Searching again to Sino-U.S. bilateral trade balance：
An analysis of trade products’ competitiveness
LIN Jue
Shanghai University of Finance and Economics, Shanghai 200433, China
Abstract：After China’s entry into the WTO, Sino-U.S. bilateral trade presents the fast growth
tendency. But, at the same time, the United States’ trade deficit to the China is also unceasingly
expanding. Thus, that initiates unceasing trade friction. How to regard the dispute between China
and America? How to explain the expansing deficit? Where is the way to balance the bilateral
trade deficit? This article attempted to answer them from the trade products’ competitiveness angle
by the methodology of positivism analysis. The paper separately calculated and contrasted the
trade competitive index（TC） and revealed comparative advantages index（RCA）of all products
on the two levels of “Section”（2001～2006 years）and “Chapter”（2003～2006 years）, through
using the data from different statistical caliber of both country governments. Further, the article
inspected the world competitive situation on the American products which being in “very low” or
“lower” competitiveness in bilateral trade. It found there were 7 Chapters products which
displayed “strong” or “stronger” state. At last, the article also used Grubel- Lloyd index（GLD）to
study the intra-industries trade level of the 36 chapters “weak” products in the world trade. It
discovered that some of those products, being in “weak” or “very low” or “lower” in multilateral
and bilateral trade, were intra-industry trade, not inter-industry trade. In the foundation above
analysis, the article pointed out the primary cause of U.S. deficit to China and the way to realize
the trade balance.
Key words：Sino-U.S. trade balance; competitiveness comparison; intra-industry trade and
inter-industry trade
Resume of Author：LIN Jue, Professor and Ph.D, Director of the World Economy Institute of
Shanghai University of Finance and Economy.
1
Searching again to Sino-U.S. bilateral trade balance：
An analysis of trade products’ competitiveness
LIN Jue
1．Introduction
After China’s entry into the WTO, Sino-U.S. bilateral trade presents the fast growth tendency.
But, at the same time, the United States’ trade deficit to the China is also unceasingly expanding.
That initiates trade friction rising between both countries. How to regard the dispute? How to
explain the expansing deficit? Where is the way to balance the bilateral trade deficit? This article
attempted to answer them from the trade products’ competitiveness angle by the methodology of
positivism analysis.
The paper separately calculated and contrasted the competitive index（TC） and revealed
comparative advantages index（RCA）of all trade products of both countries on the two levels of
“Section”（2001-2006 years）and “Chapter”（2003-2006 years）, through using the data from
different statistical caliber of both country governments. Further, the article inspected the world
competitive situation of American products being in “very low” or “lower” competitiveness in
bilateral trade. It found there were 7 Chapters products which displayed the “strong” or “stronger”
state. At last，the article also used Grubel- Lloyd index（GLD）to study the intra-industries trade
level on 36 chapters “weak”products in the world trade. It discovered that some of those products,
being in “weak” or “very low” or “lower” in multilateral and bilateral trade, were intra-industry
trade, not inter-industry trade. In the foundation above analysis, the article pointed out the primary
cause of U.S. deficit to China and the way to realize the trade balance.
2. The bilateral trade balance situation
Since China joined in the WTO， the bilateral trade between China and America presents a
fast growth tendency. According to Chinese Customs statistics, the volume of bilateral trade was
80.48 billion dollars in 2001, which jumped at 262.68 billion dollars in 2006. It’s 2.3 times bigger
than five years ago. In which, from 2002 to 2006, China’s exportation to U.S. increased about 25
percent to 35 percent，above importation. At the same time, the trade surplus of China to America
expanded unceasingly, from 28.08 billion dollars up to 144.26 billion dollars for 2001-2006, that
expands 4.1 times. The favourable balance reached 73.91 billion dollars in first half year of 2007，
it’s 18.6 percent higher than that of 2006. And according to American statistics, from 2001 to 2006,
American trade deficit to China increased 1.58 times，from 90.15 billion dollars up to 232.5 billion
dollars. The deficit was 56.9 billion dollars in the first season of 2007, increased 20.2 percent.（see
Table 1）
Table 1: Sino-U.S. bilateral trade statistics data
import & export value
year
rank*
export value
import value
American trade
deficit
import and comparison rank* export total comparison rank* import total comparison according to
export total rate(%)
(billion
rate(%)
(billion
rate(%)
China
(billion
dollars)
dollars)
(billion
dollars)
dollars)
2
according to
U.S.
(billion
dollars)
2001
2002
2003
2004
2005
2006
2
2
2
2
2
2
80.48
97.18
126.33
169.63
211.63
262.68
8.1
20.8
30.0
34.3
24.8
24.1
1
1
1
1
1
1
54.28
69.95
92.47
124.95
162.90
203.47
4.2
28.9
32.2
35.1
30.4
24.9
4
6
6
6
6
6
26.20
27.23
33.86
44.68
48.73
59.21
17.2
3.9
24.3
31.9
9.1
21.5
-28.08
-42.72
-58.61
-80.27
-114.17
-144.26
-90.15
-111.43
-134.83
-175.80
-217.99
-232.50
2007
2
66.72
20.1
2
50.70
20.4
6
16.02
19.1
-34.68
-56.90
**
2007
2
158.35
27.3
2
107.23
17.8
6
33.32
16.1
-73.91
NA
***
Note：* Rank means U.S position in China’s trade partner. ** The statistics data is the first season of 2007.
