New estimates of the United States-China bilateral trade balances

The United States and China have vastly different official estimates of the bilateral trade imbalance. The U.S, figures show that the United States ha d a merchandise trade deficit of US$68.7 billion vis-a-vis China in 1999 wh ereas the Chinese figures show that China had a merchandise trade surplus o f only US$22.4 billion vis-h-vis the United States. There is a difference o f US$46.3 billion. Which set of figures is right? It turns out that neither side is completely right. Various factors, such as f.o.b.-c.i.f. adjustmen ts and treatments of re-exports and re-export markups, complicate the measu rement of the bilateral trade balance between the United States and China. One important conclusion that emerges is that while U.S. trade statistics m ay be more reliable than Chinese trade statistics, even they are not comple tely accurate. By explicitly taking into account the aforementioned factors , the discrepancy between the adjusted U.S. and Chinese data on the bilater al trade balance in 1999 is narrowed from US$46.3 billion to US$4.8 billion , or approximately 10% of the initial figure. Our best estimate for the tru e U.S.-China bilateral merchandise trade balance for 1999 is US$47.8 billio n, in China's favor. If we take into account the trade in services? in whic h the United States has traditionally enjoyed a surplus, the U.S.-China bil ateral trade balance may be estimated at approximately US$45 billion in 199 9. Compared with the U.S, trade deficit with Japan (over US$70 billion in 1 999), the U.S.-China trade deficit, appropriately adjusted, is still signif icantly smaller. (C) 2001 by Academic Press.