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PeakTrader said...
America’s trade deficit with China was $232.5 billion in 2006, up 125% from 2002.

Of the $287.8 billion in American imports from China in 2006, the following product categories had the highest values.

Top Chinese Exports to the U.S.

1. Computer accessories, peripherals and parts.
2. Miscellaneous household goods.
3. Toys & sporting goods.
4. Computers.
5. Non-cotton household furnishings & clothing.
6. Video equipment.
7. Household furniture.
8. Footwear.
9. Cotton household furnishings & clothing.
10. Telecommunications equipment.

Of the $55.2 billion in American exports to China in 2006, the following product categories had the highest values.

Top Chinese Imports from the U.S.

1. Semi-conductors.
2. Civilian aircraft.
3. Soybeans.
4. Plastics.
5. Raw cotton.
6. Industrial machines.
7. Copper.
8. Computer accessories.
9. Aluminum.
10. Steelmaking material.

Top Chinese Exports & Imports
Most Popular Products Traded Between China & America
Jun 28, 2007 Daniel Workman

This analysis is based on latest statistics from the US Census Bureau - Foreign Trade Statistics and CIA World Factbook as of the date of article publication. Read more at Suite101.

CompEng said...
If someone sends free goods to America, it reduces American productivity by roughly the difficulty of finding a non-subsidized industry times the number of people affected (effectively, it costs America job opportunities, which matters in proportion to America's unemployment rate). It also does increase the purchasing power of those in America who have jobs.

Foreign protectionism, then, encourages a wealth transfer from the underemployed in America to the well-employed.

PeakTrader said...
CompEng, your statement isn't supported by the facts. In the mid-2000s, the U.S. current account deficit was 6% of GDP. Yet, the U.S. unemployment rate was 4 1/2%.

Protectionism causes job losses, but also creates jobs, in part, because there's more leisure to acquire higher skills from the higher goods to labor ratio. The volume of imports tend to benefit the masses, including lower income Americans.

bobble said...
one thing left out of this free trade conversation is what is the "actual" benefit? this is important because assuming, as i do, that there is a benefit, what if the benefit is insignificant?

so, in the spirit of adding some reality to the conversation, here is a posting by trade economist dani rodrik that discusses this very issue. link please read it.

here are some (controversial) selected quotes:

"the gains from moving to complete free trade are a meager 0.25% of GDP"

"bottom line for the U.S.: full liberalization of global merchandise trade would eventually increase U.S. income by 0.1% by 2015"

PeakTrader said...
Bobble, why do we have to pay it back? If China stops buying U.S. Treasury bonds, its economy would implode, because it wouldn't be able to sell its goods to the U.S. (exports are a large proportion of its economy). Also, it wouldn't be able to buy commodities at world prices, that are priced in dollars. China cannot damage the U.S. economy without causing much greater damage to its economy. So, China has to continue to lend to the U.S., at negative real returns, while the U.S. economy expands and inflates the debt away or just prints money.

Yes, it's a paradox. Americans were buying houses, autos, and many other goods at a record pace. Yet, they didn't have a job or a good job.

However, there were jobs, e.g. in construction, transportation, retail, health care, finance, etc. Flipping houses seem to be a good job for a while. So was lending money to people without a job. Some people are better at finding jobs than others.

The U.S. government has been incompetent putting money in American hands. So, they can buy the excess assets and goods. Tax cuts for China or Japan wouldn't do any good, because there are few consumer goods to buy. So, they're better off spending on infrastructure. However, the U.S. had too many consumer goods and too little money to buy them.

A lack of credit or money brought down the U.S. economy. All the U.S. government had to do was distribute money to the masses. Yet, it failed!

CompEng said...
If you make a number of people a little more wealthy and minority less wealthy, there tends to exist money to hire the minority... but often not in what they're most efficient at.

So if (hypothetically) foreign protectionism knocked out 2M jobs in a 150M job economy, 70% of those 2M were able to get new jobs and half of those at roughly comparable wages... how does that show up in an underemployment rate? The answer can hide in the noise. If in exchange the goods those guys were making are (for example) 30% cheaper, I think that works out as both a transfer and a net loss in total value, but who's going to measure it? It's small relative to the economy. Maybe I shouldn't be making noises over such second-order effects?

