China Trade: Myths vs. Reality

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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.

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  • FriendofGaryCooper

    What would happen if the U.S. put a 20% tariff on all goods coming into America from China? Of course, fewer Chinese goods would reach U.S. markets; but the demand for
    the corresponding American-made goods would go up, and this would create jobs in the U.S. The next U.S. President ought to do this.(Obama surely won't) And what would happen if the U.S. Navy was restored to the 600 ships it had under George W. Bush?
    (Up from the anemic 238 odd ships it has now, under Obama) China would be put on notice, that the U.S. is a serious country again. Very good for world peace. Interesting article.

  • Alexander Gofen

    1) Even from the most general considerations, it is bordering with treason that America does not impose tariffs on foreign goods and services – while other nations do just that. Our Founding Father considered tariffs as the main source of State revenue.

    2) Yet it is worse: China is not just any foreign nation: it is a communist enemy nation! It is an enemy nation holding a lot of our debt. So it is even more treasonous to export our jobs there and to sell their goods here – because both empower the enemy and transfer an immense wealth to the enemy together with high and military technology.

    3) It also de-industrializes America and makes us dependant on the hostile foreign powers – especially in a case of military conflict when our own heavy industry becomes of paramount importance.

    This article is a demagogic apologetic for the treasonous policies conducted by the treasonous one party system and treasonous Congress for decades.

    • Bob of Aussie

      Being an enthusiastic free marketeer, I nevertheless agree 100% with Alexander. Thade with China, an evi and increasingly hostile power, is neither free nor fair. By its very description a "free trade"is between free people. How can an exchange between free people and a half slaves whose salaries are being kept artificially low by the brutal force, be called a free trade?
      America has transfered some ten trillion dollars of the wealth and close to fourty milion jobs to China for ABSOLUTELY no benefit to herself.
      Not only that. America is tolerating an unimaginable theft of American technology that must have reached at least trilion dollars in value.
      All those surplusses are being used by Chinese regime to prop up its military machine specifically to challenge America in the incoming future.
      Reagardless of all other equally important factors, burdened by 15 trilion dollar debt, America cannot aford herself to waste even a single dime, the American people cannot then aford themselves to maintain a 250 bilion trade deficit with the enemy that is plotting America demise.
      This nonsense must be stopped as soon as possible.