Trading with China

Here at Townhall.com is a good column by Walter E. Williams on some of the myths about our trade with China. Unfortunately, this sort of foolishness is a bipartisan affair, which is never a good thing.

Republicans and Democrats, liberals as well as conservatives, have bought into anti-Chinese trade demagoguery. Former House Speaker Nancy Pelosi suggested that tariffs against China are a “key part of our ‘Make It in America’ agenda.” During his 2010 campaign, Senate Majority Leader Harry Reid, D-Nev., called his tea party-backed Republican challenger, Sharron Angle, “a foreign worker’s best friend.” In a recent news conference, President Barack Obama gave his support to the anti-China campaign, declaring that China “has been very aggressive in gaming the trading system to its advantage,” adding that “we can and should take action against countries that are keeping their currencies undervalued … (and) that, above all, means China.”

Republican 2012 presidential candidates have jumped on the anti-China bandwagon. Mitt Romney wrote: “If I am fortunate enough to be elected president, I will work to fundamentally alter our economic relationship with China. … I will begin on Day One by designating China as the currency manipulator it is.” Former Sen. Rick Santorum, R-Pa., was even more challenging, saying, “I want to go to war with China.”

I don’t want to go to war with China, trade war or real war. I think former Sen. Rick Santorum needs to have his head examined.

Here is the meat of the column.

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.

You should read it all. In a way, the US and China are leaning against each other holding up the economy of the whole world. It simply doesn’t make much sense for either to work against the interests of the other. I hope both American and Chinese politicians realize that. Being politicians, they probably don’t.

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