Author(s)

John B. Benedetto

July 2012
Abstract

Recent academic work has suggested that China’s exports to the United States contain a large portion of non-Chinese value added. This paper looks at what the findings of this work could suggest for U.S. and Chinese trade balances, provides some theoretical cautions in interpreting value-added trade findings, and applies those cautions to U.S. and Chinese trade balances.

The paper begins by showing that a country’s reported trade balance with the world is always the same as its value-added trade balance with the world. Thus, to the extent that China’s net exports to the United States are lower on a value-added than on a reported basis, China’s net exports to some other countries must be correspondingly higher on a value-added basis than on a reported basis. China must also have a substantially smaller market for imported final goods than reported import data suggest. Additionally, the paper discusses data and theoretical issues in comparing Chinese value added to value added in other countries.

Tags(s): China Trade Balance
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Author(s)

John B. Benedetto

January 2012
Abstract

In recent years, Germany has had higher per capita exports to China than the United States has had. Some policymakers and analysts have argued that the United States should attempt to replicate Germany’s success in exporting manufactured products to China, or that Germany’s relative success at exporting to China refutes those who attribute the U.S. trade deficit with China to Chinese government policies. This paper analyzes trade data and finds that a majority of Germany’s exports to China likely consist of (1) mechanical and electrical intermediate and capital goods that are likely used in China’s exports to other countries and (2) luxury cars. The paper then argues that, given this export profile, Germany’s example does not offer a way for the United States to substantially reduce its trade deficit with China in a manner consistent with reducing global imbalances, and is potentially consistent with a model of the world in which some governments’ policies exacerbate global imbalances.

Tags(s): China Germany Trade Balance
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