Expert: West Michigan ‘well-positioned’ in trade market
CEO of SafeSource Trading credits region’s diversity in advanced manufacturing, agriculture for good standing.
A Chinese expert believes much of the world is looking at trade all wrong, but West Michigan has a lot to gain.
Jeremy Haft spoke at the World Affairs Council Western Michigan in March with the message that the trade numbers the United States uses don’t explain the whole story, including the Gross Domestic Product. Haft is CEO of Washington, D.C.-based SafeSource Trading and an adjunct professor at Georgetown University.
Haft’s belief starts with GDP and how many Americans believe China has surpassed, or will soon, the U.S. as the world’s economic superpower. Comparing national wealth, the U.S. is more than $45 trillion richer than China and the gap is growing, Haft said.
“GDP is a number that was invented in 1930s and has little bearing on a modern globalized economy,” said Haft, who also has written two books on Chinese trade. “If we compare household wealth, how would you compare mine to yours? You compare balance sheets. In economics, the balance sheet is national wealth, which adds up assets and liabilities of households, businesses and government. That’s a much better sense of what a larger economy is.
“China isn’t catching up, they’re stagnating.”
Along with GDP, Haft said the trade imbalances touted by both President Donald Trump and Vermont Senator Bernie Sanders during the 2016 presidential race are misleading. Most of the products consumed by people across the globe are made in collaboration by companies in multiple countries, he said, but the trade numbers assign 100 percent of the value to the last country to ship them to the U.S.
Haft used an iPhone as an example of a product 100 percent assigned to China in trade value, when in producing the product, China adds less than 10 percent with non-critical components and assembly. He suggests moving to the value-added trade measurements, as both Japan and the World Trade Organization support, as well.
“What we’re doing is measuring trade as if we’re still swapping wine for cloth,” he said. “Looking at the value-added system, it starts to show where the value comes from. When you look at products that way, you see how important the U.S. is and how our current numbers minimize it.”
He used tariffs imposed on Chinese solar panels in 2014 by the Obama administration as an example of trade policy having the reverse affect as planned. The U.S. hiked tariffs on solar panels being “dumped in the U.S.”
“They were saying it was costing the U.S. jobs and looking at gross trade, it gave China a big imbalance in their favor,” Haft said. “When you look at it with value add, the U.S. is a net exporter; we sell them more value in solar panels than we buy.
“When he put on those tariffs, the panels became more expensive, imports slowed down, demand of the inputs lowered and we ended up losing more jobs.”
Haft said his message is apolitical, as both parties have suggested trade policies to protect and add jobs.
“Tariffs aren’t the way to protect jobs,” he said. “For every dollar worth of imported stuff from China, 55 cents go to U.S. firms. When we bring a car in from Canada, it has a high degree of U.S.-made content.
“If you start taxing imports from Canada, it makes those products more expensive, demand goes down and it supports fewer jobs in the U.S. The U.S. is really exporting a ton of stuff we’re importing.”
Michigan could and already does add value to trade relationships globally, he said.
West Michigan stands to gain a lot from China’s inefficiencies, Haft said. The region’s diverse advanced manufacturing, scientific assets and agriculture will be needed to help China in the coming years, he said.
“West Michigan is well-positioned for the next century, because it’s so diversified with advanced manufacturing, agriculture,” he said. “The reason is, for China, the next century will be driven by scarcity.”
Haft called his message optimistic. Despite internal issues, such as underemployment and wage stagnation, the U.S. is the global economic superpower and should turn focus away from “demonizing Mexico” to policy training the next generation on how to handle automation and helping workers who have been displaced.
“The U.S. is far and away richer than China,” Haft said. “We have vexing issues, but competitiveness and remaining a global economic power is not one of those problems.
“It ain’t China, it’s our own policies that determine our destiny.”