Any tourist standing on Shanghai's waterfront and gazing across at the garish Pudong skyline sees the visible manifestation of American wealth moving to China and every businessperson on the streets of Shenzhen knows that the manufacturing export business built it.
Yet, a recent "economic letter" from the San Francisco Federal Reserve Board contends that America is spending only 1.9 percent of its dollars on Chinese goods. It has inspired headlines like: "'Made in China' Taking Over U.S.? Not By a Long Shot" from the Wall Street Journal. How can we reconcile what we see on Wal-Mart's shelves with what these experts and media pundits tell us?
As Benjamin Disraeli supposedly remarked, "There are lies, damned lies and statistics" and the arcane art of econometrics makes it easy for academics and pundits to tell the public that black is really white with a straight face. Let's peel back just the surface of the onion that the FRB has offered us:
Firstly, the paper, titled "The U.S. Content of 'Made in China'" is based on Personal Consumption Expenditures (PCE), which include everything from existing housing to used cars and nursing home stays. It just isn't germane to discussions of trade balances and creating national wealth.
Obviously, China doesn't play in these generally non-tradable categories, which comprise the largest portion of consumer spending. Leasing cars and renting houses do move a lot of PCE dollars around, but they create no new net wealth for America and provide relatively few jobs. Making the tools to build new homes and making the parts to build new cars are what create wealth and jobs; two things that are increasingly "Made in China."
Secondly, while the study carefully subtracts the value of American made inputs of Chinese production -- hence the title -- it neglects to add in the corresponding Chinese components in products we import from other nations. For instance, a large percentage of Indonesian clothing is cut entirely from Chinese cloth and China is the source of valuable rare earth metals in many high-tech products from Japan and Korea. Cars from these same nations are filled with Chinese tires, hoses, and transmissions. None of these indirect imports are included in the 1.9 percent figure simply because there is no available data source.
In truth, it simply isn't possible to accurately calculate total Chinese imports! Pretending to have done so, while ignoring visible evidence that contradicts the results, epitomizes the fashionable approach to economics. This eagerness to place our faith in highly abstract datasets over messy reality has encouraged an elite cadre of brilliant thinkers to drive our economy right into the ditch.
Finally, the study also asserts that China's spiraling inflation will not impact America, because we spend so much on domestic products and services. However, it fails to acknowledge that China's insatiable demand for commodities -- China just became the world's largest energy consumer and is just getting started -- increases the cost of nearly everything, regardless of the source of production. Further, when Chinese tire and drywall prices drive-up U.S. auto and construction costs, the price of domestic substitutes like used cars and existing homes will rise as well -- regardless of their "Made in China" content.
Sadly, what has actually preserved us from Chinese inflation is that the evisceration of our manufacturing sector has slashed real wages and left millions of Americans unemployed. The paper's most accurate statement is that China's share of PCE has doubled over the last decade.
An organization with a much closer connection to reality, the Consumer Products Safety Commission, reports that Chinese imports quadrupled from 1997 to 2008 and that a full 46 percent of imported consumer products are now produced there. Since China's hazardous goods also dominate product safety recalls, the CPSC has established offices in Beijing to help Chinese manufacturers improve their quality -- at the expense of American taxpayers.
We've got a better idea: let China keep their dangerous cribs and killer medications, and we'll keep our jobs and standard of living. If, as Beijing's apologists are so eager to believe, "Made in China" really constitutes only 1.9 percent of our spending, then the cost of returning to the safety of "Made in America" should be correspondingly minuscule.
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FT.com / China - US manufacturing crown slips
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BBC News - US and China manufacturing growth eases concerns
Is 'Made in China' avoidable? - Business - World business - msnbc ...
The way out of this mess is nearly impossible given the way our corporations and political leaders operate. I read somewhere that what has essentially happened is that our corporations don't see much market potential in a population of 300 million with falling wages and instead salivate when looking at a population of one billion+ with rising wages. They pimp, er, lobby our politicians who talk "jobs needed in the USA" but do nothing substantive.
The way in which Germany has managed to remain competitive and prosperous while keeping their manufacturing at home is truly admirable in this era of globalization.
Why was it so wrong to be communist during the cold war but it's ok now because we get cheap stuff from China. China is even more dangerous than the USSR ever was.
up on food and because of Irene gas is going up. People making
minimum wage at Walmart can't buy food at big grocery stores.
Second, Chinese manufacturers make to order, if you order a cheap MP3, they'll make you a cheap MP3, if you order an iPod, they'll make you an iPod, if you are willing to pay German prices you can get German quality in China too, the truth is American consumers demand the cheaper variety, and consumers vote with their wallet.
1. Intentionally degraded Chinese Heparin kills at least 81 in US and hundreds abroad: http://www.nytimes.com/2008/04/22/health/policy/22fda.html
2. Intentionally degraded Chinese Syrup kills at 365 in Panama, hundreds in Haiti and possibly thousands around the world. http://www.nytimes.com/2007/05/06/world/americas/06poison.html
3. Chinese Deadly Toothpaste banned: http://ndri.com/news/fda_has_banned_on_all_china_made_toothpaste_due_to_its_poisonous_chemical_diethylene_glycol_deg-300.html
I agree with you that the Multinational corporations deserve more blame. To be clear it is not the "Chinese" I blame here, but their despotic overlords who have intentionally crushed China's ethical base and have none of their own.
I like that the author has highlighted the use of statistic to dupe otherwise smart people into accepting a clearly false proposition - that the China trade, built on manipulated currency and overt and covert protectionism - is not a problem for the nation. More attention needs to be placed on the openly manipulative practices of so called professional economists throughout the government bureacracy
Engagement with China was part grand bargain, part gamble. The liberalization of US-China economic ties partly solidified the US-China strategic partnership to opposed the USSR during the second half of the Cold War, after the Sino-Soviet split. Assisting Chinese enterprises and allowing it to joint the Western trading regime was meant to balance the USSR's leverage. Later, trade and investment was supposed to weaken the PRC's domestic regime, and lead to the collapse of one-party rule. This didnt happen, but we are now left with the legacy of strategic economic policies designed in the 1970s and early 1990s - a policy entrenched by the corporate interests you have noted.
Further, they are continually exposed intimidating US firms into handing over the jobs, technology and R&D in order to gain "market access", which they agreed to make available under the WTO rules they signed on to. http://www.nytimes.com/2011/09/06/business/global/gm-aims-the-volt-at-china-but-chinese-want-its-secrets.html
More recently they've held the gun / carrot to Europe's head. Insisting that the EU declare China is a "Market Economy" (what a joke) in exchange for bailout money.
I have been trying to buy American products for years now, every year it gets harder and harder to find "Made in the U.S.A. So, I have been buying a lot of thinks made in Canada, Europe---(Fair Trade).
This form of Hyper- Globalization has totally cap sized the American Economy.
The book The globalization Paradox:Democracy and the future of the world economy--by Dani Rodrik talks about the choices we will have to make to maintain our democracy.