thing because a
major underlying reason for it is specialization. If every country
was able to produce everything that it needed at the lowest possible
price, there would be no reason to trade with others. Bringing it
back to a personal level, if everyone had to grow their own food, make
their own clothes, build their own cars, we'd still be in the dark
ages. By specializing in certain areas, individuals (or countries)
can get really good at doing certain specific things, and if that
thing is a good or service desired by others, you have something of
value which you can trade for the things you want, which are made
better or more cheaply than you could do it yourself. The net result
is that everyone gets a higher quality product at a much cheaper price
than if they did everything themselves, and they have a lot more free
time on their hands to boot. Another aspect to this is, think about
the kind of stuff we are buying from China - cheap consumer goods. To
create those kinds of items requires mostly unskilled labor. Assembly
line, repetition, etc. Frankly, they are welcome to keep doing that
stuff, this frees us up to do the higher paying, skilled labor jobs.
Hmmm, I get the feeling I've rambled on for too long again. My
apologies for anyone who actually read through all of that. :-) I
just find the topic somewhat interesting; a big part of what makes it
such is all the pap I see in the general media, parroted by the
talking heads who don't stop to think about what they are saying.
Every now and then I will stumble across a gem that chips away some
incorrect "conventional wisdom" and these are really fun realizations
to experience. Its like draining away a little bit more of the sea of
murkiness and confusion which pervade everyday life. Its quite
refreshing to come across things like that, and it makes me want to
share them with others, in a regrettably long-winded fashion. ;-)
The non-issue of trade deficits is just one such revelation which I
have been fortunate enough to experience. Who knows, maybe someone
will read this and something of what I wrote will spark a doubt in
their mind, or at least make them think twice before blindly accepting
some drivel that a news anchor or newspaper headline would have them
believe.
--
-Jon-
.- Jon Steiger -- jon@dakota-truck.net or jon@jonsteiger.com -.
| '96 Kolb Firefly, '96 Suzuki Intruder, Miscellaneous Mopars |
`-------------------------------- http://www.jonsteiger.com --'
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