Tim Worstall

That Sino-British Trade Deficit

This doesn’t actually matter:

Britain’s trade deficit with China soared to
its highest level last year as a glut of cheap imports continued to
flood into the UK, official data is likely to show.

Economists
expect figures to show that Britain imported goods and services from
China worth around £11bn more than it exported to the world’s most
populous country last year.

Bilateral trade deficits simply aren’t important at all. I run a very large bilateral deficit with my local supermarket: they don’t buy anything at all from me. Similarly, I run a large (although of course not as large as I would like) trade surplus with the advertisers on this blog: I don’t buy anything at all from them but they still send me money.

In the sense that such trade deficits do in fact matter at all, it’s my (the UK’s) total deficit or surplus with everyone that matters.

This looks ominous:

But the boom in Chinese imports is not without
political challenges. From the start of next year European Union quotas
on imports of 10 textile categories from China will be lifted, leading,
in theory, to further price falls in Europe’s shops.

However,
a row is brewing over the EU’s possible imposition of anti-dumping
duties on textiles from next year, which would wipe out any price
benefits from the end of tariffs.

British
retailers say protectionist southern European countries are already
lobbying the EU to impose anti-dumping duties on clothes. The EU is
reviewing the situation.

I assume this is the same as with the bra and panties sets and the leather upper shoes. When China joined the WTO we all agreed that such restrictions would be lifted over time. The question now is whether Mandelson will cave and reimpose quotas or tarrifs. Judging by his past performance, he will. Which is something of a pity for as is said:

"Free global trade will contribute more to jobs and growth in Europe
than protectionism ever can. It’s time the EU started putting the
interests of consumers first," said Alisdair Gray, the consortium’s
Brussels director.

Quite, it is the imports that make us rich.

 

In

2 responses

  1. Matthew Avatar
    Matthew

    I’m not sure your analogy is perfect – if you continue it, then you are spending more than your income in general (Britain has a trade deficit) and so your spending at the supermarket might need to be curbed. I don’t think this applies to Britain.
    Tim adds: I agree it’s not a perfect analogy. If we do continue it, and I am spending more than my income, then I must either borrow or sell assets to pay for it. As Britain must and does. We have a surplus on the capital account, don’t we?

    Reply
  2. gene berman Avatar
    gene berman

    Matt:
    There’s nothing whatever wrong with the analogy. Every “trading unit” (whether person, firm, or nation) has more than one “trading partner” either active or potential. The normal situation is that, when summed, the net is positive. (Though a very wealthy person, especially a wealthy retired person, might well choose to continually draw down their surplus without any attempt at offsetting earning. And, even in that latter case, production of sorts is involved as the subject’s assets are productively involved–loaned through banking system or partnered in the wider (shareholding) system of production and exchange.
    In the case of nations whose “account” (nations have no account–they are generated by specific traders) vs another are in deficit, money is “exported,” diminishing continued capacity to import-purchase; they see the foreign money (actually needed for purchases) rise in price (in terms of their own) and their exports rise (what else are foreigners going to do with the money except buy things?).
    Free trade (domestic and foreign) is the closest human attainment to harmony and peace; no force is required to achieve balance in which each does whatever gives the most desirable result and all achieve result to the extent of their abilities. Indeed, the only force involved is the inescapable, reality-imposed condition requiring that each devote himself to that at which he can do best (the principle of comparative advantage) or suffer the diminished circumstances brought on, not by any cruelty of Nature, but by personal choice of another mode.
    Properly understood,”trade policy” will be seen for what it is: the attempt, via coercive violence, to stake out restricted-competition “turf” for politically-important interests; the victims of the monopolistic restriction are voteless foreigners and voting but disorganized (thus less influential) domestic consumers.
    An entirely accurate picture is that gov’t, endowed with legal exercise of violence to protect persons, property, and peace, embezzle part of that capability selling it to specific fractions intent on victimizing their fellows both at home and abroad.
    The tragedy is that an overwhelming majority–everywhere–live less well-off (materially ) and more subject to violence and disruption than would be otherwise the case. There can be no doubt whatever that interventionism (trade policy) has caused the largest wars in the history of mankind and that even many other expressions of violence such as religious wars and those over land and natural resources are, in great degree, a result of like wrongheadedness.

    Reply

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