*** The statistics data is the first half year of 2007.
Data source：a) Tabulation according to Chinese Customs statistical data comed from Website of Ministry of
Commerce of the People‘s Republic of China：http://www.mofcom.gov.cn；b) American statistics data
comed from Website of United Nations Commodity Trade Statistics Database：http://comtrade.un.org.
The trade deficit of the unceasing expansion has already caused some American congressmen
enormous disaffection. They requested to cancel the permanent most-favored nation treatment to
China, even signed jointly “Fair Currency Act of 2007”. They asked their government to take the
trade sanction action to China. The United States thought the unbalance to China mainly came
from China’s unfair Competition, such as artificially underestimating the exchange rate of
Reminbi to U.S.dollars; carring on commodity dumping by the inexpensive price; establishing
non-tariff barrier to import; limiting American products to enter the Chinese market, for exmple,
to limit the importation of America beef, to limit the entry of America movies. In addition, there
was insufficient intellectual property protection. That made American products, the most
competitive power and the most capability surplus, such as computer software and audio-visual
products as well as books and so on, were influenced by copyright pirace. According to the
forecast from International Intellectual Property Alliance which is composed by U.S. industrial
groups，these industries in total lost 2.2 billion dollars in China market for the copyright pirace
action in 2006. Furthermore, the congressmen accused the Chinese government to implement the
subsidy policy to the domestic exportation enterprises’s product, as well as unfair competition in
the telephone communication service and the bank service.
1
But, China retorted upon U.S. and said that United States limited the high-tech products’
export to China was primary cause of the trade deficit expanding. At present the exportation of
U.S. high-tech product is less than 1 percent of total exportation to China. So long as he expanded
the high-tech product exportation, it was completely possible to realize the trade balance.
In April 2007, the United States put China into the “blacklist” of copyright pirate again and
submitted two trade lawsuits to WTO. It accused China not to take strong measures against
copyright pirace, and the trademark protective measures violate the WTO’s principle. It said that
China established trade barrier to American movie, music and books products. The first half year
of 2007, from the defeat suit about the patent infringement on wooden floor lock catch which
brings the universal elimination command to the correlation products, to levying counter-subsidy
1
See “American congressmen creates a clamor reportedly trade sanction to China”, Reference News, March 2,
2007, Page 8; “America threatens China that it will ‘very quick’ submit a case to WTO” Reference News,
February 24, 2007, Page 1.
3
tax to the Chinese art paper, and to all sorts of limitation to Chinese food import for the initiation
of pet food event, the United States is enhancing gradually to the China non-tariff barrier.
How to regard the trade dispute between China and America? How is the competitiveness
both Chinese and American products in the bilateral trade? Where is the way to realize the
bilateral trade balance? This article attempted to find answer from the trade products’
competitiveness angle by analysis methodology of positivism.
3．Analytical method and studying route
As respect competitiveness index of trade product, what used indexes commonly have
“TC”(Trade Competitiveness Index， also called “net import index”) and “RCA” (Revealed
Comparative Advantages Index). The former reflects the competitiveness situation of a certain
product of a nation in international market, through the product’s trade gap between export and
import divided by the sum of the product’s imports and export. The latter judges a certain
product’s comparative advantage for a country, through calculating a ratio – with a product’s
export share of this country’s gross exportation divided by the product’s world export share of the
world whole products’ export. Both fundamental formulas are separately as follows:
a)
( -1≤TCij≤1 )
TCij = (Xij - Mij)/(Xij + Mij)
Where TCij is the international trade index of Product j of Country i; Xij is the volume of
export of the product；Mij is the volume of import of this product.
Generally，0.8≤TCij≤1, which shows that Product j of this Country has a “very strong”
competitive advantage；0.5≤TCij＜0.8， a “stronger” competitive advantage；0＜TCij＜0.5，a
“strong” competitive advantage；TCij = 0, a “normal” competitiveness；-0.5≤TCij＜0，a “low”
competitiveness；-0.8＜TCij＜-0.5， a “lower” competitiveness；-1≤TCij≤-0.8， a “very low”
competitiveness.2
b)
( RCAij≥0 )
RCAij = (Xij/Xit)/(Xwj/Xwt)
In which, RCAij is the revealed comparative advantages index of Product j of Country i; Xij is
the volume of the product’s export of this Country; Xit is the export volume of whole commodities
of this country; Xwj is the total volume of the product’s export in the world; Xwt is the total export
volume of all commodities in the world.
Generally speaking, RCAij≥2.5， which means that Product j of the Country has “strong”
competitive advantage；1.25≤RCAij＜2.5， means “stronger” competitive advantage；0.8≤RCAij
＜1.25，means “normal” competitiveness；RCAij＜0.8， means “weak” competitiveness.
Under normal conditions, in bilateral trade, a certain product being at a “very low” or “very
strong” competitiveness condition often displays inter-industry trade tendency, and a certain
2
Feng Fei，“Appraisal of the key industries’ competitiveness of our country in the transition-period after China’
entry into WTO”， September 9, 2005. See the Website of China Trade Remedy Information：http://www.cacs.
