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WTO chief downplays China-US trade imbalance

By Tan Yingzi (China Daily)

09:22, October 03, 2012

With the changing nature of global trade, a new way to measure bilateral trade balances will see China's surplus with the United States reduced by half, said World Trade Organization Director-General Pascal Lamy on Monday.

In today's world, high-tech products are made around the world, with components and parts being manufactured in many countries, he said. The country where the final assembly takes place only contributes a small part of the final value of the product.

"If we were to measure trade in value-added rather than gross statistical terms, bilateral trade balances would look very different," he said during his speech at the Brookings Institution, a Washington-based think tank.

He cited the example of the iPhone, which is assembled in China. Goods and services contributing to the phone's final assembly come from 15 companies located in many different countries. China only gains 4 percent of the added value, but when a $400 iPhone is sold in the US, standard trade accounting lists it as $400 credit to China's side of the ledger and $400 debit for the US.

"WTO economists believe that China's $295 billion trade surplus with the United States would be reduced by nearly half if two-way trade were measured in valued-added terms."

Given the importance of the China-US relationship for the world, he urged people to look at those numbers more closely.

In this year's US presidential campaign, both President Barack Obama and Republican challenger Mitt Romney have voiced harsh rhetoric about China's trade practices, blaming it for US job losses and the trade deficit. They also have criticized one another for outsourcing jobs to China.

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