Truth behind China-US trade 'imbalances'

MADE-IN-US DEFICIT

Statistical differences aside, the fact that the United States is not only running a trade deficit with China, but many other countries means the root cause of the imbalance is the US economic structure, which features low savings and high consumption.

In the past decades, US businesses transferred their manufacturing bases to countries with cheap labor and low costs, which helped drive up their profits and benefited consumers.

In a world whose prosperity has been built on the free flow of trade and investment, price-sensitive consumers largely decided the directions of trade, either for exports or imports.

"China has been a major market where the United States enjoyed its fastest export growth, and an important cause of the trade imbalance is the fact that many US goods are less competitive in the Chinese market," said Long Guoqiang, deputy director of the Development Research Center of the State Council.

Solutions to the US-China trade deficit do not come from cutting exports from China, but from US enterprises making their products more competitive, he said.

Joe Kaeser, CEO of Siemens AG, held the same view.

"I believe people should not confuse the lack of competitiveness with unfair trade. If companies lack competitiveness, they need to invest in innovation and people development in order to catch up," he told reporters at the China Development Forum in Beijing.

As China has repeatedly stressed, the trade imbalance between the two countries is mainly a result of different economic structures, industrial competitiveness, and international division of labor, and China has never sought a trade surplus as the flow of trade is determined by the market.

Another factor that has often been overlooked is that US control of high-tech exports to China contributed a lot to trade deficit with China, Commerce Minister Zhong Shan said earlier this month, quoting one US research report which estimated a 35-percent fall in trade deficit with China if the United States relaxed export restrictions.