1. Korea, Japan & Taiwan = True Cause of US-China Trade Imbalance

    There are plenty of misguided reasons why media and politicians love calling China a “currency manipulator,” but Bloomberg makes a shrewd observation and points out that much of the trade imbalance (aka, China’s trade surplus) is the the result of Asia’s value-add bottleneck: 

    Processing exports (those with a high import content, facilitated by low import tariffs) now account for about half of China’s trade volumes but are responsible for the entirety of its surplus. Eighty percent of the value added for these components, however, is sourced elsewhere.

    This relationship is captured in the swelling trade surpluses of South Korea, Japan and Taiwan with China. Together, they rose from $30 billion in 2000 to more than $200 billion in 2010. In other words, China’s trade surplus with the U.S. originates largely from this North Asian trio.

    When U.S. President Barack Obama welcomed Lee Myung Bak, his counterpart from South Korea, to Washington last year, he commented approvingly that South Korea’s trade with the U.S. was in balance — “as it should be.” What Obama should have done was congratulate Lee by noting that South Korea, along with several others, has been able to avoid U.S. criticism by hiding its trade surpluses behind the Great Wall of China. Don’t Blame China’s Currency for US Trade Deficit