© 2014 Prof. Farok J. Contractor, Rutgers University
Since the year 2000, the US has suffered a horrendous merchandise trade deficit against China, adding up to $2,947 billion over the 14-year period. This means that China has accumulated nearly $3 trillion surplus dollars—much of which they “kindly” reinvested in US assets, notably US Treasury debt. (More on this in a future post.)
In its heyday, Rome suffered a similar deficit against China and India, which they had to finance by sending bullion (gold and silver) to Asia to pay for their insatiable appetite for Chinese silk, Indian muslins, and oriental spices. More recently, in the 1800s Britain suffered another unsustainable deficit because of the insatiable appetite on the part of the British middle classes for Chinese tea—a problem they solved by forcing the purchase of Indian opium on an unwilling Chinese government, which led to the Opium wars of the 1840s. To this day, the Chinese smart at the memory of their humiliation and maintain their aggressive stance in the 21st century against their neighbors (Japan, Vietnam, the Philippines) in the seas—over seemingly inconsequential islets—a direct a result of what happened 175 years ago. History matters.
Global business is not new. Read about it in AIB Insights: The Story of Globalization and YaleGlobalOnline: How A Soothing Drink Changed Fortunes And Incited Protests.