China overtook the United States in the second half of 2006 to become the world’s second leading exporter of goods. That fact, contained in a new report from the World Trade Organization and trumpeted in headlines around the country this morning, is bound to further rile up skeptics of America’s growing trade with China.

Although the United States exported more goods ($1,037 billion worth) in all of 2006 than China (which exported $969 billion), figures for the second half of the year show that China has now claimed the no. 2 spot behind Germany.

For those of a mercantilist mindset, to whom trade is all about exporting more than you import and more than the other guy, this news is guaranteed to be alarming. But the real news is nothing of the sort.

First, China is bound to move up in the world rankings of trade. It represents 20 percent of the world’s population, it is surrounded by thriving, trade-oriented economies, and its increasingly open and free economy has been growing at double-digit rates for more than a decade. We should welcome the news that China is more integrated than ever in the global economy.

Second, the United States continues to be a trade and export powerhouse. U.S. exports of goods grew 14 percent between 2005 and 2006, and surpassed $1 trillion for the first time ever. When combined with the $387 billion in services Americans sold abroad last year, we remain the world’s no. 1 exporter.

Third, most of the goods that China exports are in fact designed and in large part made in other countries, including the United States. “Assembled in China” would be a more accurate label than “Made in China” for most of its exports. More than half of China’s exports are made in foreign-owned factories. The most sophisticated components in the computers and other consumer electronics exported from China are in fact made in Japan, South Korea, Taiwan, the United States, and other, more advanced economies. China has become the final link in a deepening global supply chain. (For more detail, see my 2006 study on U.S. trade with China.)

Finally, trade is about more than exports. It’s about, well, trade. We export for the purpose of getting back things of even greater value. Americans benefit at least as much from imports as we do from exports. The $2.2 trillion in goods and services we imported last year make our lives better every day.

As author P.J. O’Rourke summarized in his terrific new book, On the Wealth of Nations, “To give [Adam] Smith's case against mercantalism in extreme concision: imports are Christmas morning; exports are January's MasterCard bill.”