US trade relationships with China

¶ … U.S. Trade with China?

The economic ties between the United States have expanded substantially in the last several years rising from $5 billion in 1980 to an approximated $231 billion in 2004. Currently, China is considered as the third-largest U.S. trading partner with the second-largest source of imports and fifth-largest export market (Morrison, p. 3). The major reason why China is rapidly becoming a large market for America's exports is due to its population and the speedily expanding economy. However, there are several concerns regarding trade relationship between the United States and China because of the continued rise in trade imbalance between the two countries. Additional reasons that have led to the emergence of such concerns include the huge job losses due to unfair trade practices by China and widespread trade barriers. These concerns and complaints have been mainly raised by several American manufacturing companies regarding the competitive challenges caused by cheap Chinese imports. Generally, trade between these two countries has been strained by such as America's trade deficit with China, negligent protection of America's intellectual property rights and China's currency policy.

Since its entry into the World Trade Organization, China has failed to lessen its trade surplus with the United States or increase the general U.S. employment contrary to the predictions of its supporters. It's reported that the United States trade deficit with China has transferred production that could have supported more than 2 million jobs in America. While this deficit has led to the transference of production between 1997 and 2006, approximately 1.8 million U.S. jobs have been lost following the entry of China into the World Trade Organization in 2001. Actually, it's estimated that there is average transfer of 101,000 U.S. jobs annually between 1997 and 2001 due to the increasing trade deficits. Furthermore, the entry of China into the World Trade Organization (WTO) has resulted in increase in the average job losses to almost 353, 000 annually. While many jobs were displaced in every state in America, most of them were mainly displaced in the manufacturing industries.

As a result of these losses, the promised benefits of China's trade liberalization with the United States have remained unfulfilled (Scott par, 1). Based on its policy, China strongly pegs the value of its currency to the dollar's value at rates that stimulates a large bilateral surplus with America. Since the maintenance of this peg requires a huge amount in U.S. Treasury Bills and securities, Yuan becomes artificially cheap and offers an efficient subsidy on Chinese exports. Additionally, China also engages in extreme suppression of labor rights which has a significant effect on wages. In fact, without the broad labor repression, it's estimated that wages in China would increase between 47% and 80%. The country has also been accused of huge direct subsidization of export production while maintaining rigid non-tariff obstacles to imports. In 2006, Chinese exports to the United States were amounting to $288 billion while America's exports to China were totaling $52 billion as a result of this policy.

Since Chinese exports to the United States were six times greater than America's exports to China in 2006, it was a clear reflection of America's most imbalanced trading relationship. The debate on whether or not the United States should trade with China began in the early 1990s when America's economy was much healthier and Chinese exports to the United States were smaller. In the recent years, this debate has risen to include concerns on whether China's trade policies are resulting in the transference and loss of many U.S. jobs.

Reasons Why the U.S. Should Not Trade with China:

Given the concern by policymakers and the entire American public, the United States should not trade with China because of various reasons which have a huge impact on the American population. These reasons include:

Trade Imbalance:

As mentioned earlier, this is one of the reasons why the United States should not trade with China since it results in widespread trade barriers. The trade imbalance is as a result of China adopting policies that promote huge subsidization of export production and sustaining stiff non-tariff hindrances to imports. Furthermore, the trade imbalance has been as a result of China's currency pegged policy that doesn't allow Chinese currency to move with greater flexibility in foreign exchange markets. These policies adopted by the Chinese government have made its trade relationship with the U.S. To be regarded as America's most imbalanced one and continues to hurt many Americans.

Negative Impacts:

While trade with China doesn't really harm America's economy, it has considerable negative impacts on many American workers. According to the findings of a research by three academic economists earlier this year, U.S. trade with China results in several negative effects in the form of lost jobs, lower labor-force involvement and lower wages (Trumbull par, 6). While this loss of jobs is particularly in the area of manufacturing factories, the negative impact of wages is spread through the entire local economies in America. The magnitude of these negative impacts from the trade relationship between these two countries is surprising for many academic economists and analysts alike.