PeakTrader said...
CompEng, that may be true in the economic literature. However, how do you measure total value? The same quantity of goods (or more goods) for less labor or for more leisure increases total value. The underemployed can acquire higher skills, which require more time (or leisure) than in the past. The flexibility is there.

CompEng said...
Peak Trader,
That's the key, isn't it? If you really believe enough of those guys could all get new jobs that are just as good, then there is no loss. I believe the people responsible for providing out counseling for those 50-yr old lifers in manufacturing that the odds in many cases aren't that good.

PeakTrader said...
CompEng, there's more demand for modern skills than obsolete skills, unless you want to keep old skills new.

Throughout history, more leisure (or less labor) and more goods have been "luxuries" that allowed people to innovate and invent. Creating more leisure and goods are in themselves products of innovation and invention.

Anonymous said...
"A lack of credit or money brought down the U.S. economy. All the U.S. government had to do was distribute money to the masses. Yet, it failed!"

A lack of true consumer purchasing power through wages was what brought the US economy down - the easy credit merely delayed the pain, but inevitably made the result worse. Since a lot of the well-paying jobs aren't coming back, and the recovery is expected to be jobless, this mess will likely take some time to get out of.

Years of high unemployment might possibly extend until the 2020s, which, with the slew of retiring baby boomers expected to come, might bring one positive effect: a shortage of manpower will drive employers scurrying and competing for workers - anyone who wants to work will work.

Of course there's the dilemma of paying for social security and medicare, the younger generations will likely being taxed more to pay to support the aged population (and not to mention for years of debt run up)... but that's different subject altogether.

PeakTrader said...
Anon, I've explained before that government, not wages, caused the recession:

Massive U.S. job losses over the past two years were the result of dollars being drained out of the U.S. economy through current account deficits (when foreigners sold their goods to the private sector and bought government bonds), restrictive monetary policy (keeping the Fed Funds Rate at 5 1/4% too long), contractionary fiscal policy (shrinking budget deficits that reached $162 billion in 2007), allowing Lehman to fail [in Sep '08], which froze the credit market, the government spending spree over the past year (rather than refunding households with a large tax cut), which made it harder for households to pay-down debt, and generally poor or failed fiscal policy responses over the past year.

Bush was open to a stimulus plan in late '08 (I suspect a tax cut). However, if Obama announced in Jan '09 something like a $5,000 per worker tax cut (or $750 billion for 150 million workers), there would've been a more shallow recession and a V-shaped recovery rather than this L-shaped recovery.

U.S. workers would've paid-off or paid-down their highest interest rate debt first to increase their monthly income, while strengthening banks, which would spur demand and increase production.

The U.S. was on a path to a mild recession or soft-landing from the small tax cut in early '08. Large tax cuts worked under Kennedy in '61, Reagan in '81, and Bush in '01.

PeakTrader (continued):

Is it better for America to offshore high-paying manufacturing jobs and then import those goods at lower prices and higher profits, or keep the high-paying manufacturing jobs and sell the same standardized goods at higher prices and lower profits?

Are more goods and capital better than fewer goods and capital?

Displaced U.S. workers can become biochemists, microbiologists, engineers, auto mechanics, retail clerks, or design and improve the goods it offshores, etc. Resources are freed-up to move into higher-quality, higher-skilled, and more profitable "core" goods in older U.S. industries or into emerging U.S. industries.

Of course, we could have stopped or slowed the inevitable long ago and most of us would still be farmers, similar to China.

Also, I may add, why export U.S. goods when the U.S. can export worth less paper assets?

Moreover, regarding quality, is it better to buy a microwave oven that works well for 10-years at $100, or buy one that works well for 50-years at $500?

Anonymous said...
I used to be a quality control consultant for Caterpillar. My job was to travel to suppliers throughout the Upper Midwest, and help sort out quality control issues. Over the years, I became familiar with corrosive effects of manufacturing towns losing their base - schools, tax base, roads and basic services getting the axe. They all end up suffering. A few might come back, but most don't

PeakTrader said...
Anon, it seems, your solution is to maintain the high-paying jobs as long as possible, until the firm is bankrupt, since competitors produce the same good cheaper. It may be better to focus on new jobs for displaced workers.

Also, I stated before, a country benefits from more, not less, goods and capital, and when limited resources are freed to produce other goods, including facilitating growth in emerging industries.