gov.cn/DefaultWebApp/showNews.jsp?newsId=400480000058。
4
product being near a “normal” competitiveness state shows intra-industry trade tendency. To
inspect inter-industry trade level, common index has Grubel-Lloyd index (GLD ） , which
fundamental formula is:
GLD = {1-[∣Xig-Mig∣/（ Xig+Mig）]}×100
(100≥GLD≥0)
When GLD=0， the trade of Department g of Country i belongs to inter-industrial trade；
when GLD=100， the trade all belongs to intra-industrial trade；when 100＞GLD＞0， partial
trade belong to intra-industrial trade.3
This article basic mentality is that：according to Chinese and American different statistics
caliber data, using trade competitiveness index（TC），separately calculates the competitiveness
index of total trade products of both countries on the levels of “Section” in the period 2001-2006
year and of “Chapter” in the period 2003-2006; then rejects those products which are smaller than
0.4 billion dollars in import or export amount, and analyzes U.S. products’ (the 59 chapters being
in “very low” and “low” competitiveness condition in the bilateral trade) competitiveness situation
in the world trade by using Revealed Comparative Advantages Index (RCA); further, adopts
Grubel- Lloyd index（GLD）to study the intra-industries trade level of the 36 chapters which are in
“weak”state, in the world trade; at last, to point out main reason of America trade deficit to
4
China and the way to realize the bilateral trade balance.
4．Analyzing on the levels of “Section”
Firstly, let us selecte the classification’s data - SITC Rev.3 - to calculate and compare TC
index of bilateral trade products in the level of “Section”. According to China’s statistics, the
competitiveness state of Chinese products in the period of 2001-2006 is as follows:
5
a）Over the last 6 years, although China’s primary products’ exports and imports to the
United States separately enhance 2.29 times and 1.87 times, the primary products’ competitiveness
situation is in the level of “low”. In which the TC index of some products, such as “Beverages &
Tobacco” （Section 1） and “Crude Materials & inedible & except fuels”（Section 2）, as well
as “Animal & Veg.Oils & Fats & Wax” （Section 4）, transfered “strong” to “low” or turned
“lower” to “very low”, for their importation volume from America grew especially fast in 2003
or/and 2004 and 2006.
b）In the light of manufactured goods，the aggregate level is “stronger” in the period. In which
“Misc Manufactured Article”（Section 8） is in the “very strong”situation; “Maufatured Goods”
（Section 6） is in the “stronger” level；but “Chemicals & Reled.Prod.Nes” （Section 5） is in
“low” state. With regard to export growth rates, “Machines & Transport Equipment” （Section7）
is the most fast, rose to 4 times in 6 years. The second fast is “Manufactured Goods” (Section 6),
increased 3.46 times。
3See
Zhu Zhongdi & Guo Yudan & Lan Yisheng chief edition, International Trade, Press of Shanghai University of
Finance and Economics, 2005，P92-93。
4This article calculating work load is very big. It includes 16 tables in total. Dut to the length limit, here is only
demonstrated 4 tables.
5SITC is Standard International Trade Classification.
5
c）China’s products as a whole is in “strong” competitiveness state and the TC index has risen
from 0.3492 (strong) up to 0.5400（stronger）
， further slightly up to 0.5491（stronger）since 2001.
On the other hand, according to the United States’statistics data，the competitiveness state of
American products in the period of 2001-2006 is as follows:
a）Since 2001, the primary goods which export to China have increased near 2 times, but the
import from China only increased 1.4 times. The primary goods on the whole are in “strong”
competitiveness situation. Among them, “Crude Materials & inedible & except fuels”（Section 2）
and “Animal & Veg.Oils & Fats & Wax” （Section 4）are in “stronger” or “strong” and “very
strong” state; and “Fuels, Lubricants, Etc.” （Section 3） is in “lower” state; but, “Beverages &
Tobacco” （Section 1） has varied from “lower” to “low”, further to “strong” condition.
b）The manufactured goods as a whole are at “lower” competitiveness. The goods exported to
China increase 1.56 times, but that imported from China expand 1.79 times - from 106.9 billion
dollars up to 298.7 billion dollars in six years. Among the ten sections’ products, “Chemicals &
Reled.Prod.Nes” （Section 5） is in the change from “low” to “strong” then to “low”；
“Machines & Transport Equipment” （Section7） and “Goods not classed by kind” （Section 9）
keep “lower” state；“Manufactured
Goods” (Section 6) and “Misc Manufactured Article”
（Section 8）basically are in “very low” competitiveness condition.
c）On the whole, American trade commodities to China are in “lower” competitiveness
situation.
Obviously，according to the statistics either China or America, the competitiveness pattern of
the bilateral trade products in “Section” classification is that: Chinese products have “stronger”
competitiveness superiority in manufactured goods production, but have “low” inferiority in
primary goods production; American products, just right opposited to China, have “strong”
competitiveness advantage in primary goods’ production, but have “lower” state in manufactured
goods’ production.
However, if we further analysis deeply into the level of “Chapter” classification, we will
discover where these goods being in “low” or “lower” competitiveness state on the “Section”，
don’t all display so state. Some of them showed “strong” or “stronger” even “very strong”
competitiveness situation.
5．Analyzing on the level of “Chapter”
Here uses the data from United Nations Statistics Division. According to the classification’s
data of HS2002,6 we inspect in turn competitiveness state of 97 Chapters products （the Chapter
77 is a empty chapter）of both countries in the period of 2003-2006.
According to the statistics data on this side of China, the competitiveness index of “Chapeter”
products in 2003-2006 are as follows:
a）As a whole, the competitiveness situation of China’s products on the level of “Chapter” is
6
HS2002 is Harmonized Commodity Description and Coding System 2002.
6
rising from “strong” up to “stronger”. There are 64 chapters’ commodities being in “strong” or
above “Strong” competitiveness state. They account for 2/3 of the total chapter number.
