Saturday, October 23, 2010

How We Count

As long as we’re talking about China, here’s another good item. When we talk about trade and the topic moves around to trade deficits, I think it's always a good idea to talk about how trade is measured. Mark Perry at Carpe Diem has a good post that discusses that very idea.

The example Mark uses is the iPod. It is counted as "made in China" and is counted as an import. The reality is the components come from many countries and the final assembly is done in China. Of the $150 price tag, only about $4 of value is directly attributable to China. Yet, since that's the last stop before it finally comes to the U.S. It's counted as an import from China. But it really is a simplification.

I look forward to your comments.

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