RE: MADE IN CHINA
The author explains why....
CUT AND PASTE:
Almost all consumer goods are the product of many hands, and properly accounting for what is made where further reduces the share of “made in China.”
Hale and Hobijn explain:
Obviously, if a pair of sneakers made in China costs $70 in the U.S., not all of that retail price goes to the Chinese manufacturer. In fact, the bulk of the retail price pays for the transportation of the sneakers to the U.S, rent for the store where they are sold, profits for shareholders of the U.S. retailer, and the cost of marketing the sneakers. These costs include the salaries, wages and benefits paid to U.S. workers and managers who staff these operations.
The San Francisco Fed’s calculations show that on average 36% of the price of imported goods goes to U.S. companies and workers, and for goods imported from China that number is even higher:
“On average, of every dollar spent on an item labeled ‘Made in China,’ 55 cents go for services produced in the U.S.,” Ms. Hale and Mr. Hobijn write. “In other words, the U.S. content of ‘Made in China’ is about 55%. The fact that the U.S. content of Chinese goods is much higher than for imports as a whole is mainly due to higher retail and wholesale margins on consumer electronics and clothing than on most other goods and services.”
It gets more complicated. Chinese made parts also go into the 88.5% of U.S. consumption spending devoted to goods made in the U.S. Adding it all up, the researchers conclude that the total share of “made in China” goods in U.S. household consumption is just 1.9%.
What does it all mean? There’s good news and there’s bad news. The good news is that the China threat that looms so large in U.S. political debate is overstated. China’s exports as a share of U.S. consumption might have grown quickly, but they are still a small fraction of the total. U.S. workers and companies are also taking a fair chunk of change from the process.
The bad news is that hopes of a stronger yuan creating more space for U.S. manufacturers to sell to the domestic market – already overplayed – appear even less credible. If most of the cost of “made in China” imports actually accrues to U.S. workers and companies, yuan appreciation will have only a limited impact on competitiveness.
All I am saying is, we’ve in just one generation, managed to build up China to the largest manufacturer on the entire planet, mostly we have done that by de-Industrializing right here in America.
I am ready to bring back American jobs.
Bigtime.
That, in a nutshell is the real issue: trade with China depresses US wages-- if the goods were manufactured here, US wages would be higher and the margins lower.
If you look at the US trade deficit since 1970, there has been an enormous transfer of wealth from the US to East Asia.
About the only equivalent I can think of is the Soviet Union's stripping of conquered German territory of all its manufacturing equipment.
The study fails to take into consideration what the effects of these "benefits" are on US wages and real GDP growth.
It's not accidental that Nixon taking the US off the gold standard allowed the trade deficit to balloon to epic proportions, nor is it accidental that the US became the world's preeminent industrial power behind a tariff wall.
The real question is how many more Americans would be employed at high wage manufacturing jobs instead of low wage retail and services if it weren't for the enormous trade deficits.