In which that being in “very strong” state in the comtinuously three yearly have 28 chapters,
account for more than 29 percent of the total chapter number. They are “Articles of leather &
saddlery and harness”（the Chapter 42，the same below）, “Articles of apparel and clothing
accessories, knitted or crocheted”（61）, “Articles of apparel and clothing accessories, not knitted
or crocheted”（62）, “Other made up textile articles; sets; worn clothing and worn textile articl”
（63）, “Footwear, gaiters and the like; parts of such articles”（64）, “Headgear and parts thereof”
（65）, “Prepared feathers and down and articles made of feathers or of down”（67）, “Ceramic
products”（69）, “Articles of iron or steel”（73）, “Tools, implements, cutlery, spoons and forks,
of base metal”（82）, “Miscellaneous articles of base metal”（83）, “Railway or tramway
locomotives, rolling-stock and parts thereof”（86）, “Furniture; bedding, mattresses, cushions and
similar stuffed furnishing”（94）, “Toys, games and sports requisites; parts and accessories thereof”
（95）, “Miscellaneous manufactured articles”（96）. In addition, “Edible vegetables and certain
roots and tubers”（07）
， “Coffee, tea, matl and spices”（09）
， “Preparations of meat, of fish or
of crustaceans”（16）
， “Explosives; pyrotechnic products; matches”（36）
， “Manufactures of
straw, of esparto or of other plaiting materials”（46）
， “Silk”（50）， “Other vegetable textile fibers;
paper yarn and woven fabric of paper yarn”（53）
， “Carpets and other textile floor coverings”
（57）
， “Umbrellas, sun umbrellas, walking sticks, seat sticks, whips, riding-crops”（66）
，
“Clocks and watches and parts thereof”（91）
， “Musical instruments; parts and accessories of such
articles”（92）
， “Arms and ammunition; parts and accessories thereof”（93）
， “Works of art,
collectors' pieces and antiques”（97）. The volume of export of these commodities reached to
68.99 billion dollars in 2006，accounted for 33.85 percent of the total exports to the United States.
b）That chapters which commodities being in “lower” or “very low” have 12 chapters，
account for about 13 percent of the total chapter number. There are 9 chapters being in “very low”
or near “very low” in countinual two years, which are “Meat and edible meat offal”（Chapter 02,
the same below）, “Cereals”（10）, “Oil seeds and oleaginous fruits”（12）, “Ores, slag and ash”
（26）, “Fertilizers”（31）, “Raw hides and skins (other than fur skins) and leather”（41）, “Pulp
of wood or of other fibrous cellulose material”（47）, “Cotton”（52）, “Aircraft, spacecraft, and parts
thereof”（88）. The volume of import was 14.83 billion dollars in 2006， accounted for 25 percent
of the total imports from America.
c）It is noteworthy that chemical product being in “low” competitiveness state on the level of
“Section”（Section 5：Chemicals & Reled.Prod.Nes） are not all being in “low” state on the level
of “Chapter”, which TC indexes show “strong ” or “stronger” even “very strong”, such as the
Chapter 28（Inorganic chemicals）， the Chapter 30（Pharmaceutical products）, the Chapter 33
（Essential oils and resinoids; perfumery, cosmetic or toilet preparations）, the Chapter 36
（Explosives; pyrotechnic products; matches）, the Chapter 37（Photographic or cinematographic
goods） and so on.
Similarly, that the products, such as Section 6（Manufactured Goods） and Section 7
（Machines & Transport Equipment）, are not all so “stronger” on the level of “Chapter” as that
on the level of “Section”. Some of them display “very low” or “low” competitiveness, for example
7
the Chapter 52（Cotton 52）, the Chapter 88（Aircraft, spacecraft, and parts thereof）, the Chapter
90（Optical, photographic, cinematographic, measuring, checking, precision, med.，the state has
changed a bit until 2006）, etc., in which the products’ import of the Chapter 88 from America is
from 3.35 billion dollars in 2005 to 5.63 billion dollars in 2006, accounted for 9.5 percent of the
total imports.
d）The weak competitiveness state for some products is changing. For example, the TC index
of the Chapter 31（Fertilizers）continuously being in “very low” has turned its state, rising from
less than “-0.8”（very low）up to “-0.6”（lower）；and the index of the Chapter 10（Cereals） has
turned “-0.9862”（very low） to “-0.0901”（low） for the export rose fast（490 percent）and the
import shaply felt down（-58.6 percent）in 2006.
Also looks to the caculated result of American products’competitiveness situation according
to the United States’ statistics data in the period:
a）Although American trade products are being in the level of “lower” in the bilateral trade as
a whole, there are still 11 chapters being in the state of “stronger” or “very strong”
competitiveness advantage. They are “Meat and edible meat offal”（the Chapter 2, the same
below）, “Cereals”（10）, “Oil seeds and oleaginous fruits”（12）, “Animal or vegetable fats and
oils”（15）, “Ores, slag and ash”（26）, “Fertilizers”（31）, “Raw hides and skins (other than fur
skins) and leather”（41）, “Pulp of wood or of other fibrous cellulose material”（47）,“Cotton”
（52）, “Nickel and articles thereof”（75）, “Aircraft, spacecraft, and parts thereof”（88）. In 2006,
above exports reach to about 14.39 billion dollars，accounted for 26 percent of all volume of
exports to China.
