Foreword 15 Introduction 18. Chapter 1: Does Trade with China Benefit the United States?

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1 Contents Foreword 15 Introduction 18 Chapter 1: Does Trade with China Benefit the United States? Chapter Preface 23 Yes: Trade with China Benefits the United States Cheap Chinese Imports Have Saved 26 American Consumers Billions of Dollars The Economist Chinese President Hu Jintao claims that inexpensive imports from China benefited America over the last decade by saving American consumers $600 billion. Some economists corroborate President Hu s claims, finding that as Chinese imports increase in market share, American producer prices fall, thus reducing the costs of goods for American consumers. Much of the Money Spent on Chinese 28 Imports Goes to US Businesses Galina Hale and Bart Hobijn Chinese-made goods and services accounted for only 2.7 percent of Americans personal consumption expenditures in 2010, and more than half of this amount went to US businesses and workers who market, sell, and transport China products. This figure rises if goods containing Chinese content are included, but even then, Chinese imports make up only a tiny share of US consumer spending. In the Long Run, US-China Trade Is Good 34 for Both Countries Molly Castelazo

2 Trade has been the foundation of global economic development throughout history, and today US trade with China benefits America in various ways helping US companies be more successful, helping Chinese people to purchase more US goods, and providing inexpensive goods to Americans. China also benefits as its economy and population becomes more prosperous. Only a small group of US employees suffer when jobs are moved to China. No: Trade with China Does Not Benefit the United States The US-China Trade Deficit Has Cost US Jobs and Driven Down US Wages Robert E. Scott From the time China entered the World Trade Organization (WTO) in 2001, rapidly growing US-China trade has caused a dramatic loss of 2.4 million US jobs, including high tech jobs. Competition from China has also driven down wages and reduced bargaining power for other US workers in non-china-related manufacturing and other industries. The US Relationship with China Is Lopsided in China s Favor Robert J. Samuelson The United States and China share interests in global peace and prosperity, but China s goal is a new global order in which its needs are placed above those of other countries. The result is a US-China trade relationship that transfers US jobs, technology, and finances to China in return for its support for suppressing nuclear proliferation in Iran and North Korea. The United States should stop its passive appeasement of China. Free Trade with China Has Benefited China More than America Alan Tonelson

3 China s economic rise threatens America s future because so-called free trade with China has really been used by multinational corporations to gain a free ride at the expense of the US economy. These businesses have not really opened China to US exports; rather, they have focused on supplying the US market from bases in China, thereby avoiding US labor, education, and regulatory costs. This benefits China and earns profits for US corporations but destabilizes and destroys the US economy. Chapter 2: Are Chinese Imports Safe? Background on Health and SafetyConcernsoverUSImports of Chinese Products Wayne M. Morrison Reports of unsafe Chinese products including seafood, pet food, toys, and tires have raised concerns in the United States over the health, safety, and quality of Chinese imports. Many analysts attribute these problems to ineffective Chinese health and safety laws and regulations, and a corrupt and highly competitive economic system that fails to monitor the quality of products. China maintains that most of its products are safe and it has announced a number of new safety initiatives, but reports of tainted goods continue to surface, contributing to trade tensions between the countries. Yes: Chinese Imports Are Safe China Arrests 2,000 in Food Safety Crackdown Agence France-Presse Following a scandal in 2008 in which the industrial chemical melamine, added to infant formula, killed six babies and sickened 300,000 more, China pledged to clean up its food industry. In April 2011, the country launched a major campaign to fulfill this pledge, arresting about 2,000 people and closing 5,000 businesses in a major crackdown on illegal food additives. China promises to continue this effort in the future. A New US Food Safety Law Will Increase Scrutiny of Chinese Food Imports Marc Sanchez

