How Statistics Don’t Measure Up To ‘Global Imbalances’

People’s way of conducting commerce has always been changing, i.e. from agriculture to industrial and now to the information age. However statistics used by vested interest groups to promote certain policies don’t.

Presently global trading platform has been shifting towards a supply chain network.

This from Xinhua,

Measuring global trade in line with the principle of "the country of origin" fails to reflect the complexities of global commerce where the design, manufacturing and assembly of products involves several countries, experts said...

"The concept of country of origin for manufactured goods has gradually become obsolete," said Pascal Lamy, director-general of the WTO, in a speech to the French Senate in October.

"What we call 'made in China' is indeed assembled in China, but what makes up the commercial value of the product comes from the numerous countries," said Lamy.

"For instance, every time an iPod is imported to the U.S., the totality of its declared customs value (150 U.S. dollars) is ascribed as if it were an import from China," said Lamy, adding that "In fact, according to American researchers, less than 10 of the 150 dollars actually come from China and all the rest is just reexportation."...

This means that current trade data used and extrapolated by the mainstream does not accurately account for the genuine picture.

From the same article... (bold highlights mine)

Sheng Guangzu, head of China's General Administration of Customs, told Xinhua in an interview in April that much of China's trade surplus was "transferred" from foreign-funded enterprises operating in China.

In the first 11 months this year, exports of foreign-funded enterprises totaled 779.14 billion U.S. dollars, accounting for 54.7 percent of China's total exports, according to China's customs authorities.

The data also showed that, during the same period, foreign-funded firms generated 112.51 billion U.S. dollars of trade surplus, accounting for 66 percent of China's total surplus.

In short, 'global imbalances' are not what they are projected to be.

The take away is that those arguing about global imbalances, aimed at advancing the cause of mercantilism via protectionism and inflationism, using old statistics are either missing the big picture by unwittingly parroting popular misperceptions or deliberately engaged in economic sophistry.

As Mark Twain rightly pointed out: There are three kinds of lies: lies, damned lies and statistics.