China bashing won't save US

The high-pitched attack on China because of its large trade surplus with the US is misplaced. Little of the gross surplus actually accrues to China.

A 2010 paper by the South Centre shows that only a small part of China's exports to the US is actually retained as income in China.

For example, in 2005, China's gross trade surplus with the US was $172 billion but in value-added terms (what is earned by the respective countries after deducting the import content of their exports) it was only $40 billion.

Further, a large part of the Chinese trade surplus in value-added terms was earned by foreign firms in China and thus does not belong to China. As a result, income left in China was no more than 30 percent of total value of exports to the US.

Therefore the criticism that China enjoys extraordinarily high trade surpluses with the US is misplaced.

Also, even if US trade measures reduce Chinese imports into the US, this does not mean that the US import bill will be reduced. Goods from other developing countries such as Vietnam or Indonesia may just replace the Chinese goods.

Therefore, US actions based on the Senate bill would hardly help the US get rid of its trade deficit.

It is best that the US take domestic actions to address its domestic economic problems, rather than make a scapegoat of other countries and potentially unleash new trade wars.

The author is executive director of South Centre, a think tank of developing countries, based in Geneva.

(China Daily 10/13/2011 page9)

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