Trade statistics are treacherous, and you can make any argument that you want to with them. Here’s mine: I want to eliminate from “trade” all intra-firm transactions, where GM, on paper, sells to GM in Mexico and Canada; and these subsidiaries, in turn, sell the same products back with some in-country value added.
In the early 90’s I made a presentation to the Heritage Foundation in which I guessed at the percentage of intra-firm trade between the US and other countries. Once you deflate for intra-firm transactions, Canada and Mexico, instead of being the 1st- and 2nd-ranked trading partners with the US, fall to 10th and 13th.
In terms of trade, and excluding energy, Blackberry and Corona, Mexico and Canada are mainly service providers, not true exporters.
As for China, trade statistics, which measure customs declarations, do not include the product R&D that is done in the US. Apple is advertising “Designed in USA.” The value of that design, which is incorporated into Chinese-assembled exports of the iPad and iPhone, is not included in the putative 4.2% US value-added in imports from China. Given China’s history over the past half-century of appropriating the intellectual property of others, trade statistics that were deflated by the value of appropriated property would likely tell a very different story.
CLICK HERE to view the original article “The North American Global Powerhouse” that was published in the Wall Street Journal July 12, 2013.