by Brenda Rosser
cross posted from Econospeak with permission of author.
Today, the latest spin that purports to describe the still unfolding global economic crisis is that of ‘global trade imbalance’, with particular attention being focused on the US and China.
The US, we are told, has a huge trade deficit and China is conveniently blamed for this. “They say China’s currency manipulation hurts the U.S. economy”  making China’s goods much too cheap relative to those produced in America.
This tale does not reflect the contemporary reality and it is all the stranger because, on the other hand, it’s never been a secret about the manner in which the large global corporation has evolved its operations over the last 4 decades. These huge networked businesses now have production systems that most often span a large number of countries at the one time. That means, in effect, that world trade is now mostly defined by the nature and extent of the global corporation and its networks. The nation is no longer the core economic entity.
In 2006 Samuel J. Palmisano, Chair of the Board, President, and Chief
Executive Officer of IBM described the evolution that has occurred in the nature and function of the international corporation.Since the early 1970s economic nationalism has abated, Palmisano says. Trade and investment barriers consequently receded. A revolution in information technology also occurred and this development improved the quality and cut the cost of global communications and business operations “by several orders of magnitude”. The large transnational corporation was then much more able to standardise technologies as well as its business operations all over the world. This, in turn, led to the interlinking and facilitation of work both within and among companies.
“New perceptions emerged as to what was possible and permissible…. The focus shifted from products to production.” State borders defined less and less “the boundaries in corporate thinking and practice….”
More ominously, as we now see with the global fad for deregulation, Palmisano eulogises
“the growth of horizontal, intergovernmental networks among the world’s regulators and legislators [that are] built on shared professional standards and relationships among cross-national communities of experts.”
Almost anyone with more than a fleeting interest in economics understands this new reality. The most dominant global enterprises have embedded themselves in one nation after another and most of those businesses are US and European in origin. The economic reasons for these entities doing so appear quite obvious. Labour is cheaper in Asia. Corporations find it much easier to avoid tax and engage in transfer pricing to maximise profits, and so forth.
So, it’s not surprising, and somewhat belated, to find a 2007 paper published by the Asian Shadow Financial Regulatory Committee that finally raises the very serious issue of false accounting in international trade by governments around the globe. Quote:
“MNC affiliate sales within their host countries are not included in trade balances, but are counted in host country GDP. MNC affiliate sales from the host country to other countries are counted as exports of the host country. This accounting practice overstates the current account surplus of a country like China with heavy inward foreign direct investment (FDI). This surplus would be reduced if sales outside China by affiliates of foreign-owned MNCs were excluded from its exports and sales within China by affiliates of foreign-owned MNCs were included in its imports. The trade accounting system overstates the current account deficit of a country like the US, with heavy outward FDI. This deficit would be greatly reduced if sales outside the US of overseas affiliates of US MNCs were included in US exports and sales back to the US of overseas affiliates of US MNCs were excluded from US imports.” 
For all the huge trade surplus that China is purportedly ‘enjoying’ it turns out that little benefit is being derived from it. Over 50% of China’s exports are produced by foreign corporations. Walmart, for instance, has 700 factories in China. And ‘China’ (whatever accounting entity this word constitutes) has ‘trade deficits’ with “the rest of Asia”.
“In effect, China aggregates the trade surplus of East Asia with the U.S. and Western Europe, takes the political heat, but captures relatively little of the value that it adds to final products.”
We need to know more than just the fragments of data that government bureaucracies, mainstream professions and the media serve out. A true understanding of the nature of the crises now confronting us is absolutely essential, and yet deliberate obfuscation is occuring as to the cause and nature of our collective dilemma.
“Were it part of our everyday education and comment that the corporation is an instrument for the exercise of power, that it belongs to the process by which we are governed, there would then be debate on how that power is used and how it might be made subordinate to the public will and need. This debate is avoided by propagating the myth that the power does not exist.”
John Kenneth Galbraith, The Age of Uncertainty, 1977
 Q&A: How China’s Currency Policy Affects You
by Adam Davidson
April 20, 2006
 “The Globally integrated Enterprise” Samuel Palmisano, ceo and chair of the board of ibm, Foreign Affairs
 Asian Shadow Financial Regulatory Committee
A New Perspective on Global Imbalances: the Role of MNCs
Statement No. 8
Hong Kong, July 5, 2007
Posted by Brenda Rosser