NY Times gets it right

After the Commerce Department today announces the country's trade deficit numbers, which some experts say will hit record levels, get ready for another round of 'China is a growing economic threat' warnings coming from protectionist advocates like Senators Schumer and Graham who have repeatedly called for a massive 27.5% tariff on all Chinese—made products that move across the Pacific. 

In the New York Times, David Barboza finally makes the critical point  that "Made in China" is often times "Made by Someone Else."  While relying on their vast global supply chain, many multinational companies, like Motorola and Dell, often are using China as the final assembly station in their vast global production networks.  Mr. Barboza writes:

Analysts say this evolving global supply chain — which often tags goods at their final assembly stop — is increasingly out of step with global trade figures, which serve to inflate China into a bigger trade threat than it may actually be.

At the same time, U.S. multinationals and other foreign companies, including retailers, are big winners, because they are the largely invisible hands behind the factories pumping out inexpensive goods from China. And they are reaping the bulk of the profit from the trade.

Even high—ranking Communist officials admit that America is getting a pretty good deal under the current setup.  Mr. Barboza continues on:

The biggest beneficiary of all this is the United States," said Tao, the UBS economist. "Look, a Barbie doll costs $20 but China only gets about 35 cents of that."

Chinese officials rarely miss an opportunity to argue that the trade statistics showing huge surpluses for China are misleading indicators of the country's prosperity.

"What China got in the past few years is only some pretty figures," said Mei Xinyu of the Ministry of Commerce Research Institute. "American and foreign companies have gotten the real profit."

It seems Mr. Mei, mostly likely a loyal Communist Party member, has a much better understanding of international trade and capital flows than many of our 'well—educated' and 'enlightened' members of Congress.

As I previously noted, a report in December from the Organization of Economic Cooperation and Development that claimed China's high—tech exports had surpassed those of the US for the first time caused considerable alarm in the Western media, including the New York Times and its subsidiary the International Hearld Tribune.

After digging a little bit deeper into the numbers, the Hong Kong—based China Economic Review pointed out:

Numbers can be deceiving, though. While high—tech exports have increased, it's not all DVD and MP3 players: the presence of budget—buy washing machines and air conditioners cannot be ignored.

"These figures also include white goods, and not only high—end electronics, "said Stephen Pong, executive director of the America—Hong Kong Electronics Association (AHKEA).

And 78% to 80% of the high—tech goods exported are only assembled in China from foreign components.

Despite the Washington rhetoric, most of benefits from increased Sino—American trade flow our way. While some people have surely lost their job or salary squeezed because of increased competition from China, the bottom line is that the American economy, in sum, greatly benefits from a prosperous and peaceful Middle Kingdom.

Brian Schwarz   2 10 06