My iPhone explains false US trade analogy
Print Edition
EDITOR’S Note: China doesn’t want a trade war with the United States and will not start one, Chinese Minister of Commerce Zhong Shan said on Sunday at the 13th National People’s Congress. Dominic Ng, chairman and chief executive of California-based East West Bank gives his opinion on the Sino-American trade issue concerning the 25 percent tariffs on steel imports and 10 percent on aluminum imposed by the US last Thursday.
“It looks like President Donald Trump has started to do something in order to live up to another aggressive campaign promising to address trade imbalances after the tax reform has been done last year,” Dominic Ng, chairman and chief executive of East West Bank, said.
When talking about dispute between the United States and others countries on higher steel and aluminum import tariffs imposed by Washington last Thursday, Ng said domestic political purpose was behind the decision, but the trade deficit problem could be overstated by politicians and lead to a trade war with other countries, including China.
“It’s a strange phenomenon that the steel and aluminum tariff issue actually has very small impact to Chinese exporters since only a measly 2 percent of total US imports of steel products, by value, came from China in 2017,” he said in a recent interview with Xinhua news agency at the bank’s headquarters in Pasadena City. “But most people interviewed by local media in street showed they believed China will feel pain.”
According to statistics, Canada is the biggest supplier of steel to the US. In Asia, South Korea accounted for almost 10 percent of all American steel imports last year and Japan for nearly 6 percent. “So do you believe the tariff hike will rescue the six big (American) producers left in the country?” Ng doubted it would, saying it will only result in dispute in the World Trade Organization for years.
Ng emphasized that even though public opinion in the US has been turning against free trade, Americans would not like a trade war, not to speak of a ridiculous trade war basing on wrong calculation. “A trade war must have a internecine result,” the banker said.
Ng called on American media, economists and Trump’s trade advisers to take their responsibilities to deliver a simple truth to the president and public that the current officially reported US-China trade numbers are grossly inaccurate because they are based on outdated methods of data collection and calculation.
“Currently, statistical agencies pin the entire trade value of a product to the last place it was exported from, even though the parts in the product come from many other countries,” Ng said. “This method of data collection is based on the International Monetary Fund’s Balance of Payments Manual, which was first released in 1948.”
Ng then put his Apple iPhone on the table and explained how the device alone may add US$17 billion to the fault trade deficit with China in 2016.
“One iPhone comes from different countries and regions, such as displays are manufactured in South Korea, processors come from the US and barometric pressure sensors from Germany. Final assembly takes place in China. Even though work in China is only a tiny fraction of the total manufacturing cost, the entire import cost of the iPhone is attributed to China in US trade statistics,” Ng said.
“It’s like a boy sending a box of pizza to your house, he took you 100 bucks, you can’t say the boy earned you 100 bucks. He got only very small part from the business, the restaurant, market, farm, everyone are on the chain.”
He said, basing on traditional methods, trade statistics compiled by the US Bureau of Economic Analysis recorded a net trade deficit with China of US$309 billion in 2016, or 1.7 percent of American gross domestic product, but if under value-added methods for tabulating trade created by the Organization for Economic Co-operation and Development, the number will be much lower. “While data for recent years is not available, if we assume a stable ratio between traditional and value-added data, then the adjusted US trade deficit in 2016 with China would come down from US$309 billion to US$169 billion,” Ng said, adding “it is a much more sensible and useful starting point for discussions about policies to reduce US trade imbalances with China.”
Ng’s argument was supported by a study from Federal Reserve Bank of Dallas, which shows that using a value-added approach to measure bilateral trade reduces the US-China trade imbalance by 33 percent in 2013.
“There’s no question that trade integration with China has had negative impacts for specific demographics and regions in the US, particularly for workers in low value-added manufacturing sectors. However, it is important to keep in mind that the trade deficit with China has also yielded tangible benefits to the United States.”
“Better statistics would go a long way to help us overcome myths and political gamesmanship, and instead identify and tackle the real problems in the US-China trade relationship,” he said, while repeating that trade is just a part of economic cooperation between the two counties.
The key to resolve the trade problem is not trade itself, Ng said, adding a comprehensive cooperation framework is necessary. “If the two countries work together, they can achieve a lot to the world, from economic development to anti-terrorism operations,” he said.
“As long as both sides have the intention of creating a win-win solution, respect the issues they are facing, and proactively and constructively resolve them, this will push the US-China trade relation to be more fair, balanced, and mutually beneficial.”
- About Us
- |
- Terms of Use
- |
-
RSS - |
- Privacy Policy
- |
- Contact Us
- |
- Shanghai Call Center: 962288
- |
- Tip-off hotline: 52920043
- 沪ICP证：沪ICP备05050403号-1
- |
- 互联网新闻信息服务许可证：31120180004
- |
- 网络视听许可证：0909346
- |
- 广播电视节目制作许可证：沪字第354号
- |
- 增值电信业务经营许可证：沪B2-20120012
Copyright © 1999- Shanghai Daily. All rights reserved.Preferably viewed with Internet Explorer 8 or newer browsers.
