Monday, January 10, 2011

Trade Stats Rarely Tell the True Story

A great article by Andrew Batson in the Wall Street Journal shows how trade stats are often misleading.

The article "Not Really 'Made in China': The iPhone's Complex Supply Chain Highlights Problems With Trade Statistics" illustrates how the entire value of the iphone is considered by present stats as part of the U.S. trade deficit with China, however, in value-added terms less than 4% of the value of the product is actually attributed to China, while 34% should be attributed to Japan; 17% to Germany; and 13% to South Korea.

The articles quotes the director-general of the WTO:
What we call “Made in China’ is indeed assembled in China, but what makes up the commercial value of the product comes from the numerous countries," Pascal Lamy, the director-general of the World Trade Organization, said in a speech in October. "The concept of country of origin for manufactured goods has gradually become obsolete."

Mr. Lamy said if trade statistics were adjusted to reflect the actual value contributed to a product by different countries, the size of the U.S. trade deficit with China—$226.88 billion, according to U.S. figures—would be cut in half.
The article may be found HERE.


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SeanHayes@ipglegal.com