Our yearly trade deficit with China is around $340 billion and rising. That is, we import from China $340 billion worth of goods more than we export to China. Trump fulminates obsessively about this, saying China “rapes” us to the tune of that $340 billion.
Confession: I have personally added to our past China trade deficits, by importing many thousands of dollars worth of goods.
They were old Chinese coins, bought mainly from one Shanghai dealer, Luo. I think he actually got rich in the process. But I made money too. For example, I’d get Northern Song Dynasty (960-1127 AD) coins, 10,000 at a time; cost around 13¢ apiece (shipping included). I’d sort through them, cleaning many, picking out better ones to sell for a buck or two, and the rest typically at $20 per hundred. Collectors loved such inexpensive thousand-year-old coins.
A middleman or trader like me has traditionally been seen as a kind of economic parasite. After all, I produce nothing myself. However, what I do is to get coins from people who value them less to ones who value them more. That creates what economists call a “consumer surplus,” making both my suppliers and my buyers better off. That’s economically beneficial.
I sell much to other dealers too. They retail the stuff to other collectors, creating still more customer value. And meantime, Luo got the coins from other Chinese sellers. They too profited and were made better off.
Also it’s not exactly the case that I produced nothing. My work of sorting, cleaning, and identifying coins added value to them.
Did any of this entail any job losses? On the contrary, my profits made me richer and hence able to buy more goods; and enabling my customers to buy coins cheaper than they would otherwise pay left them with more money to spend on other things. All this added buying power triggers creation of more jobs, to produce the additional goods and services now wanted. Similarly, Luo’s enrichment, and that of his Chinese suppliers, enabled them to spend more, contributing to Chinese job growth. And more jobs in China means Chinese can buy more goods made in America.
So is China “raping” us? What nonsense. Trade is win-win. That’s why people do trade. Being able to buy imported goods cheaper than they can be made here puts something like a trillion dollars annually in American consumer pockets; and spending that extra cash creates lots of jobs — surely more than the few trade might displace.*
Trump refuses to understand this. In his ignorant diseased mind, all deals have a winner and a loser. Sad.
My personal trade imbalance with China ultimately reversed. Chinese coins got much more expensive in China; Luo stopped selling those and switched to other stuff, which he’s been buying in recent years from me. Alas, my profit margin on those is much smaller.
* Another perspective on our China trade imbalance is that as Americans buy more Chinese goods than Chinese buy from us, money flows from the U.S. to China, which translates into China saving and investing at a higher rate than Americans do. Net annual saving by U.S. citizens has hovered around zero. And we finance our combination of consumer spending plus government spending by borrowing (much from China, lending us back the money we’ve spent for their goods). But that’s another issue.
This post first appeared on The Rational Optimist | Frank S. Robinson's Blog On Life, Society, Politics, And Philosophy, please read the originial post: here