b）The products with “very low” competitiveness in total have 35 chapters. They are: “Live
trees and other plants”（the Chapter 06）, “Edible vegetables and certain roots and tubers”（07）,
“Coffee, tea, matl and spices”（09）, “Preparations of meat, of fish or of crustaceans”（16）,
“Preparations of vegetables, fruit or nuts”（20）, “Explosives; pyrotechnic products; matches”（36）,
“Articles of leather; saddlery and harness”（42）, “Cork and articles of cork”（45）, “Manufactures
of straw, of esparto or of other plaiting materials”（46）, “Printed books, newspapers, pictures and
other products of the printing industry”（49）, “Silk”（50）, “Other vegetable textile fibers; paper
yarn and woven fabric of paper yarn”（53）, “Carpets and other textile floor coverings”（57）,
“Knitted or crocheted fabrics”（60）, “Articles of apparel and clothing accessories, knitted or
crocheted”（61）, “Articles of apparel and clothing accessories, not knitted or crocheted”（62）,
“Other made up textile articles; sets; worn clothing and worn textile articl”（63）, “Footwear,
gaiters and the like; parts of such articles”（64）, “Headgear and parts thereof”（65）, “Umbrellas,
sun umbrellas, walking sticks, seat sticks, whips, riding-crops”（66）, “Prepared feathers and down
and articles made of feathers or of down”（67）, “Articles of stone, plaster, cement, asbestos, mica
or similar materials”（68）, “Ceramic products”（69）, “Natural or cultured pearls, precious or
semi-precious stones”（71）, “Articles of iron or steel”（73）, “Tin and articles thereof”（80）, “Tools,
implements, cutlery, spoons and forks, of base metal”（82）, “Miscellaneous articles of base metal”
（83）, “Clocks and watches and parts thereof”（91）, “Musical instruments; parts and accessories
of such articles”（92）, “Arms and ammunition; parts and accessories thereof”（93）, “Furniture;
8
bedding, mattresses, cushions and similar stuffed furnishing”（94）, “Toys, games and sports
requisites; parts and accessories thereof”（95）, “Miscellaneous manufactured articles”（96）,
“Works of art, collectors' pieces and antiques”（97）, accounted for 36 percent of all chapter
number.
c）China’s products – the Chapter 86（Railway or tramway locomotives, rolling-stock and
parts thereof ）have “very strong” competitiveness advantage according to the front computation
with China’s statistical data. It seems that American product in the Chapter should be in “very
low” state. But, according to American statistical data, the computation is not at all. On the
contrary, American exports of the Chapter 86 to China enhance 5.6 times and the imports from
China only increase 1.7 times in the period of 2003-2006, so that the Chapter products’
competitiveness index rose from “-0.6388”（lower） up to “-0.3076”（low）.
Below to make a comparison between both computations according to China and America
respective statistics.（See Table 2）
Table 2: TC indexes comparison according to Chinese and American respective statistics
（Years: 2003-2006）
The
Competitiveness
state of China’s
products
The Number of Chapters（HS2002）
86
Very Strong（28） 07、09、16、36、42、46、50、53、57、61～67、69、73、82、
83、91～97
Stronger or
Strong
（40）
Very Low
（9）
Very Low（35）
06、20、45、49、60、68、71、80
03、05、13、17～19、22、25、27、28、30、33、37、39、40、
43、44、48、51、54、58、59、70、72、76、78、79、81、84、
Lower or Low
（19）
The
Competitiveness
state of America’s
products
Lower（1）
85、87、89
01、08、11、14、23、29、32、34、56、90
21
04、15、24、35、38、55、74、75
10、26、31、52、
Lower or Low
（42）
Stronger or Strong
（13）
02、12、41、47、88
Very Strong（5）
From Strong to
Total
Lower
Stronger
Note：The digital in the parentheses means “a sum total of chapter number”, amounts to 97 chapters (Chapter 77
is a spatial chapter).
Logically, in the bilateral trade, when China’s TC index of a certain chapter
show a
“strong” competitive advantage condition, America’s TC index of that Chapter would inevitably
show “low” competitive advantage state and vice versa. But, observing table 2 we saw the
exception：about the products of 10 chapters – Chapter 01, 08, 11, 14, 23, 29, 32, 34, 56, 90 – both
countries are all being in “lower” or “low” competitiveness state.
To analyze its reason that mainly lies in no unify of the bilateral statistics caliber. For
example, the U.S. statistical data of the import from China includes China’s entrepot trade by
Hong Kong, but the statistical data of the export to China doesn’t include himself entrepot trade by
9
Hong Kong. Otherwise, the China’s statistics is also. Thus, both side statistical results appear the
big difference. To take the soap（Chapter 34）as the examples, according to China’s statistics, in
2006 the volume of the commodities’ exports to America was 120 million dollars and of the
imports from America was 280 million dollars. China’s trade deficit was 160 million dollars. But,
according to America’s statistics, the volume of imports from China was 270 million dollars and
of the exports to China was only 190 million dollars. America’s deficit was 80 million dollars. So,
this year the goods’ competitiveness indexes for both countries were all being in the “low”
competitiveness state with negative.
6. Further analysis on the bilateral competitiveness situation
It is well known that the United States is a developed country with rich resources and
developed agriculture as well as advanced technology. However, the inspection result from above
two levels of “Section” and “Chapter” is that, either the primary goods or manufactured goods, a
large number of American goods appear the phenomenon of low competitiveness situation to the
Chinese trade products. In order to understand actual competitiveness state of the American
products (59 chapters products) being in “very low” and “lower” competitiveness to China’s trade,
we will use Revealed Comparative Advantages Index (RCA) to inspect their situation in the world
trade, according to American statistics data.
