What you must understand about trade

What you should know about international trade

There is a common argument that China’s exports are underestimated. Basically, that China exports much, much, much more stuff than is being reported, and, therefore, controls far greater share of the global trade than most assume.

That is almost certainly true

At the same time, it is important to understand why and how it happens that Chinese exports, specifically, get massively underestimated. And I think it is a good starting point to launch a conversation on trade in physical goods.

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Let’s start from the basics

Here is a shipping container, packed with stuff

Lots and lots of miscellaneous stuff inside

Lots of boxes, lots of parcels, lots of packages filled with stuff

Now the question would be

Like yeah, it has much stuff inside. But how much, exactly?

How can we measure it?

Well, there is a relatively straightforward way to do it

Which is:

Measure its physical properties

Objective properties of material reality can be measured in a clear, straightforward way, not allowing for much interpretation, or manipulation.

(Examples may include width, height, volume)

As we are interested not in the container per se, but in its contents, we will probably be measuring its weight.

Again, it is very easy & straightforward to do:

1. Put the container on a scale

2. Look at the numbers

3. Subtract the weight of a container itself

Voila, you have measured the weight.

Moral of the story being:

First, objective properties of material reality (e.g. weight) can be measured.

Second, they can be usually measured through a clear, straightforward procedure, not allowing for much manipulation.

Third, as they can be measured this way, they usually are.

One implication of that being

We usually do have reliable data referring to the objective properties of trade volumes

Because it is possible to collect, in the first place.

So, when you are reading about the physical volumes of trade, you may assume that figures referring to physical properties (e.g. weight) are either true, or relatively close to the truth¹. And that is because they are based on measurements.

Measuring physical values - that is what a moderately qualified bureaucracy can do - and could do quite successfully since at least the Bronze Age.

So why would we have any problem with measuring trade at all?

The problem would be:

Physical values are not what we want to know or are interested about

Politicians, media, general audience are not much interested in volume, weight, etc

What they are interested in is value.

Now the problem with value is that:

Value is a social construct

Once again, weight is an objective property of reality. Can be measured.

Volume is an objective property of reality. Can be measured.

Value is not an objectively property of reality and it cannot be measured in any objective way.

Value is a matter of convention

One implication of that being:

Regarding trade, what we usually have is:

Physical properties that you can measure.

Social conventions that you can not.

The problem is that we want to know this un-measurable, a matter-of-conventions properties. But we cannot.

We want to know value, but we can’t know it.

We can know weight, but we don’t want to know it.

What we know we are not interested in, and what we are interested in, we cannot know.

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Or can we?

In many cases, we can make an educated guess.

The thing is that some goods are in fact highly convenient for translating their (measurable) physical properties into more or less reliable estimates of value.

Which goods would that be?

For the most part, that would be commodities