Most China-bashing in this country has concentrated not on China-sans-Hong Kong's overall trade surplus, but on its apparently even larger bilateral surplus in trade with the United States. I say "apparently" because there is considerable dispute about the numbers. The problem is--not surprisingly--the difficulty of disentangling the Chinese and Hong Kong economies. Many U.S. exports to China go through Hong Kong, and most experts agree that as a result U.S. statistics overstate exports to Hong Kong and understate those to China. That $50 billion number you often hear is surely too large; $30 billion is more like it. Of course, even if this weren't true it would be as silly to focus on the China-United States balance alone as to evaluate U.S. trade with, say, Canada while ignoring the imports and exports of New York City.

What a number of analysts have pointed out in particular is that the rise of U.S. imports from China has largely reflected a relocation of production that formerly took place in Hong Kong and Taiwan--and that while America's deficit vis-à-vis China has surged, its deficits vis-à-vis the other two have plunged. The overall trade deficit with Greater China (all three) has increased over time, but not nearly as much as the simple bilateral balance.

But I would argue for a deeper way of looking at the emergence of a large United States-China bilateral imbalance. That imbalance does indeed reflect an asymmetry between open markets in the United States and closed markets somewhere else--but that somewhere else is not China. Rather, the problem lies in other advanced countries, notably Japan.

Bear in mind that overall trade balances are determined by the balance between savings and investment; to a first approximation they have nothing to do with trade policies. Now imagine that a new producer emerges, eager to export labor-intensive products, prepared to import a roughly equal value of skill- or capital-intensive products. But while some countries (like the United States) have markets that are pretty open to that producer's exports, others (like Japan or France) have tacit barriers making it difficult for the emerging economy to sell there. What will happen, clearly, is that the new producer will sell a large fraction of its exports to the more open market, while it will not buy as large a fraction of its imports from that country. That is why China ends up running a large bilateral surplus with the United States.

Remember, however, that overall trade balances are tied down by the savings-investment balance. So the open-market United States will make up for its new deficit vis-à-vis China by running larger surpluses or smaller deficits with other countries (with the mechanism for this shift probably being some weakening of the dollar against other advanced-country currencies). Meanwhile, China will offset its trade surplus vis-à-vis the United States by running deficits vis-à-vis other countries. In effect, the world economy engages in a game of scissors-paper-stone: China takes markets previously held by America, America takes markets from other advanced countries, and these countries make up the difference by selling to China.

It may seem that America is bearing an excessive burden, being required to accept the lion's (dragon's?) share of Chinese exports without gaining a comparable share of the Chinese market. But this is the wrong way to look at it; in fact, on most counts the United States gets the better deal.

First of all, to suggest that the United States does worse than other countries because it allows in imports while they don't brings to mind the classic comment of the 19^th-century economist Frédéric Bastiat: It's like saying that we should block up our harbors because other nations have rocky coasts. By accepting labor-intensive imports from China and producing other things instead, the United States is taking advantage of the opportunity to stop doing things it does relatively badly and concentrate on doing things it does relatively well. Meanwhile, other advanced countries are denying themselves that opportunity: The kinds of goods they will start selling to China will be pretty similar to the goods they stop selling to or start buying from the United States.

Moreover, to the extent that you think some industries are more important than others--for example, because they yield technological spillovers--the jobs the United States gains by rolling back Japanese and European market shares in computers or semiconductors are surely more likely to produce those benefits than the jobs we give up by allowing in Chinese shirts and footwear.

The downside--which is significant--is that precisely because our more open markets lead us to gain high-wage jobs but lose low-wage employment, our disproportionate role as a market for Chinese exports may exacerbate the problem of growing income inequality.

The important thing to bear in mind is that the bilateral imbalance between the United States and China does not mean that the Chinese are taking advantage of our naiveté. (Which is not to say that they wouldn't if they could. ... ) It is mainly the result of the restrictions third parties place on China's exports, not the restrictions China places on ours. And we are not being taken advantage of: In fact, the imbalance is actually a sign that America is taking advantage of opportunities that other advanced countries are passing up.