Trade Deficits A Little Bit Skewed

Data,Economics — Zac Townsend @ December 15, 2010 2:16 pm

I think its obvious from many of my posts that I am interested in statistics and data analysis. I'm also interested in the failure of unexamined metrics.  Ethan, an old friend of mine from Brown, shared WSJ's Tech Supply Chain Exposes Limits of Trade Metrics, which notes that Apple's iPhone, as it is produced in China, add to the US trade deficit. I think that director-general of the World Trade Organization explains the failure of that stat best:

"What we call 'Made in China' is indeed assembled in China, but what makes up the commercial value of the product comes from the numerous countries that preceded its assembly in China in the global value chain," Pascal Lamy, director-general of the World Trade Organization, said in a speech in October. "The concept of country of origin for manufactured goods has gradually become obsolete." Mr. Lamy said that if trade statistics were adjusted to reflect the actual value contributed to a product by different countries, the size of the U.S. trade deficit with China—$226.88 billion, according to U.S. figures —would be cut in half. That means, he argued, that political tensions over trade deficits are probably larger than they should be. "The statistical bias created by attributing the full commercial value to the last country of origin can pervert the political debate on the origin of the imbalances and lead to misguided, and hence counterproductive, decisions," Mr. Lamy said in his speech to the French Senate in Paris.

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