China surpassed the U.S. to become the world’s biggest trading nation last year as measured by the sum of exports and imports, a milestone in the Asian nation’s challenge to the U.S. dominance in global commerce that emerged after the end of World War II in 1945.
U.S. exports and imports last year totaled $3.82 trillion, the U.S. Commerce Department said last week. China’s customs administration reported last month that the country’s total trade in 2012 amounted to $3.87 trillion. China had a $231.1 billion annual trade surplus while the U.S. had a trade deficit of $727.9 billion.
China’s emergence as the biggest global trading nation gives it increasing influence, threatening to disrupt regional trading blocs as it becomes the most important commercial partner for countries including Germany, which will export twice as much to China by the end of the decade as it does to neighboring France, said Goldman Sachs Group’s Jim O’Neill.
“For so many countries around the world, China is becoming rapidly the most important bilateral trade partner,” O’Neill, chairman of Goldman Sachs’s asset management division and the economist who bound Brazil to Russia, India and China to form the BRIC investing strategy, said in a telephone interview. “At this kind of pace by the end of the decade many European countries will be doing more individual trade with China than with bilateral partners in Europe.”
Still, the U.S. economy is more than double the size of China’s, according to the World Bank. In 2011, the U.S. gross domestic product reached $15 trillion while China’s totaled $7.3 trillion.
“It is remarkable that an economy that is only a fraction of the size of the U.S. economy has a larger trading volume,” Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics in Washington, said in an e-mail. “The surpassing of the U.S. is not because of a substantially undervalued currency that has led to an export boom,” said Lardy, noting that Chinese imports have grown more rapidly than exports since 2007…
Of course, the typical American politician – whether he knows the facts or not – will still try to trade xenophobia for votes.
The U.S.’s bilateral trade deficit with China, which peaked in 2012, could remain a flashpoint of tension between the two countries, said Eswar Prasad, professor at Cornell University.
“This trade imbalance is not representative of the amount of goods actually produced in China and exported to the U.S., but this perspective tends to get lost amidst the heated political rhetoric in the U.S,” Prasad said…
According to O’Neill, the trade figures underscore the need to draw China further into the global financial and trading architecture that the U.S. helped create.
“One way or another we have to get China more involved in the global organizations of today and the future despite some of their own reluctance,” said O’Neill said, mentioning China’s inclusion in the International Monetary Fund’s Special Drawing Rights currency basket. “To not have China more symbolically and more importantly actually central to all these things is just increasingly silly.”
“Increasingly silly” passes for economic analysis in the American political establishment, nowadays. The conservative half of the TweedleDeeDum political parties has buried itself up to the eyeballs in ideological corruption. A losing quest for absolute political power in a changing society. The moderately conservative leadership of the other half of our Beltway Gemini still hasn’t the courage to walk away from Cold Warrior agitprop that passes for foreign policy, international commercial policy.
I think our nation’s economy will continue to underperform, continue to reject opportunities that mutually benefit both East and West until we finally face the possibility of being nothing more than a junior partner in the global economy of the future. Maybe our politicians will figure out how to screw that up, too?