China estimate of the day

by  Tyler Cowen in

The estimates imply that trade with China increased U.S. consumer surplus by about $400,000 per displaced job, and that product categories catering to low-income consumers experienced larger price declines.

That is from a new paper by Xavier Jaravel and Erick Sager.

Comments

clockwork_prior

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'increased U.S. consumer surplus by about $400,000 per displaced job'

Simply needing to buy a lot of cheaply made goods to keep up with how quickly they need to be thrown out is likely not what most would consider
'consumer surplus.'

Crikey

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Here in Australia land, among other things, we get solar panels, solar inverters, roof racking hardware, cabling, and batteries from China. No wind turbines I know of, but we test Chinese ones in Tasmania. Many of our very limited number of electric cars come from the US, but that's not likely to be maintained. (For one thing, Tesla doesn't allow their car batteries to discharge to the grid. Just 10 hours of discharge can earn $2,000 US during critical peaks.)

clockwork_prior

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'among other things, we get solar panels, solar inverters, roof racking hardware, cabling, and batteries from China.'

And in Germany, where all those things were manufactured locally, to fairly high quality, performance, and longevity standards, the Chinese underbid on price, based to a major extent on lower quality.

Of course, at this point, China is able to manufacture high quality goods - which do not really compete on price to the same extent.And in large part, they were able to do this by having intentionally undercut competitors and gain market share.

Clearly, if one is merely a consumer of such equipment, lower prices are attractive, and the Chinese strategy can certainly be seen as beneficial to the consumer.

In contrast, if one actually has a manufacturing base for such equipment, being undercut in such fashion is fairly obviously an attempt of the Chinese to remove competitors from the market.

At which point, the discussion starts involving a lot of different variables and perspectives. However, the idea that market dumping practices is always beneficial to a consumer tends to be the sort of idea held by those that actually do not care about a manufacturing base. Or those who notice that the power drop off over time on those cheaper panels is much higher than originally advertised - which tends to actually reduce one's anticipated ROI.

JF

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Please prepend applicable trigger warnings to comments.TW: Brain-melting

Tom T.

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Precisely the arguments made by GM and Ford fifty years ago to try to keep Japanese cars off the US market.

M

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And could be levelled at Germany itself, too, with plenty of licence.

But the difference is that China is a authoritarian power which sees market share and limited, managed access to its market as a means to an ends of spreading the tendrils of China's security apparatus across the world, managing speech in foreign democracies, and generally suppressing any single threat across the world to the party's rule.

Whereas the Germans don't. The Germans pursue extraordinary means to subsidize exports at the expense of their workers - they have a currency union which is systematically undervalued relative to the Mark, they work with unions to suppress worker wages, they have low educational, occupational and income mobility society in which workers are channeled along specific routes which are of use to German capitalism, they subsidize R&D by a high clip of taxation relative to the norm at the same time as they evade their military spending commitments.

But those are largely issues for the German worker (and workers in other Euro states) to take up against the German Establishment, which represents German capitalism. They are not really issues for *us* in the same way that are the issues China poses.

They are further issues which are largely internal to German society - Germany achieves its competitiveness by suppressing costs within Germany, and subsidizing R&D, while complying with internal trade law. They're not something which other governments can do anything about, unlike the assymetric market access and IP protection arrangements between the West and China, and China's WTO violations, which cannot be justified to stand, in that they mainly help a party whose goals are on a collision course with what the West would consider free societies.

OneGuy

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This all reads like pure BS. If they want this fabrication to be believed they should have picked a more believable dollar amount like $6000 instead of $400,000. Perhaps they underestimated their audience.

Crikey

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I'd like to thank Germany for selling the better Chinese panel manufacturers a great deal of the equipment they use.

clockwork_prior

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Absolutely - and one of the major American panel manufacturers is German owned.

One can have an interesting discussion about the differences between a manufactuing economy and one that is (or no longer) concerned about the balance necessary between the cheapest price and the preservation of a manufacturing base. Of course competitors will price dump in an attempt to gain market share and/or destroy competing manufacturers - and to ignore that fact is as stupid as to protect an industry by excluding all competition.

But what was obvious in 1980 to most Americans regarding a number of industries - manufacturing electrical/electronic equipment comes very much to mind - seems to be of no concern to Americans today. Which may make some sense, since there is not much of an American electrical/electronic equipment manufacturing base left at this point.