Through calculating, we saw, in the world trade, these 59 chapters’products even being
in“very low” state in bilateral trade are as follows:（see Table 3）
Table 3: The competitiveness comparison between the bilateral and multilateral
trade on American 59 chapters products（Years: 2003-2006）
The state
in bilatral trade
Very low
（35）
The number of Chapters（HS2002）
93、97
36、49、71
07、20、57、60、82、83、92
06、09、16、42、45、46、50、53、61～69、73、80、91、94～96
The state
in the world
Very Strong
Stronger
Normal
Weak
Lower
（24）
03、17～19、22、25、27、43、44、58、78、89
13、33、39、40、48、70、84～87
Normal
Stronger
05、28
a）There are 7 chapters shown “strong” or “ very stronger” state in the world. They are: the
Chapter 93（Arms and ammunition; parts and accessories thereof）
， the Chapter 97（Works of art,
collectors' pieces and antiques）
， the Chapter 05（Products of animal origin, not elsewhere
specified）
， the Chapter 28（Inorganic chemicals）， the Chapter 36（Explosives; pyrotechnic
products; matches）， the Chapter 49（Printed books, newspapers, pictures and other products of
the printing industry）
， the Chapter 71（Natural or cultured pearls, precious or semi-precious
stones）.
b）There are 17 chapters being in “normal” competitiveness state in the the world. Which
mainly has: the Chapter 84（Machinery and mechanical appliances; parts thereof）, the Chapter 85
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（Electrical machinery and equipment and parts thereof; sound recorders）, the Chapter 86
（Railway or tramway locomotives, rolling-stock and parts thereof）, the Chapter 87（Vehicles
other than railway or tramway rolling stock）, the Chapter 92（Musical instruments; parts and
accessories of such articles）, the Chapter 70（Glass and glassware）, the Chapter 82（Tools,
implements, cutlery, spoons and forks, of base metal）, the Chapter 83（Miscellaneous articles of
base metal）. Moreover, also that has the Chapter 07, 13, 20, 33, 39, 40, 48, 57, 60（Vegetables,
Gums, Fruit or nuts, Essential oils and resinoids, Plastics and articles thereof, Rubber and articles
thereof, Paper and paperboard, Carpets and other textile floor coverings, Knitted or crocheted
fabrics, and so on ） . In other words, on these goods’ production America has certain
competitiveness advantage in the world. In which the volume of the export of the Chapter 84
（Machinery & mechanical appliances parts & thereof） accounts for 18.22 percent of the world
exportation, and the volume of the export of the Chapter 85（Electrical machinery and equipment
and parts thereof; sound recorders） accounts for 14.99 percent of that.
To analyze the reason why these American products show such a situation as “very low” or
“lower” competitiveness in bilateral trade, which mainly lies in that:
Firstly, the restriction of American export policy to China on the high-tech product, such as
military weapon and high-tech equipment, hinders his competitiveness advantage on export.
Secondly, America’s multinational corporations for reducing cost put some outsourcing work on
China. Thirdly, Chinese price in the similar product, for instance glassware, tool products and
jewels, has competitively superiority. Fourthly, China’s demand market to America expensive
goods, such as maquillage, does not show very high enthusiasm due to lower level of income per
person.
c）There are 35 chapters being in “weak” state in the world trade. It means that the products
are being in an inferior situation not only in the bilateral trade, but also in the world trade. It is
impossible for America to increase employment by the policy of trade prevents for Chinese
product, because the similar products from other trade partners would very quick fill the share of
Chinese products in American market. The sanction result only could make American consumers
to increase their expenditure.
d) The fact that “Section” and “Chapter” two levels display different competitiveness state
lets the author to imagine: if we inspected deeply toward to “Item” classification, we maybe would
find that 35 chapters being in an inferior competitiveness situation in the bilateral trade and the
world trade could appear different competitiveness state on the level of “Item”. Of course, it is a
very hard work for us to calculate 5019 items’ data. However, in order to be simplification, here
we could use Grubel- Lloyd index（GLD）to analysis further.
