Over-Hyping the “Made in China” Situation?

Made in China ... as threatening as we think?“Made in China” aren’t the most welcome-sounding words to American workers these days. Many of us believe that the plethora of goods it manufactures means the People’s Republic of China is grabbing scads of U.S. jobs as well.

Recent reports about Apple’s scads of assembly facilities in China only add fuel to fiery debate … and at least one presidential candidate is making the loss of manufacturing jobs a key component of his campaign rhetoric.

So I was surprised to read the findings of an analysis performed by economists Galina Borisova Hale and Bart Hobijn which contends that goods and services from China accounted for only ~2.7% of personal consumption expenditures in the United States in 2010.

What’s more, less than half of that amount reflected the actual cost of Chinese imports. The remainder went to American businesses and employees transporting and selling the products carrying the “Made in China” mark.

The report, which draws on data published by the Bureau of Economic Analysis, U.S. Census Bureau, the Bureau of Labor Statistics and other sources, states that total U.S. imports in 2010 amounted to about 16% of total Gross Domestic Product.

More specifically, imports from China amounted to ~2.5% of GDP. Moreover, nearly 90% of consumer spending in the United States during 2010 was on American-generated products and services.

Of course, services – which comprise about two-thirds of total spending – are mainly produced locally. And when we consider items like automobiles and electronics, the picture is different: One-third of U.S. consumption on durables goes for goods that are made outside the country.

It’s not hard to guess which products are the ones most likely to be imported from China; they’re primarily electronics, furniture, clothing and shoes. Offshore sourcing is most pronounced in apparel and shoes, where more than 35% of U.S. purchases in these categories were of items labeled “Made in China.”

No wonder so many clothing mills in America have gone the way of the dodo bird.

Without dismissing the impact of overseas manufacturing on manufacturing jobs in the United States, the broader statistics suggest that any long-term drop in American manufacturing employment is due to more factors than merely Chinese labor competition. Undoubtedly, advanced manufacturing technology and productivity gains per worker have a lot to do with it as well.

It looks like the “Made in China” debate may be another example of how the issues and challenges we face in the world are rarely ones of “black and white” … but rather “shades of gray.”

2 thoughts on “Over-Hyping the “Made in China” Situation?

  1. So, while the apparent numbers and people’s experience seem to diverge, people’s experience is no less real. Then perhaps the numbers can use some re-examining. Or perhaps let’s forget the numbers. Or perhaps let’s not forget the numbers but start at the level that people experience them. People don’t know from GNP. People know from:

     paying their mortgage or rent
     paying their residential utilities
     paying their kid’s schooling
     making car payments
     paying health insurance
     paying car insurance
     paying other insurances, incl. Social Security
     paying for telephone services
     paying for internet services
     paying for television services
     and from paying financing charges.

    At this point, people may have a roof over their heads,
    maybe, but no more.
    But they still wear nothing and they eat nothing.
    And yet it is still considered GNP.

    Perhaps one of the questions to ask would be:
    Who is our internal ‘China’?
    Perhaps it’s like a huge car crash where you see just a few scratches and the victim is dying of internal bleeding.

  2. While the statistics used are small when stated as percentages, the numbers they represent are huge. Some estimates go as high as one million jobs lost just to the trade imbalance with China.

    Of course, anyone who understands free trade understands that we should not try to reach equilibrium with each country … but the U.S. has carried the world for a long time by tolerating unfair trade practices elsewhere.

    If my job were one of the million or so lost to the trade imbalance with China, I would feel very cheated indeed. And comments about what a small percentage of the economy my job represents wouldn’t make me feel any better.

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