4 The Food Safety Modernization Act (FSMA) was passed in 2011 and if funded should have a positive impact on food manufacturers in China and the companies that import Chinese food products into the United States. Inspections and new Food and Drug Administration authority contained in FSMA will push China to improve its own food safety system because it will not want to be on the list of countries blocked from exporting foods into America. No: Chinese Imports Are Not Safe Jungle of Problems: Beijing s Failure to Protect Consumers Stanley Lubman In February 2011, China announced a campaign to improve food safety, but more effort is needed to address serious ongoing food and product safety issues associated with China-made goods. Not only does China need robust consumer protection legislation, it also needs to raise public consciousness about safety and strengthen enforcement of those public safety laws. The Safety of Chinese Food Products Is Not Improving Food & Water Watch China is a leading global food exporter, but the country has also been exporting its food safety problems an issue that was illustrated when milk products tainted by the chemical melamine sickened hundreds of thousands of infants in China and killed thousands of pets in the United States. Despite China s recent campaign to improve its food safety, there is no evidence that this is occurring. As such, it is time for a common sense approach to inspecting imported food and guaranteeing its safety. Food Safety Is Still a Crucial Issue in China Cesar Chelala Years after the scandal over China s melaminecontaminated milk products, reports of tainted food products continue to surface, particularly in rural areas of China. The problem is that local food producers can increase profits by adding contaminants to products, and China s food safety system is fragmented and has been unable to correct the problem

5 Chapter 3: Is the US-China Trade Deficit a Threat to the US Economy? Background on the US Trade Deficit with China Kimberly Amadeo The United States imports many more products from China than it exports to China, creating a large trade deficit. This deficit exists because China is able to keep the costs of its goods low by paying low wages to workers, by keeping the value of its currency the yuan lower than the US dollar, and by buying US treasuries to keep the dollar strong. Yes: The US-China Trade Deficit Is a Threat to the US Economy The US-China Trade Deficit Is the Main Structural Problem with the US Economy Peter Navarro The main problem causing slow economic growth and high unemployment in the United States is the US-China trade deficit. China maintains this deficit not merely by keeping its labor costs low but by ignoring environmental pollution and employing a variety of unfair trade practices such as export subsidies, piracy of US technologies and trade secrets, undervaluing its currency, and counterfeiting of US brand names. To get America working again, US policymakers must reduce the trade deficit with China. China s Economic Development and the US-China Trade Imbalance Is Harmful to the US Economy Ralph E. Gomory

6 Many people believe that free trade benefits everyone, but as China s economy becomes more developed, it is acquiring a competitive advantage over the US economy. China s mercantilist policies promote Chinese industries, and US corporations, which have set up production facilities in China instead of America, are making huge profits by adding to China s production and technical knowledge, while harming US interests. The US government must implement policies that promote an alignment between corporate interests and those of the larger nation. Such a program would bring jobs back to the United States and balance trade with China. The US Trade Deficit Is the Biggest Threat to America s Future Alec Feinberg The US-China trade deficit is the most pressing economic issue facing the United States and is the cause of today s high unemployment and burgeoning national debt. The United States has lost 2.4 million jobs to China over the years, and China is now the top owner of American businesses and debt. By outsourcing jobs to China, a vicious cycle has been created that is destroying the American economy. No: The US-China Trade Deficit Is Not a Threat to the US Economy The US-China Trade Imbalance Benefits the United States US-China Media Brief The United States has had a trade deficit with China since the late 1980s, but this is not because China is restricting its markets, keeping wages low, or undervaluing its currency. Rather, the US-China trade deficit exists because the United States imports more products than it exports, not just with China but worldwide. The trade deficit has benefited American businesses that have relocated or outsourced to China, American consumers who have bought inexpensive goods, and the US government which has used US Treasury securities, mostly bought by China, to finance wars and economic bailouts. The United States Is Still the Top Global Economic Superpower Mark Trumbull