Now, to suppose that “10≥GLD≥0” represents some department’s trade inclining to the
inter-industry trade, expressed with “E”. Also, to suppose that “100＞GLD＞10” shows part of the
department trade belong to the intra-industry trade, expressed with “A”. Then the 35 chapters
situation in the bilateral trade are as follows:（see Table 4）
As a general rule，when a product is being in extremely weak state or very strong state in
competitiveness, its Grubel- Lloyd index（GLD） often trends zero, i.e. it display inter-industry
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Table 4: The GLD indexes of America’s products of 35 chapters being in “weak”
competitiveness state （Years: 2003-2006）
Num
Name of
ber of Products
Chap
ters （HS2002）
Fish and
03
crustaceans,
molluscs and
other aquatic
invertebrates
06
Live trees and
other plants
09
Coffee, tea, matl
and spices
16
Preparations of
meat, of fish or
of crustaceans
Sugars and sugar
17
confectionery
18
Cocoa and cocoa
preparations
19
Preparations of
cereals, flour,
starch or milk;
bakers' wares
22
Beverages, spirits
and vinegar
25
27
42
43
44
45
46
50
53
58
Salt; sulfur;
earths and stone;
plastering
materials
Mineral fuels,
mineral oils and
products of their
distillation
Articles of
leather; saddlery
and harness
Fur skins and
artificial fur;
manufactures
thereof
Wood and
articles of wood;
wood charcoal
Cork and articles
of cork
Manufactures of
straw, of esparto
or of other
plaiting materials
Silk
Other vegetable
textile fibers;
paper yarn and
woven fabric of
paper yarn
Special woven
fabrics; tufted
textile fabrics;
lace, tapestries;
trimmings
2003
2004
2005
2006
31.11
（A）
39.63
（A）
46.03
（A）
45.06
（A）
6.51
（E）
16.07
（A）
15.10
（A）
23.93
（A）
2.17
（E）
2.46
（E）
7.58
（E）
17.87
（A）
11.31
（A）
11.43
（A）
15.16
（A）
13.24
（A）
58.91
（A）
98.95
（A）
67.67
（A）
51.13
（A）
44.43
（A）
38.61
（A）
45.04
（A）
42.66
（A）
34.17
（A）
34.69
（A）
32.62
（A）
31.32
（A）
26.61
（A）
43.18
（A）
54.02
（A）
26.10
（A）
39.69
（A）
35.24
（A）
26.89
（A）
18.21
（A）
42.27
（A）
33.15
（A）
21.75
（A）
28.00
（A）
0.27
（E）
0.35
（E）
0.33
（E）
0.35
（E）
19.53
（A）
36.34
（A）
42.69
（A）
50.23
（A）
30.38
（A）
30.60
（A）
30.36
（A）
27.95
（E）
31.97
（A）
0.53
（E）
14.19
（A）
0.97
（E）
9.45
（A）
1.72
（E）
16.83
（A）
3.08
（E）
20.14
（A）
18.40
（A）
17.81
（A）
8.79
（E）
2.87
（E）
7.62
（E）
2.58
（E）
2.39
（E）
Num
ber of
Chap
ters
Articles of apparel
and clothing
61
accessories, knitted
or crocheted
Articles of apparel
and clothing
62
accessories, not
knitted or crocheted
Other made up
textile articles; sets;
63
worn clothing and
worn textile articl
Footwear, gaiters
64 and the like; parts of
such articles
Headgear and parts
thereof
Umbrellas, sun
umbrellas, walking
66
sticks, seat sticks,
whips, riding-crops
Prepared feathers
and down and
67
articles made of
feathers or of down
Articles of stone,
plaster, cement,
68
asbestos, mica or
similar materials
65
69
Ceramic products
73
Articles of iron or
steel
78
Lead and articles
thereof
80
Tin and articles
thereof
89
Ships, boats and
floating structures
Clocks and watches
and parts thereof
Furniture; bedding,
mattresses, cushions
94
and similar stuffed
furnishing
Toys, games and
sports requisites;
95
parts and accessories
thereof
91
96
26.18
（A）
31.63
（A）
25.67
（A）
17.25
（A）
Name of
Products
（HS2002）
Miscellaneous
manufactured
articles
Total products
Note：“E”means inter-industry trade，“A”means inclineing to intra-industry trade.
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2003
2004
2005
2006
0.36
(E)
0.51
(E)
0.67
(E)
0.25
(E)
0.20
(E)
0.33
(E)
0.21
(E)
0.17
(E)
0.57
（E）
0.50
（E）
0.75
（E）
0.60
（E）
0.67
（E）
0.54
（E）
0.63
（E）
0.80
（E）
0.11
（E）
0.16
（E）
0.29
（E）
0.17
（E）
0.20
（E）
0.19
（E）
0.20
（E）
0.51
（E）
1.06
（E）
0.80
（E）
0.76
（E）
0.97
（E）
9.38
（E）
14.30
（A）
13.50
（A）
13.37
（A）
6.78
（E）
6.46
（E）
5.33
（E）
5.38
（E）
6.14
（E）
9.73
（E）
8.57
（E）
8.18
（E）
29.16
（A）
90.27
（A）
35.21
（A）
9.30
（E）
12.13
（A）
7.31
（E）
9.79
（A）
11.19
（A）
50.75
（A）
66.21
（A）
32.27
（A）
8.66
（E）
0.77
（E）
1.23
（E）
0.71
（E）
0.99
（E）
0.01
（E）
1.14
（E）
0.91
（E）
1.13
（E）
0.39
（E）
0.65
（E）
0.64
（E）
0.46
（E）
2.37
（E）
2.37
（E）
2.34
（E）
2.78
（E）
29.66
（A）
28.32
（A）
27.74
（A）
30.60
（A）
trade. But, we find in Table 4： the products being in either “weak” in the world trade or “very
low” or “lower” in Sino-America bilateral trade, do not all belong to inter-industry trade. Except
these products, such as leather（the Chapter 42）, manufactures of straw（46）, other vegetable
textile fibers（53）, textile and apparel（61, 62, 63）, footwear（64）, headgear and parts（65）,
umbrella（66）, prepared feathers（67）, ceramic products（69）, articles of iron or steel（73）,
clocks and watches and parts（91）, furniture（94）, toys & games & sports requisites（95）,
miscellaneous manufactured articles（96）, basically belong to the inter-industry trade, the others in
Table 4, such as fish, live trees, sugars, cocoa, cereals, flour, mineral fuels, beverages, salt, fur
skins, wood, cork, woven fabric, lead and article, etc., belong to intra-industry trade.
It means that there is a possibility of competitive advantage on the level of “Item”. Or at least
it means that the characteristics of America as a power country with rich resources and capital still
obtain development to a certain extent in the bilateral trade. This hints that these products had
bigger possibility than the others to promote competitiveness on the premise of putting aside other
factors. If America expanded the production of heterogeneous or non-uniformity goods，or
promoted the division of labour on the basis of specialization of intra-industry or intra-department
through lifting the technical level of intra-industry or intra-department production, it is completely
possible for him to change the inferiority condition in the bilateral trade competition.
