U.S. relations with China have entered an era of aggressive trade policy, and this morning's trade numbers out of Beijing are only likely to bolster the hawkish case being made in Washington.

China's trade surplus in the first quarter widened to $46.4 billion, nearly double the $23.3 billion recorded a year earlier, the Chinese customs bureau said.

But despite Chinese efforts to reduce its trade surplus with eased import restrictions and export incentives, that lower number will do "nothing, zilch, nada to address political concerns in the U.S. about China's overall trade surplus," as economist Stephen Green of Standard Chartered Bank tells Bloomberg. "The numbers have now settled down, but still to a very high level."

For years -- and especially during the 2004 election year -- China has been the bete noire of both Democrats and Republicans in Washington who argued the government wasn't sufficiently protecting U.S. workers from unfair trade practices abroad. By filing formal complaints with the World Trade Organization yesterday, the Bush administration was, in effect, "finally doing to China what it has alternately implied, suggested, hinted and sometimes vaguely threatened it would do," Variety notes.

Ten days after it reversed years of policy with the imposition of potentially steep tariffs on some Chinese paper imports, the administration accused China of failing to halt the rampant piracy of U.S. movies, music, books and other intellectual property. In fact, trade specialists and industry officials tell the New York Times the move was in part a signal to Democrats who planned to legislate even tougher sanctions if the administration hadn't acted.

But "the new policy risks angering or embarrassing those in Beijing who may be trying to reform economic policies as Washington wants," the Times says. "In addition, many trade experts worry that China might retaliate against American imports or cut back on cooperation sought by Washington on other issues, like diplomatic problems involving Iran, North Korea and Sudan."

The head of China's largest beverage maker, Zong Qinghou of Wahaha, accused the French food giant Danon of failing to understand China and Chinese culture. "I told them the Chinese have stood up and the era of invasions by eight-country armies is long-gone," he said, in remarks the Financial Times notes were "unusually aggressive and nationalistic."

While most Chinese manufacturers have to settle for razor-thin profits due to extreme competition--according to BusinessWeek, 5% or less ("How Rising Wages Are Changing The Game In China"), American corporate profits are rising to unprecedented heights (see chart above). U.S. corporate profits have risen 10% or more, quarter after quarter, for 14 straight quarters--the longest run of such rich returns ever.

So who's making all the profits in this trade? The U.S. companies. This was carefully documented in an August 2005 article in Foreign Affairs entitled A Trade War with China?. The author demolishes all the hearsay arguments about how trade with China is detrimental to the U.S. economy, revealing that much of China's manufacturing is owned and managed by foreign corporations. In effect, the companies aren't Chinese at all; only the workers are Chinese.

In essence, China is competing not with the U.S., but with other low-cost manufacturing nations. The choice for many companies isn't between manufacturing in the U.S. or abroad; the choice is between suppliers of low-cost labor and infrastructure: China. Vietnam, Mexico, Romania--anywhere but the U.S.

For people bemoaning the loss of manufacturing jobs in the U.S., here's a suggestion: get real. Companies go where they have to in order to survive and prosper in a world where foreign corporations will gladly take sales away from them. If they don't compete on quality and price, they wither. For a better understanding of the realities of the global marketplace, read this Foreign Affairs article, Offshoring: The Next Industrial Revolution?

Many U.S. companies still have huge American manufacturing workforces--Catepillar and Boeing come to mind, both global leaders which generate big profits--but they also manufacture components in other nations as well, for a number of compelling reasons which may have little or nothing to do with low-cost labor. Boeing, for instance, essentially guarantees sales in Japan by subcontracting out the wing assemblies to high-tech Japanese manufacturers. No parts made in Japan, no sales in Japan, and so fewer planes made in Seattle. Pink slips fly, both in Japan and America--not good for anyone.

If you compare the rates of "hard core" long-term unemployment in the industrialized nations (see chart), then you'll see that the U.S. workforce has a far smaller problem than the European nations, which are staggering beneath a long-term unemployment rate of 40% - 50%.