[230113.EN.BIZ] New OECD-WTO Trade Calculation Aims To Dampen Protectionist Outcry

CHINA's trade surplus with the US diminished 25 per cent when calculated according to how much value each country contributed to the product's Chinese factory price, Reuters reports.

The new calculation comes from the Organisation of Economic Cooperation and Development (OECD) and the World Trade Organisation (WTO), which hopes it will dampen cries for protectionism.

Giving as an example, the Chinese factory price of an Apple smartphone - US$187.51 - the WTO and the OECD say the total price should not be honestly included in China's gross export figures, because components were made elsewhere.

Taking the Apple smartphone example, iSuppli and Chipworks estimates that Taiwan contributed $20.75 of the value; Germany, $16.08; South Korea, $80.05; the United States, $22.88 and others, including Japan, $47.75.

OECD secretary general Angel Gurria said the value-added approach challenged the conventional wisdom regarding trade, adding that cries to revalue the Chinese yuan are "less important and less relevant. Today, we have to think about goods and services as 'made in the world".

Said WTO director general Pascal Lamy: "What these numbers change is the ingredients of the judgment you have to make. You have to look at how this is distributed."

Putting the figures together in what the OECD and WTO said was a "first analytical stab," America's 2009 trade deficit with China shrinks 25 per cent to $131 billion from the $176 billion shown in the gross data.

The flip side is that the US deficit with South Korea, Japan and other Asian countries supplying intermediate inputs to China is bigger.

For the same reason, Japan's trade surpluses with South Korea and China almost disappear when looking at value-added flows because Japanese exports of chips and components do not end up in those countries' final consumption.

Source : HKSG.