Selling to China
Posted by SCapozzola on February 5th, 2008
An interesting item in today’s Wall Street Journal notes that, while most countries run a trade deficit with China, Japan is the only G-7 country to run a surplus. Just why is this?
Japan has oriented itself as an export-based economy and is now China’s leading supplier of industrial parts and equipment. Essentially, Japan sells Beijing the machinery (like auto parts and building materials) that it needs for government and infrastructure projects. This means that Japan is providing China with the raw equipment it needs to build its own manufacturing base.
The U.S. has typically been Japan’s largest export market, but China’s meteoric rise is seeing them closing the gap. In 2007, the U.S. imported an estimated $144 billion worth of goods from Japan, compared with $100 billion from China.
America’s wanton consumption of Japanese goods, however, has racked up a trade deficit projected to exceed $80 billion in 2007. Ironically, that debt receives little attention when compared with an expected $260+ billion U.S. trade deficit with China in 2007.
Both Japan and China have positioned themselves as net exporters, manufacturing the goods and products that the rest of the world consumes. Once upon a time, the United States held that position. The famous Delaware River Bridge in Trenton, NJ still bears a sign that states “Trenton Makes, the World Takes.” Sadly, Trenton, like many U.S. factory hubs, no longer houses a thriving manufacturing base.
What then is the difference between the U.S. and competitors like China and Japan?
China has captured much of America’s marketshare by adopting what the Washington Post’s Bob Samuelson termed “new mercantilism.” By utilizing illegal currency manipulation, subsidies, dumping, and other predatory trade practices, Beijing has been able to undercut American producers.
Similarly, Japan has captured huge swaths of the American electronics industry through targeted efforts to underbid U.S. producers. The American TV industry was decimated in the 1970’s by a flood of low-cost Japanese products. Today it’s essentially impossible to find an American-made TV or CD player.
All this points to a simple question: why doesn’t the U.S. emphasize manufacturing’s importance, like the Chinese and Japanese do?
Super Tuesday provides an excellent opportunity to look at the candidates running for president and ponder their views on American manufacturing. Do these candidates understand that China is cheating, and that U.S producers are suffering the consequences? With the media ringing the alarm bells of “impending recession,” it would be helpful indeed to know that our potential leaders are aware of the problem and have a plan of action.
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