The growing lopsided trade deficit between China and the US is highlighted by the Barbie doll, writes Rone Tempest in Beijing
A BARBIE doll is for sale at the Anaheim, California, Toys R Us store in a bright cardboard-and-cellophane box labelled “Made in China”. The price is $9,99.
But how much will China make from the sale of the pert fashion doll marketed around the world by Mattel Incorporated?
About 35 cents, according to executives of the Asian and United States toy industry – mostly in wages paid to 11 000 young peasant women working in two factories across the border from Hong Kong in China’s Guangdong Province.
“What China is mostly exporting is its cheap labour,” said David A Miller, president of the Toy Manufacturers of America.
China’s cut of the Barbie doll is important because it touches one of the main political strains between China and the US today: the growing, lopsided trade deficit in favour of Beijing.
China contends that the US Commerce Department’s calculation of the deficit, estimated to reach $36,2-billion by the end of the year, is distorted and unfair. US political leaders view the deficit with alarm, proclaiming it America’s next No 1 trade issue, eclipsing the long-standing wrangle with Japan.
But tracing Barbie’s peripatetic, multi- country path from her raw material source in a Saudi Arabian oil field to aisle 12-C of a Southern California toy store raises even bigger questions that are being debated in business and academic circles:
l How relevant are traditional bilateral trade calculations – a baseball-type scorecard of winners and losers – in an era of increasing globalisation of products?
* If such calculations are relevant, should the deficit with China, a developing country where most exports are still labour- intensive “processed products,” be placed in the same category as the deficit with Japan, a fully industrialised country that has systematically targeted key US industries?
* In the end, what does the label “Made in China” – or “Made in USA” or “Made in Japan” – really mean? China gets its estimated share of Barbies sold in Anaheim from minimal taxes and licensing fees as well as in worker wages. However, because of complicated international trade rules that define a product’s point of origin, China is charged with an import value of $2 by the time the doll reaches America.
Eventually, after factoring in transoceanic shipping, domestic trucking, advertising and other functions that employ thousands of workers in the US, the Anaheim Barbie will eventually achieve her full price, resulting in at least a $1 profit for Mattel.
According to the US Customs figures, toys imported from China in 1995 totalled $5,4- billion, about one-sixth of the total deficit figure as calculated by the US government.
Several other countries contributed to the making of the Anaheim Barbie as much as or more than China did. From Saudi Arabia came the oil that, after refining, produces ethylene. Taiwan used the ethylene to produce vinyl plastic pellets that make up Barbie’s body. Japan supplied her nylon hair. The United States supplied her cardboard packaging. Hong Kong managed everything.
Each country took a cut along the way to the doll’s $2 export value, the number used in calculating trade figures (about one-fifth of the eventual retail price). But China was stuck with the bill: in the trade ledgers, Barbie is one of its exports.
This fact is increasingly important as China’s trade advantage with the US continues to grow, alarming politicians and pushing the world’s richest country and its most populous country into a testy standoff.
US Commerce Department officials recently announced that according to June figures, for the first time in history China surpassed Japan as the country with the largest trade imbalance with the US. China immediately cried foul, claiming the US figures failed to take into account the value added to the product in Hong Kong and other way-stations.
A vast gap divides the US estimate of its trade deficit with China and the calculation of China’s Ministry of Trade. In 1995 the Commerce Department placed the deficit at $33,8-billion in China’s favour. China said the deficit was $8,6-billion.
In a recent position paper, the US-China Business Council, a high-powered lobby dedicated to promoting US-China trade, blamed the trade discrepancy on two accounting errors: the Commerce Department’s failure to factor in the role of Hong Kong as a critical entrepot for both exports from China to the US and exports from the US to China.
In fact, the differences in calculations would not matter much if they did not have an important political dimension in America.
In recent years, the US government has focused on trade issues, such as the annual renewal of Most Favoured Nation trading status, as a way of attempting to influence China on a range of unrelated issues. Like the bitter ongoing dispute with Japan, the US-China trade clash could be a volatile political issue in years to come.
Presidential candidate Ross Perot, armed with the June figures, made it a central point of his Reform Party acceptance speech in August.
“We’re the only industrialised nation in the world with a trade deficit with China,” Perot said. “We’d better find somebody who knows how to horse trade, don’t you think?”
“Yes!” shouted his enthusiastic supporters.
Such pronouncements are usually based on the assumption that as the exporting country, China makes more from its products than does the US. In fact, most of Barbie’s eventual $10 price is accumulated in America.
Mattel’s profit alone is three times what China gains from each Barbie. – Los Angeles Times