Caixin
Jun 07, 2019 04:53 AM
ECONOMY

U.S. Trade Deficit With China Is Far Smaller Than Claimed, Ministry Says

The U.S. has enjoyed “substantial benefits” from economic and trade cooperation with China, commerce ministry said. Photo: VCG
The U.S. has enjoyed “substantial benefits” from economic and trade cooperation with China, commerce ministry said. Photo: VCG

American claims of a trade deficit with China of more than $500 billion a year are “false,” reflecting disparities in accounting and trade restrictions, and the U.S. has benefited from bilateral trade to the tune of hundreds of billions of dollars a year, China’s Commerce Ministry said Thursday in a report.

In an 11-page research paper, the Commerce Ministry found that China’s actual trade surplus with the U.S. in 2018 was only about a third of the figure asserted by Washington. U.S. Commerce Department data show that the U.S. had a $419 billion deficit in goods with China in 2018, while China’s customs data show a surplus of $323 billion.

The issue is at the center of the protracted trade dispute between China and the administration of President Donald Trump. Citing the trade imbalance, Trump has long accused China of stealing manufacturing jobs and technology from the U.S. Over the past year, Trump imposed 25% tariffs on hundreds of billions of dollars a year of imports from China, prompting Beijing to respond in kind. The trade war is weighing on China’s export-driven economic growth.

There have always been differences between the official trade statistics of the U.S. and of China, reflecting different accounting methods. A joint working group consisting of representatives from China’s Commerce Ministry and General Administration of Customs, the U.S. Department of Commerce, and the Office of the U.S. Trade Representative found that U.S. statistics are generally 20% higher than China’s data, according to the Commerce Ministry’s report.

The ministry argued that more than half the surplus comes from processing trade, in which Chinese businesses import parts and components, add value and then re-export finished products. Excluding the processing trade, China’s 2018 trade surplus in goods with the U.S. would be $240.9 billion.

In addition, taking into account that China runs a trade deficit in services with the U.S., the total trade surplus should be only $153 billion, or 37% of the figure claimed by the U.S. government, the Commerce Ministry found.

The overall American trade deficit with China has been caused by multiple factors, including different levels of industrial competitiveness, a U.S. economy noted for low savings and high consumer spending, and the nation’s trade control policy, the Chinese ministry said.

Restrictions imposed by the U.S. on certain exports to China are also a significant contributor to the trade deficit, the ministry said, noting that U.S. export control measures target about 3,100 items, mostly high-tech products.

The U.S. accounted for 16.7% of China’s imports of high-tech products in 2001, while the share dropped in half to 8.2% in 2018, the report said.

“If the U.S. were to lift its export ban against China to the same level as those applicable to France, the U.S. trade deficit with China would narrow by a third,” the ministry said, citing an analysis by the Carnegie Endowment for International Peace.

China’s trade surplus with the U.S. mainly comes from labor-intensive products, while China has deficits in agricultural goods and capital- or tech-intensive products such as airplanes and automobiles, the ministry said. “For example, in 2018 China imported $10.4 billion of cars from the U.S, and exported only $1.8 billion of cars to the U.S.,” according to the report.

The U.S. has enjoyed “substantial benefits” from economic and trade cooperation with China, the study found. American companies earned $940 billion in 2017 in China, while Chinese businesses and individuals invested $1.37 trillion in the U.S. that year, the report said.

Although Trump has long charged China with stealing American manufacturing jobs through an unfair trade imbalance, the Commerce Ministry study said the U.S. lost jobs not because of trade deficits but because of industry changes caused production shifts, citing a report by the conservative-leaning American Cato Institute.

A separate report published last month by U.S.-China Business Council showed that U.S. exports to China have supported more than 1.1 million American jobs during the past decade, the ministry said.

The ministry called for mutual efforts in the same direction to resolve the trade imbalance issue. China is willing to increase imports from the U.S., and in return, the U.S. should relax its export controls on high-tech products to China, the report said.

Contact editor Han Wei (weihan@caixin.com)


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