Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

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. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Tuesday, April 19, 2005

China's Trade Surplus with the U.S.

Here is one reason that the U.S. trade deficit with China is more complex than appears at first blush: China has a trade deficit with many other Asian countries. Ben Muse says,

Over the last 20 years, other East Asian countries have been transferring many of their assembly operations to China. They still make the parts, but these are increasingly assembled in China and exported from there to the U.S. and Europe.
He goes on to quote Nicholas Lardy:

China's global pattern of trade - surpluses with the United States and Europe but deficits with most of its Asian neighbors - stems from China's rapidly increasing role in the global production chains of multinational corporations. China's openness to FDI, its trade policies, and its relatively abundant labor supply have made it the premier location for the assembly of manufactured goods for the global market.
What this means is that the massive U.S. Trade deficits are not just with China, but directly and indirectly with many other countries in Asia as well.
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