Wayne M. Morrison
Specialist in Asian
Trade and Finance
ties have expanded substantially over the past three decades. Total U.S.- China
trade rose from $5 billion in 1981 to $503 billion in 2011. China is currently
the United States’ second-largest trading partner, its third-largest
export market, and its biggest source of imports. Because U.S. imports
from China have risen much more rapidly than U.S. exports to China, the
U.S. merchandise trade deficit has grown from $10 billion in 1990 to $296
billion in 2011. The rapid pace of economic integration between China and
the United States, while benefiting both sides overall, has made the trade
relationship increasingly complex. China’s large population and booming
economy have made it a large and growing market for U.S. exporters and
investors. According to one estimate, China is currently a $200 billion market
for U.S. firms. U.S. imports of low-cost goods from China greatly benefit
U.S. consumers, and U.S. firms that use China as the final point of
assembly for their products, or use Chinese-made inputs for production in
the United States, are able to lower costs and become more globally
competitive. China’s purchases of U.S. Treasury securities (which total
nearly $1.2 trillion) help keep U.S. interest rates relatively low. On the
other hand, many analysts argue that growing commercial ties with China
have exposed many U.S. firms to greater competition from low-cost Chinese
firms, which they contend has negatively affected wages and employment in
a number of U.S. industries.
However, China’s incomplete transition to a free market economy and its use of
distortive economic policies have increasingly strained commercial
relations with the United States. Major concerns raised by U.S.
policymakers and stakeholders include China’s efforts to maintain an undervalued
currency, its mixed record on implementing its World Trade Organization (WTO) obligations,
its relatively poor record on protecting intellectual property rights (IPR),
and its extensive use of industrial policies (such as financial support of
state-owned firms, discriminatory government regulations, pressure on
foreign-invested firms in China to transfer technology, and export
restrictions on raw materials). Many analysts argue that such policies are
harmful to U.S. economic interests and have contributed to U.S job losses.
For example, one U.S. government study estimated that IPR infringement in
China cost U.S. IPR-intensive firms $48 billion in 2009.
Some Members of Congress advocate a more aggressive U.S. trade policy towards
China, such as increasing the number of dispute settlement cases brought
against China in the WTO, where the United States has prevailed on a
number of issues. During his State of the Union Address in January 2012,
President Obama announced plans to create a new Trade Enforcement Unit “charged
with investigating unfair trade practices in countries like China.” Some
analysts caution that taking a more aggressive stance against China over
its trade policies could induce it to retaliate against U.S. exports to,
and investment in, China. They further contend that major economic
disputes should be dealt with through established high-level bilateral
dialogues, such as the Strategic & Economic Dialogue (S&ED) and
the U.S.-China Joint Commission on Commerce and Trade (JCCT). They note,
for example, that under talks held under these forums, China agreed to
eliminate discriminatory government procurement practices linked to the
development of “indigenous innovation.” Many trade observers contend that
the United States should also continue to press China to rebalance its
economic growth model by boosting domestic consumption and decreasing the
country’s reliance on exporting for its economic growth.
This report provides an overview of U.S.-China trade ties and major issues.
Date of Report: May 21, 2012
Number of Pages: 51
Order Number: RL33536
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