Economic Analysis

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Economic Analysis

Economic Analysis

Executive Summary

US-China trade in context: Yes, we import a lot from China. But the US trade deficit with China has increased to a great extent because of shifts in export manufacturing from other Asian economies to China. East Asia, including China, is now responsible for significantly less of the global US trade deficit than a decade ago, even though China's share within East Asia has risen.

US exports to China are up dramatically this decade. Since 2000, US exports to China are up more than 300 percent, benefiting almost every state, county, and congressional district. The next-biggest increase was to Germany, far behind at 70 percent.

The US economy dwarfs China's. The United States added nearly two Chinas to its economy in the past decade. China is rapidly developing, but the United States has a much stronger foundation from which to build. In fact, the US and Chinese economies are greatly interdependent and need each other to succeed.

US manufacturing faces an array of challenges, but China is not at the top of the list. The US share of global manufacturing output has been consistently above 20 percent since 1982. China is increasing its global manufacturing position, but it is primarily taking share from Japan and others in East Asia.

US services exports to China are growing and hold the potential to get even stronger. The United States has a services trade surplus with China, supporting high-quality, high-wage jobs in the financial, logistics, and legal sectors, to name a few.

A single-minded focus on China's currency is a distraction. Yes, an exchange rate that better reflects trade flows is important. Yes, a multilateral, comprehensive look at global imbalances is necessary. But China's exchange rate is not the significant factor in the bilateral trade balance many make it out to be. The renminbi (RMB) has appreciated roughly 20 percent against the dollar since 2005.

US companies are a positive influence in China. From human resources practices to environmental issues, the impact of US companies has been positive. The US business presence will continue to positively affect the development of the rule of law, civic institutions, and specific issues such as food and product safety in China.

Advancing the agenda with China: The best way to achieve US objectives is through a combination of high-level, comprehensive engagement such as the Strategic Economic Dialogue; good faith negotiation on specific issues through existing vehicles like the Joint Commission on Commerce and Trade (JCCT); and, when negotiations fail, the use of rules-based, internationally accepted trade tools such as WTO cases when they are well-defined, supported by industry, and winnable.

Most of the answers are here at home. To succeed in the years ahead, we need smart policies on energy, healthcare, education, and innovation to maintain the competitive leadership of American companies and workers.


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