7 The United States is still a global economic superpower, with an economy more than twice as large as China s, and American living standards are far above the Chinese. However, China is a strong economic competitor, along with countries like India and Brazil. Some economists fear that these emerging economies might grow at America s expense, while others maintain that the United States just needs to embrace policies that take advantage of its innate strengths, such as its entrepreneurial tradition and large consumer culture, as the best means to ensure its continued prosperity. Chinese Inflation and Other Changes May Soon Ease the US-China Deficit Patrick Smith There are signs that China will respond to growing inflation by lifting controls on its currency. This move should make Chinese goods more expensive, improve the US- China trade deficit, and decrease China s purchases of US debt. For the Chinese, this change will raise wages and move China from a producing and exporting economy to a consumer economy an astonishing accomplishment in economic development. 123 Chapter 4: Should the United States Toughen Its Trade Policy Toward China? Chapter Preface 128 Yes: The United States Should Toughen Its Trade Policy Toward China The United States Must Adopt a 132 Harder Line in Its Economic Negotiations with China Eliza Patterson US trade policy toward China, which has favored quiet diplomacy and maintaining good relations with the country, has failed to address US concerns over China s unfair trading practices. The United States should adopt a firmer negotiating stance that establishes a timetable for Chinese policy changes such as currency appreciation, intellectual property protection, and better treatment of foreign industries. This approach will work because China needs the US market as much as the United States needs China s manufacturing base and investment.

8 The United States Must Compete in Its Own Self-Interest Clyde Prestowitz US economic power is eroding, largely because the nation is clinging to an outdated policy of international free trade. The United States must accept the new reality of strategic globalization that is, using government to promote jobs and trade. China follows this model, and the United States, too, must act in its own self-interest by taking such actions as challenging China s currency manipulation and offering incentives for corporations to invest in America. The United States Should Crack Down on China s Currency Manipulation Dustin Ensinger China s currency which is undervalued by as much as 40 percent subsidizes Chinese exporters while acting as an import tariff for US exports to China. Since 2001, this has caused the loss of 2.3 million American jobs. The US Congress or the Executive Branch could fight China s currency manipulation but has refused to do so thus far. The failure to act will only perpetuate US job losses and the US-China trade deficit. The United States Should Prevent China from Buying US Debt Peter Navarro and Greg Autry A Congressional attempt to stop China s currency manipulation will not pass, so the United States should simply prevent China from buying or redeeming any more US debt. This would cause the US dollar to sink, making US goods more competitive in China and world markets. The United States should also keep China from investing in US corporations, land, or resources. US Policymakers Should Worry About China s Subsidies to State-Owned Chinese Companies Derek Scissors

9 US policymakers claim that China s weak currency costs American jobs, but there is no evidence this is true. Rather, the United States should focus on identifying and eliminating a wide variety of Chinese anti-competitive subsidies to state-owned and state-controlled Chinese companies. These subsidies make it impossible for US businesses to fairly compete in China, hurting the US as well as the global economy. The US Government Must Plan for the Threat of Chinese Investment in the United States Ting Xu The newest challenge to US-China relations is the issue of Chinese investment in US high tech companies. China needs to move its economy forward by investing in high tech industries, and this requires investment in industrialized countries, particularly the United States. The US government should develop a strategy to guide such investments and avoid those that might threaten US strategic interests. No: The United States Should Not Toughen Its Trade Policy Toward China The 2011 US-China Summit Made Progress John Pomfret The US-China summit in January 2011 produced some progress for the United States side, including deals for China to buy US products, promises from China to protect intellectual property of US firms, and some Chinese flexibility on human rights. However, China did not promise to let its currency value rise, and no real agreement was achieved on stopping nuclear proliferation in North Korea and Iran. Would a Stronger Renminbi Narrow the US-China Trade Imbalance? Matthew Higgins and Thomas Klitgaard

10 A stronger Chinese currency the renminbi or yuan would not substantially reduce the US-China trade deficit; it would only lower the costs of imported inputs for Chinese exporters and raise the cost of Chinese goods the United States imports from the country. And although a stronger currency might increase US exports to China, the low number of these exports would limit this impact. Over time, the trade deficit will shrink, however, as US exports to China increase with China s expanding middle class. Both China and the United States Need 177 to Rebalance Their Economies Joshua Meltzer In 2010, US imports from China rose but so did US exports. These trade figures are good news because they show that US consumers are buying again and that export industries may create more American jobs. However, the US-China trade deficit is likely to continue until China rebalances its economy more towards domestic consumption and the United States moves toward less consumption and more savings. Organizations to Contact 181 Bibliography 187 Index 193