America should not blame trade – or its trading partners – for its ills
Allen Yu says US politicians like to lament that trade has hollowed out American industry, but facts show that US manufacturing productivity is at its highest ever, and trade is good for all sides
Bernie Sanders and Donald Trump are leading a new American awakening on global trade. According to the new emerging consensus, America has been the victim of bad trade deals – including the yet-to-be-ratified Trans-Pacific Partnership (TPP) – for decades. These deals have shipped millions of high-paying American jobs abroad and in the process hollowed out the American middle class.
When Sanders and Trump began questioning the merits of trade even with allies such as Japan, however, many believed them to have crossed a line. It is one thing to attack China for “stealing” jobs but quite another to sell short a close and faithful ally.
Americans have long harboured schizophrenic attitudes on trade. In the Republican debate in Detroit, for example, the biggest applause went to Ted Cruz when he lamented how Detroit used to be “the Silicon Valley of America” – a city of “two million” with “the highest per capita income in the country” – and vouched to bring Detroit and America back to their former glory. Left politely unsaid, yet understood by every former auto worker in Detroit, is the fact that the adversaries that have so decimated Detroit hail not from low-wage countries such as China or India, but advanced economies such as Japan and Germany.
What would a Donald Trump presidency mean for US trade and diplomacy within Asia?
Americans’ tendency to blame so many of America’s ills on trade – especially with “low-wage” nations – is perplexing, since such trade is supposed to be complementary rather than competitive. Consider the case of the iPhone and iPad. While these devices are labelled “Made in China”, Chinese labour accounts for only about 3 per cent of their overall value. According to one estimate, some 60 per cent of the proceeds of each iPhone or iPad sold go to Apple, with the bulk of the rest going to component manufacturers from Japan (34 per cent), Germany (17 per cent), and South Korea (13 per cent). If the point is to bring back “high-paying” jobs, why the fuss over the lowest-valued 3 per cent that even China is trying to ditch?
China imports US$0.41 for every US$1 of export
