In the heated political debate over U.S. economic policy, Democrats and Republicans agree on at least one essential goal: China needs to start importing a lot more goods and services from the U.S.
China’s trade surplus with the U.S., which totaled $295.5 billion in 2011 and is growing, is one of the world’s most carefully observed statistics. The U.S. trade deficit in March was $21.7 billion, up from $18.1 billion, a year earlier.
Optimists argue, however, that these numbers tell only part of the story. According to the most recent report of the US-China Business Council, U.S. exports to China are growing, and at an accelerating pace. Between 2000 and 2011, the report notes, those exports increased 542 percent, from a modest $16.2 billion in 2000 to $103.9 billion in 2011.
When exports to Hong Kong, the special administrative region of China, are included, the total figure for U.S. exports in 2011 was $140.4 billion. That makes China the third-largest export market for U.S. goods, trailing only Canada and Mexico.
Over the past 11 years, China has been “our fastest-growing export market, and the rate of U.S. export growth has been increasing in recent years,” USCBC Vice President Erin Ennis said. “This suggests that it is a market that will continue to have growth potential for U.S. exporters. Forty-eight out of the 50 states have had triple-digit export growth to China since 2000, and outpaced their growth anywhere else in the world.”
China, she added, was “one of the few growth spots” for many U.S. exporters during the global recession.
Ken Lee, managing director of DHL Express in Hong Kong, said his company’s trade volumes are growing at a strong rate, and the imbalance between outgoing and incoming U.S.-China traffic on the company’s Pacific routes is expected to decline in coming years.
Although China’s trade surplus with the U.S. continues to expand, the numbers don’t account for the many products registered as “made in China” but that are assembled with a great deal of components from the U.S. and other foreign suppliers, Ennis said.
“With any sort of trade data, there are some simple numbers that seem like they should be telling a story, but things are much more complex,” she said.
One of those numbers is the value of the Chinese yuan, which has appreciated over the past decade, but with little direct impact on the volume of Chinese exports to the U.S., most economists agree.
Although Republican presidential candidate Mitt Romney has pledged to designate China as a “currency manipulator” as soon as he takes office as president next January, the USCBC doesn’t support such an approach as helpful to overcoming the U.S. trade deficit with China.
Rather than focus attention on the value of the yuan, “robust discussions have been going on behind the scenes between China and the U.S.” in recent weeks that could lead to Chinese reforms that significantly improve the tone and substance of the U.S.-China economic environment, Ennis said.
At the most recent meetings of the U.S.-China Strategic and Economic Dialogue, “robust discussions” took place aimed at reducing the Chinese government’s dominance and monopolies in certain areas. In response, China agreed to raise from 33 percent to 49 percent the limits for foreign ownership in Chinese joint venture securities firms, as well as to shorten the waiting period foreign companies face before they are allowed to expand their business licenses in China.
The Beijing government also is considering tax reforms and measures to deregulate how Chinese private sector companies can use their capital. Some of these measures could go a long way toward encouraging Chinese consumers to buy more imported goods, Ennis said.
Overall, she noted, there has been “tangible progress on the real irritants in the relationship” between China and the U.S.: Chinese restrictions on foreign ownership, intellectual property reforms and market access. “The Strategic Economic Dialogue has been chipping away at these issues,” she said.
Issues such as intellectual property reform can have a measurable impact on public perceptions about China in the U.S., where trade with China could be a major campaign issue this fall. “Things are going in the right direction if it is no longer obvious (one day) that there are counterfeit goods on the streets” of Chinese cities, Ennis said.
Such a transformation took place in Taiwan, decades ago, after the island nation, long notorious for its blatantly counterfeit goods, enacted reforms that protected foreign intellectual property, and encouraged imports.
Even optimists such as Ennis don’t expect U.S.-China trade frictions to disappear, of course. The goal of such bilateral talks is not to eliminate all trade frictions, she said, but to make sure “we have a mechanism to address problems when they come up.”
Contact Alan M. Field at email@example.com.