B Powers

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People still line up around the block to snag a Chinese made IPhone. Those I imagine don't get thrown out a lot.

clockwork_prior

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'Those I imagine don't get thrown out a lot.'

This starts to be more about Apple than China, but yes, those iPhones do tend to get thrown out a lot, as repairing them is not really easy. Even if there are improvements happening, one can see that Apple is responding to pressure, and not because it does not want people throwing out iPhones - 'It’s soon going to be much easier to get your iPhone fixed. Apple said early Thursday that it was expanding its product repair program. The company plans to give more independently owned repair businesses the same tools and manuals it gives to “Apple Authorized Service Providers.”

It’s a move that advocates of the consumers' “right to repair”—who often criticize tech giants like Apple and Microsoft for tightly controlling access to the tools and methods needed to fix or upgrade their electronics—are calling a major step forward in the movement.

Apple’s expansion of the program is limited to repair businesses in the US, and it comes with some qualifiers. For example, some type of certification is still required before Apple will provide the required tools, and the company is demanding that any broken parts collected by the indie repair shops are sent back to Apple. Even still, many see this as a win for technology repair businesses, as well as for consumers.

Kyle Wiens, the founder and CEO of iFixit (who also occasionally writes for WIRED’s Opinion section) says that Apple is “finally responding to the reality that their customers have been dealing with for years: Apple does not have the capacity to handle the volume of repairs generated by their market success.”' https://www.wired.com/story/apple-offers-customers-more-iphone-repair-options/

Zaua

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Stuff made in China varies on the quality spectrum just like stuff made anywhere else. If China made production cheaper, it means you can get the same quality goods for cheaper, or better goods for the same price.

clockwork_prior

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'Stuff made in China varies on the quality spectrum just like stuff made anywhere else.'

Absolutely, but you honestly think that the low income customers are the ones primarily benefitting from that effect? And it does appear that there are comparatively fewer semi-slaves working for Chinese manufacturers than a decade ago, so that fundamental moral objection to cheap Chinese goods is shrinking over time.

Basically, the Chinese want to follow the path of the Japanese or South Koreans, which means moving up the ladder. In contrast to Bangladesh, which probably remains a premier location for textiles, in part because of labor costs the Chinese are no longer willing to compete against.

Freedom for Hong Kong

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Trump has still said nothing to defend the NBA from China. He is a coward. He lacks the spine to stand up to totalitarianism.

We live in interesting times

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...It all started with a 40-year container terminal lease between the Port of Long Beach in southern California and Hong Kong. The Obama administration proudly signed the agreement in 2012 giving China control of America’s second-largest container port behind the nearby Port of Los Angeles. One of the Trump administration’s first big moves was to get the Communists out of the Port of Long Beach. After a national security review and federal intervention, the Long Beach terminal business, which handles millions of containers annually, is finally being sold to an Australian company called Macquarie Infrastructure Partners. That essentially kills China’s decades-long contract with the Obama administration....

sfw

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Yet the Australian Gov has allowed the Chinese to take control of the Port of Darwin.

We live in interesting times

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First things first—killing the Obama rental deal of the Port of Long Beach.

Axa

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First the article: http://cep.lse.ac.uk/pubs/download/dp1642.pdf

Crtl+F "food" and this comes out on page 41:

"We find that higher-income groups benefit proportionally more from increased trade with China: 6.19% more for college-educated households relative to those without a college degree; 8.39% more for households earnings above $60,000 a year relative to those earning less; and 14.53% more for households earning above $100,000 relative to below $30,000."

These differences result from the fact that, between 2000 and 2007, import penetration from China increased faster in product categories that sell relatively more to higher-income groups (e.g., in consumer electronics rather than in food products). This finding is confirmed in Column (4) in a sample restricted to goods only (including services tends to attenuate the differences, because higher-income groups spend more on services and services are not exposed to trade with China)."

There you have it. If you look only at the BLS Consumer Price Index Food, you get to the conclusion that lower-income is the most benefited from trade with China. If you look only at goods, specifically at food which represents a good fraction of poor people expenses, the benefit is no there. Food is not cheaper because China :/

chuck martel

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higher-income groups benefit proportionally more from increased trade with China:

Higher income groups have, by definition, more money to spend on consumer goods. The fact that they benefit more, proportionally, from imports doesn't negate the benefits trade brings to lower income groups.

