by James Hanson.
We generally think that the United States exports the operating
systems that power the iphone, the ipad, the kindle, and Android; in
return China exports mens underwear. This is roughly consistent with
our notions of comparative advantage: the US has an abundant pool of
the top end human capital of the world, while China has an abundant
pool of low-skill labour. Each is better off from this trade.
It, then, comes as a surprise when the Economist reports
that the US exports
chopsticks to China:
Enter Georgia Chopsticks. Jae Lee, a former scrap-metal exporter,
saw an opportunity and began turning out chopsticks for the Chinese
market late last year. He and his co-owner, David Hughes, make their
chopsticks from poplar and sweet-gum trees, which have the requisite
flexibility and toughness, and are abundant throughout Georgia.In May Georgia Chopsticks moved to larger premises in Americus, a
location that offered room to grow, inexpensive facilities and a
willing workforce. Sumter County, of which Americus is the seat, has
an unemployment rate of more than 12%. Georgia Chopsticks now employs
81 people turning out 2m chopsticks a day. By year’s end Mr Lee and Mr
Hughes hope to increase their workforce to 150, and dream of building
a “manufacturing incubator” to help foreign firms take advantage of
Georgia’s workforce and raw materials.But that is some way off. For now Messrs Lee and Hughes, and their
workers, keep busy shearing, steaming, shaving, cutting and drying
huge logs into rough chopsticks. They still need to be finished—to eat
with a pair of Georgia Chopsticks right off the Americus line you
would need tweezers in your other hand and a high pain tolerance. For
that they are shipped via the Port of Savannah to China (later this
year they will start sending them to Korea and Japan) in boxes with a
rare and prestigious stamp: Made in the USA.
This might be considered a paradox or another indicator of US manufacturing weakness, but in fact it probably reflects comparative advantage.
One basic theory of comparative advantage in exports is based on
differences in the relative abundance of labor, capital, land, natural
resources etc., leaving aside government interference with trade
patterns and macroeconomic policy. Although this theory is hard to
use to explain trade in a particular product between countries, US
exports of chopsticks to China seem consistent with the theory.
US land abundance relative to growing use of land for
non-agricultural uses in China probably means it makes economic and
price sense for the US to grow lumber to produce chopsticks for
China. This trade seems to be just another example of US net exports
of agricultural products, which reflects the relative abundance of US
land (and the land-intensive and capital-intensive agricultural
techniques that are used in the US, as well as US Government
policies).
The US exports semi-finished chopsticks, however: the final
finishing is left to Chinese labor and capital. This characteristic
of the US exports seems consistent with the theory and transport
costs. Shipping just the wood would raise transport costs and fully
finishing chopsticks is probably a labor intensive activity,
especially if it must be done to satisfy the particular demands of
Chinese consumers.
More generally, the empirical patterns of international trade are
quite complex and defy simple theory. There is a lot of rich-rich
trade than the simple theory would predict. Many poor countries are
exporting remarkably sophisticated things (e.g. India exporting
motorcycles or software). Many rich countries are exporting low-skill
things (as above). Explaining the observed patterns in the data, about
international trade, is hard. But there is more good sense in the
classical theory than meets the eye.
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