Revised Values for U.S.-China Trade Deficit
We can now use the estimated markups for goods shipped through Hong Kong to revise and reconcile the differing values for U.S.-China trade. The key principle is that the value-added on goods as they pass through Hong Kong should be attributed to Hong Kong, rather than treated as an export of some other country. This value-added is computed as the Hong Kong markup times the re-export value of the goods as they leave Hong Kong. Thus, for eastbound trade in part A of Table 5, the first column shows the value-added on Hong Kong re-exports of Chinese goods to the United States. This is obtained by using the Hong Kong value for these re-exports, multiplied by the markups obtained by method С in Table 2. In 1995, for example, the Hong Kong re-exported $27.5 billion in goods from China to the U.S. (Table 1 A, column 5), of which we attribute $7 billion as the value-added in Hong Kong (Table 5A, column 1).
This value-added in Hong Kong should be deducted from the value that the United States reports as imports from China, which was $45.5 billion in 1995 (Table 1 A, column 1), to obtain the revised value of U.S. imports of $38.3 billion (Table 5A, column 2). This revised figure therefore corrects for the policy of the U.S. Department of Commerce to attribute the value of all Chinese goods passing through Hong Kong en route to the United States as Chinese exports, thereby ignoring the value-added in Hong Kong. The value for Chinese exports to the U.S. also needs to be adjusted, to reflect the fact that many of these exports are simply not recorded. Instead of using the Chinese value for the exports to the United States via Hong Kong (Table 1 A, column 4), we instead use the value reported by Hong Kong for Chinese re-exports to the U.S. Kong (Table I A, column 5), less the value-added onto these goods in Hong Kong. This calculation yields the revised figure for Chinese exports to the United States of $30.8 billion in 1995 (Table 5A, column 3). payday advance loans
The discrepancy between the revised U.S. imports from China and the Chinese exports to the U.S. is now $7.5 billion. A small amount of this discrepancy reflects factors such as: differences in the geographic territories considered by the two countries (the U.S. includes Puerto Rico and the U.S. Virgin Islands as part of its customs territories, whereas China does not); the U.S. includes the value of repairs as imports whereas China does not include these as exports; and other factors identified in the interagency report. While the discrepancy is still sizable, it is much less than the original discrepancy of $20.3 in the reported value from each country. Thus, by properly attributed the value-added to Hong Kong, we have reduced to discrepancy in the U.S. and Chinese values for eastbound trade to about one-third of its original magnitude.