U.s. Trade Relations With China Trade Patterns

China has become a perceived threat to the U.S. economy because of the increasing trade deficit between the two countries, their ability to undercut production costs of similar products produced in the United States, and the amount of leverage that China has over the United States due to amount of money that has been lent by China. Although the United States has taken steps to close the trade deficit, such as convincing China to raise prices on their exports, there is still a considerable gap (Prasad). The United States government continues to print money that they simply can’t afford, therefore, relying even more heavily on China sustaining the value of their currency. Unless the United States is able to close the trade deficit and regain control of our economic flexibility, the problems caused by foreign countries owning our debt will remain eminent.

Since 1899, America has maintained an open door policy with China. Throughout the years, relations between the United States and China have changed with several effects on both countries caused by the open door policy.

Increased trade deficits can be concerning, but it is the United State’s large budget deficits that are concerning the worldwide leaders. The trade deficit is a reflection of the United States rapid growth compared to other countries along with the continued injection of foreign funds into the U.S. due to the dollar being the reserve currency (Carbaugh, 2011). A portion of the trade deficit is a result of a capital surplus and not a reflection of an imbalance in the U.S. economy. In other words, the budget deficit is due to a structural imbalance as the U.S. is spending beyond their means.

U.S. trade patterns are an important topic of study due to America’s power and central position in the international market. This topic of US trade partners and our trading patterns with those partners has been approached from a variety of perspectives by several economists. Namely, Sattinger (1978), Srivastava and Green (1986), Summary (1989), and Pollins (1989a and 1989b). The literature draws many conclusions from American competitiveness and the political and social factors that help explain bilateral trade patterns the choice of trade partners. And while there is an abundance of literature concerning this topic there has been little done from the perspective of how America’s trade partners have developed and shifted over the last 25 years, which is what this paper will focus on achieving. International trade flows are also an important topic and have been estimated by many economists including, Tinbergen (1962), Anderson (1979), Helpman and Krugman (1985), Helpman (1987), Feenstra (2002), and Anderson and van Wincoop (2003). Each of these researchers used a variant of the gravity model to estimate trade flows which not only demonstrates the continuing empirical validity of the model but gives firm background with which to base this analysis. The basic gravity model states that the volume of trade between two countries is proportional to the size of the two economies, and various measures of trade resistance such as geographical distance between the countries,

For the past three decades the U.S. trade deficit with China has been growing. In 2013 U.S. trade with China was $562 billion, but resulted in a trade deficit of $319 billion. Nader states that the

economies of both nations. This problem the United States must face is whether it ought

Throughout history, the United States’ trading policies have shifted from early protectionism intended to generate revenue and support domestic industry growth to a high degree of free trade within the international trade market (Carbaugh, 2015). In between, policy changes designed to increase and decrease tariffs were enacted due to pressure from politicians, economists, industries, citizens and other countries. Yet, emphasized in the ensuing paragraphs, America’s continuous efforts to maintain a sufficient amount of trade tariffs has continuously led to fluctuations in the domestic economy. Along with the country’s practice of protectionism, the policies that influenced the major changes in tariff rates include the

In our quickly expanding global economy, how states execute trade is more important than ever. Global organizations like the International Monetary Fund are established to help the states trade and regulate trade currencies. These global organizations are not always efficient, and can lead to imbalances in trade currency. “For more than a decade, the U.S. and other countries castigated China for its currency policy, saying the yuan’s level gave the country’s exporters an unfair advantage at the expense of its trading partners (Talley 1).” Since free trade always seems to result in trade deficits that are detrimental to the United States, the discussion should center on correcting the trade imbalance in an effort to have these free trade treaties fairer for all sides by imposing tariffs on China.

Furthermore, the nation will go deeper into debt with the rest of the world as Americans continue to rely on the strong flow of foreign money, particularly from central banks in Asia, to finance the trade gap. China, Japan and other foreign governments are some of the biggest holders of government securities, lending money to cover the substantial federal budget deficit and helping to keep interest rates and home mortgage costs here relatively low. As a result, American consumers are able to spend more and save less.

