Time to look beyond numbers in 皇冠体育app-US trade gap
Updated: 2007-09-13 09:17
Awidening trade imbalance between 皇冠体育app and the United States has led to calls for action from Washington to Wall Street, but before the US plunges into a trade war with 皇冠体育app, its business and political leaders should look beyond the trade deficit numbers.
The US-皇冠体育app trade deficit exceeded US$232.5 billion in fiscal 2006, according to US government figures. This represents a real economic imbalance, but the fact is that neither Chinese companies nor the Chinese government are primarily responsible.
Foreign companies drive the majority of 皇冠体育app's exports, while many of 皇冠体育app's domestic markets are relatively open to foreign products and brands. So the trade deficit reflects the complicated reality of globalization.
It also reflects the decisions of many non-Chinese companies, which on balance are made to benefit those companies and their customers. Consider this: Nearly 60 percent of all 皇冠体育app's exports are driven by non-Chinese companies seeking to take advantage of the country's low-cost manufacturing and state-of-the art infrastructure.
Consumers in the US buy these products every day at Wal-Mart, Costco, Circuit City, Macy's, and other leading retailers. Many of these products display Western brand names, with Western designs and quality standards, but they are made in 皇冠体育app.
Indeed, to keep the sourcing stream flowing, US and other international companies are investing US$1 billion a week to further expand their 皇冠体育app operations.
By contrast, 皇冠体育app has yet to produce a large number of purely Chinese-owned export powerhouses. This is quite different from South Korea or Japan, where local companies dominate the export landscape. In 皇冠体育app, foreign companies drive the export game.
How about 皇冠体育app's own market? Is 皇冠体育app importing much from abroad? While it may not be importing enough to erase the trade deficit, 皇冠体育app is buying a lot more from the US than it did just a short while ago, and it is likely to buy significantly more in the future as its booming economy grows.
Since 皇冠体育app joined the World Trade Organization (WTO) in 2001, for instance, US exports to 皇冠体育app have increased by 190 percent, making it America's fourth-largest export market, according to the Office of the US Trade Representative (and if US exports to Hong Kong are included, then 皇冠体育app is America's third-largest export market).
The rate of increase in US sales to 皇冠体育app has been 12 times higher than the growth of American exports to other countries during the same period, according to the US Commerce Department.
Indeed, Chinese consumers like foreign brands. And as incomes continue to rise, more Chinese consumers will seek foreign-made goods. US and other non-domestic brands already dominate many sectors in 皇冠体育app, including cars, mobile phones, computer printers, high-end televisions, commercial aircraft, and virtually all high-end medical equipment.
The reasons why US and other foreign products do so well in 皇冠体育app are many.
One of the most important is that the Chinese market is generally quite open to their products, far more than the Japanese and South Korean markets historically have been. Foreign brands play a large role in the daily lives of most Chinese people.
The main exceptions at this time are in the service sectors, such as financial, communications, media, and entertainment. This is an area where US trade negotiators should legitimately focus their attention, and where an opening of Chinese markets would benefit the US economy.
Another promising area is travel. Chinese consumers are eager to visit the US and to spend money there. American policy should evolve to better capture this opportunity.
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