Low wage countries are those countries with comparative advantage in the manufacture of simple commodities because they are labour intensive and have excess unskilled labor. On the other hand, high wage countries are capital intensive and have a comparative advantage in the manufacture of complex commodities that require skilled labor to produce. Based on this fact, China has a comparative advantage over America in producing simple commodities because it is a low wage labor-intensive economy. This explains why many simple products are produced in China while complex commodities are produced in the US, which is high wage capital-intensive economy.
Based on the concept of comparative advantage, China makes a large volume of simple product of export to the US. Contrary to this the US manufactures complex products most of which are sold in the local markets because low wage international markets will prefer simple cheap products to expensive, quality products. This is the reason the America ranks highest in deficit economies and China ranks among the highest surplus economies. It is important to note the US deficit does not arise because it trades with low wage countries but because its economy is able to sustain itself by consuming a significant percentage of the high wage capital-intensive products it produces.
The US-China Business and Industry Council compile and make available the historical transaction data between these two countries. It keeps track of all import and export dealings affecting the two countries and thus is an important source of information used to make trade balance decision. The council is credible because of the presence of both Chinese and US agents thus eliminating chances of bias.
Works Cited
USCBC. The US-China Business Council. 2013. 8 April 2013
