Value-added way slashes US trade gap by 25%
Source: Agencies |
January 17, 2013, Thursday
|
Print Edition
Print Edition
CHINA'S trade surplus with the United States shrinks by a quarter when calculated according to which countries provide the parts and services that go into its exports and imports.
The new estimate is one of the key findings of an ambitious project by the OECD and the World Trade Organization to present a truer picture of underlying trade flows in an age of global supply chains when intermediate inputs can cross borders several times during the manufacturing process.
The political purpose of the exercise is to reduce protectionist pressure by demonstrating that governments are shooting themselves in the foot if they raise barriers to imports because, in doing so, they are also hurting their own exporters and competitiveness.
Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said the value-added method challenged the conventional wisdom on trade.
"Today, we have to think about goods and services as 'made in the world,'" Gurria said yesterday.
The findings are likely to add nuance to the heated debate about whether China should accelerate the rise of the yuan to reduce its trade surplus, especially its bilateral surplus with the US.
"It's less important and less relevant," Gurria said of the dollar/yuan exchange rate.
Gurria launched the initial set of data with Pascal Lamy, the director-general of the WTO, who said the new database showed it was "senseless" to focus on bilateral trade balances.
The notion that an exporting country can calculate how much competitiveness it would lose by letting its currency rise was simply not true in a world of complex trade chains, Lamy said.
The new estimate is one of the key findings of an ambitious project by the OECD and the World Trade Organization to present a truer picture of underlying trade flows in an age of global supply chains when intermediate inputs can cross borders several times during the manufacturing process.
The political purpose of the exercise is to reduce protectionist pressure by demonstrating that governments are shooting themselves in the foot if they raise barriers to imports because, in doing so, they are also hurting their own exporters and competitiveness.
Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said the value-added method challenged the conventional wisdom on trade.
"Today, we have to think about goods and services as 'made in the world,'" Gurria said yesterday.
The findings are likely to add nuance to the heated debate about whether China should accelerate the rise of the yuan to reduce its trade surplus, especially its bilateral surplus with the US.
"It's less important and less relevant," Gurria said of the dollar/yuan exchange rate.
Gurria launched the initial set of data with Pascal Lamy, the director-general of the WTO, who said the new database showed it was "senseless" to focus on bilateral trade balances.
The notion that an exporting country can calculate how much competitiveness it would lose by letting its currency rise was simply not true in a world of complex trade chains, Lamy said.
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