Trade in factor income and the US-China trade balance

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

No 819, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

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.

Keywords: trade in factor income; trade in value added; trade balance; global value chain; the US-China trade (search for similar items in EconPapers)
JEL-codes: D57 F10 F21 F23 F6 (search for similar items in EconPapers)
Date: 2021-06
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 819. 2021-06

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Journal Article: Trade in factor income and the US-China trade balance (2022)
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