Pascal Lamy, part of the dynamic duo of French Socialists charges with overseeing the global economic system, has a good op-ed on the problems with existing “country of origin” designations in trade statistics.
The way the current system works, if an iPad shows up on a dock in the United States of America we ask where the ship left from. The answer is China, so then we say an iPad costing such-and-such amount was imported to the US from China. The reality is that the iPad is itself made up of a bunch of different stuff, including physical components from all over Asia. But it’s mostly made up of intellectual property and brand value that are made in California.
Now Lamy goes on from this observation to suggest that more accurate trade statistics might lessen anti-trade sentiment. I’m not as convinced. I saw an opponent of the US-Korea free trade deal pointing out this morning that many of the “Made in Korea” goods that will be imported under the agreement will, in fact, be largely assembled from China-made components. What I do think would happen under more accurate statistics is that people might get a better sense of how central petroleum is to America’s trade deficit. Americans consume much more oil per capita than do the citizens of other developed countries, and we consume much more oil than we produce. That means that over the long run for the figure to balance we need to run a substantial surplus in things that aren’t oil. We need to sell many more goods and services to foreigners than we buy abroad. We need to consumer less non-oil than we produce, which is true of all oil importers, but our uniquely high level of oil use makes this uniquely true of the United States of America. And I think it’s crucial to understand that America’s high levels of oil consumption are, in part, a hangover of policies from the days of yore when the US was a net oil exporter and promoting high levels of oil consumption was part of a mercantilist strategy.