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NEWS RELEASE 01-142; November 30, 2001
November 30, 2001
News Release 01-142
ITC'S INTERNATIONAL ECONOMIC REVIEW FEATURES ARTICLES ON
JAPANESE FOREIGN INVESTMENT, THE U.S.-CHINA TRADE DEFICIT, AND
PRIMARY COMMODITY TRADE DEPENDENCE
Recent trends in Japanese foreign direct investment, a look at why the United States trade deficit
with China is so large, and a re-examination of whether dependence on primary commodities is
detrimental to a country's economic development are the topics covered in the current issue of
the International Economic Review (IER), a publication of the U.S. International Trade
Commission's Office of Economics.
The IER is produced as part of the ITC's international trade monitoring program. The program's
purpose is to keep the Commission informed about significant developments in international
economics and trade and to maintain the Commission's readiness to provide technical
information and advice to policymakers in the Congress and the executive branch. The opinions
and conclusions of the IER are those of the authors and do not necessarily reflect the views of the
Commission or any individual Commissioner.
The current issue September/October 2001 includes the following articles:
- Analysis of Japan's Recent Foreign Investment Trends -- There are few formal
restrictions on foreign direct investment (FDI) in Japan, and in recent years the
government has taken steps to address remaining investment-related impediments.
Nonetheless, the level of foreign direct investment in Japan remains low and is less than
that for Japanese FDI abroad. Japan experienced a surge in FDI in recent years due to
structural changes in the economy, with major investments in finance/insurance,
telecommunications, and petroleum.
- Why is the U.S. Trade Deficit with China so Big? -- Whereas U.S. trade deficits have
arisen in general when U.S. investment spending exceeds U.S. domestic savings -- due in
recent years to the attractiveness of the U.S. economy to foreign investors, the
comparatively lower savings rate of U.S. consumers, and until recently U.S. federal
budget deficits -- several other factors affect the U.S.-China bilateral trade deficit in
particular. These include China's high savings rate, differing measurement of entrepot
trade through Hong Kong, China's tariff and nontariff trade barriers, trade diversion
between China and other Asian countries, and the Chinese government's recent use of
trade policy to boost slow domestic spending in China.
- The Return of Dependency Theory: Is Primary Commodity Specialization Bad for
Development? -- In the 1970s, most economists became disenchanted with dependency
theory -- and its consequent import substitution policies -- for lack of evidence that
specialization in primary commodities was damaging to a country's economic
development. The anti-globalization movement of current times appears to be more
willing to believe such dependency theories without supporting evidence. Whereas
commodity dependence may indeed correlate with fluctuating terms of trade, it is neither
clear that commodity prices are in fact trending down or whether living standards would
be necessarily depressed if they did. Although other reasons -- such as bad economic
policies -- may be more at fault, it is nonetheless true that primary commodities have not
fared well on export markets in recent years and that such countries' external debts have
In addition, the publication reviews U.S. economic performance relative to other major trade
partners, U.S. trade performance, and economic forecasts. Comparative economic indicators for
major industrialized countries are also provided. An annual IER chartbook depicting trends in
U.S. trade with major trading partners and regions is also included in the IER series.
The current issue of the IER (USITC Publication 3466, September/October 2001) will be
available on the ITC's Internet server at www.usitc.gov. To request a printed copy, write to the
Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington,
D.C. 20436, or fax requests to 202-205-2104.
To be added to the mailing list for the publication, write to the Office of Economics, U.S.
International Trade Commission, 500 E Street SW, Washington, D.C. 20436, or fax requests to
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