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Trade in factor income and the US-China trade balance

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  • Bo, Meng
  • Yuning, Gao
  • Jiabai, Ye
  • Meichen, Zhang
  • Yuqing, Xing

Abstract

Numerous the US multinational enterprises sold considerable amounts of products, which were “made” in China or third countries, to China’s domestic consumers, but these sales were not counted as the US exports to China. We propose a beyond-border-type measure, “trade in factor income,” that defines the US-owned factor-income induced by China’s final demand as the US export to China. Based on this measure, we find that the conventional cross-border trade statistics averagely leads to 17.4-32.0% overestimation of the US-China trade deficit (2005-2016). Our new measure helps a great transformation of trade measures from the territory-based “made in” label to income-based “created by” label.

Suggested Citation

  • Bo, Meng & Yuning, Gao & Jiabai, Ye & Meichen, Zhang & Yuqing, Xing, 2021. "Trade in factor income and the US-China trade balance," IDE Discussion Papers 819, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper819
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    References listed on IDEAS

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    More about this item

    Keywords

    trade in factor income; trade in value added; trade balance; global value chain; the US-China trade;
    All these keywords.

    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F10 - International Economics - - Trade - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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