Axa

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40 million US people receive subsidies to buy food because enough food is above their income.

It's not about percentages saved but the type of things that are cheaper.

chuck martel

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The food subsidies aren't just for 40 million low income Americans. They're also for farmers, agri-business enterprises, food manufacturers and distributors and retailers. The 40 million, often obese, low income consumers aren't dining on rice, beans and grits. They're eating meals that pre-industrial royalty couldn't get.

peri

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Thank you, Axa. I saw "surplus catering to low-income consumers," pictured them spending it at Walmart, along with a cart full of things bought with SNAP. But I wouldn't have been able to explain it as you did.

Vivian Darkbloom

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"The estimates imply that trade with China increased U.S. consumer surplus by about $400,000 per displaced job, and that product categories catering to low-income consumers experienced larger price declines."

Shouldn't the measure be solely the "trade increased by displaced jobs" and not trade in total? It is possible to have a lot of trade without displacing jobs.

rayward

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I suspect that Walmart benefited as much as Apple as the result of trade with China: all those cheap household goods produced in China that Walmart shoppers buy by the cart-load, most of which eventually end up in the local landfill. But manufacturing in the U.S. suffered, right? During the economic recovery manufacturing output in the U.S. soared (even as GDP did not). Can you say imported intermediate goods. But hasn't manufacturing output in the U.S. fallen during the past year? Can you say tariffs on imported intermediate goods. The story of China and trade is a lot more complex than most people realize, which is a benefit to a politician like Trump. If we really wish to accurately measure "consumer surplus", shouldn't we take into account the cost to the environment for the carbon emissions in China as the result of the China miracle, and the cost to remediate the effects of global warming? I suspect the consumer surplus would become the consumer deficit.

Ellsworth

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I am a long-life Republican voter, but in 2020 I will vote Democrat. Enough is enough. I can't remain silent while the President trashes our country.

anonymous

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Thiago, as a foreigner, you can't vote in our elections unless you want to go to jail. Trump will put you in a cage.

Ellsworth

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My name is not Thiago. I am Mr. Ellswoŕth from Raleigh, in the Great State of North Carolina.

He must be telling the truth

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North Carolinians are known for putting accents over their r's

Thomas

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I am outraged by Oresident Trump's betrayal of our allies. #weareallbrazilianstoday #theberlinairliftofourtime #brazilwillriseagain #neverinthefieldofhumanconflict #brazilsfinesthour

Arthur

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The world will little note, nor long remember what we say here, but it can never forget what Brazilians did. They were allies in WW 1, WW 2, the Cold War and the War Against Terror. They have helped America to face Red China and the European Union. They have helped America to curb the enviromentalist and the homosexual agendas. How could our president betray our closest ally?

Peter S

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So Trump doesn't think highly of Brazil. He is just a very ignorant person, it doesn't make him wrong. He feels Argentina and Romania are much more important to the OECD than Brazil. That's why he chose them.

Arthur

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So that is it. He is right when he throws our closest ally under the bus. There was a deal. Brazil gentlemanly fulfilled its side of the bargain. Yet, Trump backstabbed it. To support pro-socialist Argentina!!!!!!!!?

#weareallbrazilianstoday #theberlinairliftofourtime #brazilwillriseagain #neverinthefieldofhumanconflict #brazilsfinesthour #neverforget

Literally insane. Literally.

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There's only two possibilities for Thiago, and both indicate insanity.

1. He is trolling us, playing a character, but he's been doing it so long and so ineffectively and unrelentingly, no sane person would still be at it. Even the Cuckmeister has mostly retired.

2. He actually believes his nonsense, which is a level of insanity I've never seen in my entire life.

Lol

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He’s off his rocker either way.

Zaua

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Most studies that I’ve seen of various tariffs typically find that they cause consumer prices to rise by high-six-figures per job saved. $400,000 is lower than that but still an order of magnitude over the value of one of these typical jobs. I’ve never seen a study quantifying the consumer costs versus employment benefits of tariffs that comes out in favor of the tariffs, not even from the pro-tariff people.

Tom T.

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George Mason runs several student programs in partnership with China, and presumably lots of other American universities do too. Knowing what we know now, one has to wonder to what extent the word goes around that that Chinese money is conditioned upon the American professoriate carrying on a robust defense of China's interests.

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