A century ago, the textile and clothing industry was a major part of the U.S. economy, but that is no longer the case. Faced with foreign competitors that can produce quality goods at low cost, many U.S. firms have found it increasingly difficult to produce and sell textiles and clothing at a profit. As a result, they have laid off their workers and shut down their factories. Today, most of the textiles and clothing that Americans consume is imported. The United States and China are economically connected through importing and exporting. Due to the United States being in a large deficit with China, we must remain in good terms with China. China has a very fast growing economy due to their advances in technology and other devices. The benefits are on a global perspective, globalization means more job opportunities. China has cheap labor, which allows them to produce at a lower cost. The story of the textile industry raises important questions for economic policy: How does international trade affect economic well-being? Who gains and who loses from free trade among countries, and how do the gains compare to the losses? A low domestic price indicates that the country or in this case China, has a comparative advantage in producing the good and that the country will become an exporter. A high domestic price indicates that the rest of the world has a comparative advantage in producing the good and that the country will become an importer. China is second to Canada as the United

First, I would like to give a brief history of China’s ascension to the WTO and the modernization efforts that have been underway the past couple of years. The past decade, China has experienced incredible economic growth due to its government policies of opening up. The process of opening up started in 1978 with China’s economic reforms. These centered on transitioning China slowly from a planned economy to what is called a “socialist market economy” (Long). Yet, China still kept many of its protections against foreign involvement in the Chinese market. From 1987 to 2001, the WTO and China had been in talks to insure China’s accession to the WTO. During that time China invoked numerous policies that continued the process of opening up to the rest of the world. According to the WTO, “China has substantially reduced its tariff levels for many items, eliminated over-whelming majority of its non-tariff measures, gradually opened its service sectors, abolished the mandatory plan for imports and exports, eliminated export subsidies, established its market-based pricing mechanism, unified the exchange system, realized the convertibility of RMB under current account in international transactions, unified taxation system and provided national treatment to imported product” (Long).

In this paper we will be looking at the trade balance between the U.S. and China. The trade balance between China and the United States will be determined for the most recent past five years. The trend will also be illustrated using a graph and will offer the insights into the trade balance between these two countries. The impact of foreign trade will be analyzed, to include the two countries economic growth during the selected period, 2009 to 2013. The issues, concerns and ramifications on China’s economy will be discussed, along with the issues, concerns and ramifications on the United States economy. The nature and possible future effects on the Unites States economy, in direct result of the trade with China will be discussed in detail. This will also include the United States ability to sustain any growth and development.

For many years America has been considered one of the most powerful nations in the world. Along with having a strong army and navy force. America is also known for it wealth and the use of fossil fuels. China on the other hand got their money from the profit of other countries buying products from them. It is known that the U.S and china have a long history but in today’s economy America has been in a lot of recessions. Meanwhile in china still makes money off of the U.s from buying products and the debt that the U.s is in from borrowing money from china in the past. There are so many ways the U.S can approach this problem they could strengthen their alliance in Asia, economic pressure, and find a way to co-operate with each other.

Foreign trade with China dates all the way back to 206 BC – 220 AD during the Han Dynasty when the Silk Road was first established. Since then, the world has developed into an interconnected web of relationships that has linked empires across the globe. The foundation of these ties was formed upon the physical exchange of commodities such as porcelain and silk. These transactions have more than just satisfied the demands of eager consumers. They have led to an intricate network of contacts unifying East Asian countries with the distant nations of Europe and North America. The results of these cross-cultural interactions are vividly portrayed in an oil painting of Canton titled “View of Foreign Factories,” which hangs inside the Peabody Essex Museum in Salem, Massachusetts. Designed by Chinese artist Sun Qua, the picture depicts not only the emerging assimilation of economies, but also the spread of architecture, technology, and the integration of foreign culture into Chinese life.

In this case study, we will attempt to answer what measures China took in preparation for acceptance into the WTO and how it adjusted to its eventual admittance in December of 2001. We will also review some of the problems associated with China’s economic growth strategy.