Trade actions may backfire on American firms

Updated 2018-04-04 11:16:03 China Daily

Customers look at products in an Apple flagship store on Nanjing Road in Shanghai. iPhone products include components made in different countries around the world and are only assembled and manufactured in China. But the calculation of trade statistics attributes most of the value to China.

Trade restrictions launched by the United States could cause huge losses for U.S. companies operating in China, experts said.

The U.S. is home to many multinational companies that have a global supply chain, and the current total value statistical method has distorted reality, said Long Guoqiang, vice-president of the Development Research Center of the State Council.

"The goods China exports to the U.S. involve a considerable proportion of intermediate inputs from countries such as Japan and South Korea and even the U.S. itself, in particular chip products," he said.

Take the iPhone, for instance. The product includes components made in different countries around the world and is only assembled and manufactured in China, but the calculation of trade statistics attributes most of the value to China.

"International value flows occur in exports not only in processing trade, but also in other forms of trade," Long said.

Similarly, U.S. exports to China involve international value flows. Since China is basically at the low end of the global value chain while the U.S. is at the high end, the percentage of value inflows from the U.S. in Chinese exports is much higher than that of value inflows from China in U.S. exports, Long said.

"Under such circumstances, China is taking the blame for others," said Xue Rongjiu, deputy director of the Beijing-based China Society for WTO Studies.

He added that most of the profits actually went to U.S. companies, but the value of the products was reflected in Chinese exports, resulting in inaccurate statistics.

Attracted by China's opening-up policies and massive market potential, U.S. aircraft manufacturer Boeing is building a completion and delivery center for B737 and B737 MAX airliners in Zhoushan, Zhejiang province; construction began in March 2017 and delivery of the first aircraft is set for 2018.

"If the U.S. begins to impose tariffs on aviation products and parts manufactured in China, all its major companies will also suffer the consequence of trade protectionism," said Tu Xinquan, a professor at the University of International Business and Economics.

Tu said it is also difficult for the U.S. to seek a new alternative manufacturing powerhouse in the world to produce telecommunication, data processing and electrical equipment products it needs if the country insists on imposing more tariffs on electronics shipped from China.

Boeing earlier said the Zhoushan center would deliver 100 planes every year, and the U.S. producer would cooperate with more Chinese interior suppliers, helping raise their skills, from raw materials to assembly.

By 2025, the aviation industrial park in Zhoushan will assemble, deliver and modify more than 600 jets. The value of annual output is expected to reach .1 billion.

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