Furthermore，from Table 4, we could find that the products in inter-industry trade are mainly
labor-intensive form. This reflects the characteristic of China as a big country with rich labour
resources. China’s superiority products massively concentrate the lower-price chapters. This also
explained on the side, the bilateral trade production between China and America has already
formed the international division pattern established in factor endowment and cost comparative
advantage as well as scale economic foundation. So long as U.S. fully used his superiority in the
high and new technology and relaxed the export control to China, he could realize the trade
balance to China definitely.
7．Conclusion
Draws following conclusion from the analysis on product’s competitiveness superiority：
a）On inspects from the level of “Section”， according to the computation, as a whole US’
product in the bilateral trade presents a “lower” competitiveness state regardless of the statistics
data from Chinese government or the United States government. But, on observation from the
level of “Chapter”, the United States has a “very strong” competitiveness in agricultural product,
mineral product, raw material, aircraft product and so on. Thus，for China, that to continually
maintain and expand these products import from America, it is helpful for her to alleviate the
pressure from trade balance question and to strive for the support from US’s special interest group,
such as the air group and the agricultural group（most formidable interest group）. Besides, it also
is helpful to alleviate what Chinese economy development is facing stern challenge more and
more. For example, the population inflation is unceasingly increasing demand on grain and
massive farming land is invaded for speeding urbanized advancement and transportation industrial
development, that lead to reduce cultivated land acreage per person; scale expansion of industrial
production is increasing the demand to mineral resource, which brings environment problems such
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as vegetation destroyed and the loss of water and soil.
b）Some products on “Chapter”, such as live animals, fruit and nuts, products of the milling
industry, vegetables, Organic chemicals, tanning or dyeing extracts, soap, wadding & felt &
non-wovens, special yarns & cordage, optical & photographic & cinematographic and son on,
that are all being in a “lower ” or “low” competitiveness state in both countries. The cause to
appear the phenomenon lies in different statistic caliber of both sides. When similar difference
expands to all trade products’ statistics，American trade deficit to China mainland is greatly
overestimated. The data gap between America and China is high up to 22.2 billion dollars in 2006.
This “huge volume” of trade deficit, under election factor impetus, is hyped wantonly, which
becames an agent that some congressmen requested to punish China. However, the Chinese
government should put the item of coordinate statistic caliber on the bilateral economic
negotiation.
c）That American trade deficit expansion to China tallies with the dropping unceasingly of
American product competitive advantage in the world trade. Among American trade products to
China, there are 59 chapters being in a “very low” or “lower” competitiveness state, in which 39
chapters are being in a “weak” competitiveness state in the world also. The total volume of
America’s trade deficit is 882.25 billion dollars in 2006，equaled to 7 percent of his GDP，in which
74 percent trade deficit come from other trade partners except China. Thus, to reverse trade deficit,
it is necessary for him to change the radical thinking model on foreign trade practice, not only to
depend on the measures to inflict political pressure and to take economic sanctions to trade
partners. On the basis of the principle of comparative advantage, it is important to carry on
international division of labor, to shift the production of inferiority departments or industries to
overseas, simultaneously to display himself own science and technology superiority and to
enhance the trade division of labor in intra-industries with other countries. Besides, it is the most
important to relax the trade control in high-tech exportation, such as to relax the control of
high-tech telecommunication equipment to China.
It is noteworthy that, among America’s products of the 59 chapters being in a “very low” or
“lower” state in the bilateral trade, there are 7 chapters products being in a “strong” or “stronger”
state including arms and ammunition and parts as well as inorganic chemicals and so on. The
United States is the largest weapon export country in the world, but he limits export to China on
weapon and correlated products due to ideology influence, such as the export control in depleted
uranium to China. The control in high-value and high-technology products reduces the possibility
to realize trade balance.
d）The products being in a “very low” or “lower” or “weak” state in the bilateral trade or in
the world trade are not all inter-industry trade, part of them belongs to intra-industry trade. It
means that some products have certain competitiveness on the level of items. Thus, America could
enhance the exportation through expanding the specialized division of labor in intra-industry or
intra-department.
e）For China, the enterprises should replace exportation by investment, to shift partial
production lines to overseas. They should replace low price competition by lifting products’
quality and grade. The government should replace non-periodical purchase behavior by cancelling
14
some barrier to America products with competitive advantage（mainly agricultural product,
mineral product, raw material, aircraft）.
However, the key to realize trade balance lies in the United States. So long as America fully
used his competitive superiority in high and new technology and relaxed his export control to
China，as well as enhanced the division level in intra-industry or intra-department, it was possible
completely for him to realize the trade balance to China.
--------------------------------Reference：
1. “American congressmen creates a clamor reportedly trade sanction to China”, Reference News, March 2, 2007.
2. “America threatens China that it will ‘very quick’ submit a case to WTO”, Reference News, February 24, 2007.
3．Feng Fei，“Appraisal of the key industries’ competitiveness of our country in the transition-period after China’
entry into WTO”，September 9, 2005.
4. Zhu Zhongdi & Guo Yudan & Lan Yisheng chief edition, International Trade, Press of Shanghai University of
Finance and Economics, 2005.
5. Website of China Trade Remedy Information：http://www.cacs. gov.cn.
6. Website of Ministry of Commerce of the People‘s Republic of China：http://www.mofcom.gov.cn.
7. Website of United Nations Commodity Trade Statistics Database：http://comtrade.un.org.
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