Question

China has been growing at a phenomenal rate and recently became the second largest economy in the world. Discuss economic reasons why trade with China (both in terms of importing and exporting) is beneficial to the United States. Develop a response that includes examples and evidence to support your ideas, and which clearly communicates the required message to your audience. Organize your response in a clear and logical manner as appropriate for the genre of writing. Use well-structured sentences, audience-appropriate language, and correct conventions of standard American English.

Answer 1

The economy of China ranks as the second largest in the world by Nominal GDP and the largest in the world by purchasing power parity. China has the world's fastest-growing major economy, with growth rate averaging 6% over 30 years.

China’s economic model has a range of growing implications for the U.S. and globally. And the U.S. strategy with respect to the China to include new trade agreements, which raise the standards for trade. This strategy would provide benefits to the parties to such free trade agreements (FTAs) and create economic costs to China from non-participation, which should further encourage China to reform its economy and trade practices with the aim of joining the new trade agreements. The Trans-Pacific Partnership (TPP), from which the U.S. withdrew in 2017, included important new rules in areas that matter for the U.S. such as on SOEs, IP, digital trade, and transparency and due process in the making of regulations affecting trade. With China outside the trading block, TPP would have created costs for China. According to one estimate, TPP could have decreased Chinese income by $40 billion annually and this would have grown as more countries joined the agreement. Taken together, TPP would have been an important part of the “comprehensive toolkit” USTR refers to in creating pressure on China to reform. The TPP has now been reconstituted without the U.S. as the Comprehensive and Progressive TPP (CPTPP) and most of the rules for addressing U.S. concerns with Chinese trade practices remain. The importance of the CPTPP for addressing the China challenge warrants the U.S. to reconsider its position on the agreement and re-join. In the event that bilateral FTAs remain the focus for the time being, the U.S. should aim to conclude agreements with its strategic allies in the Asia-Pacific region and beyond.

Today, the US-China trade relationship actually supports roughly 2.6 million jobs in the United States across a range of industries, including jobs that Chinese companies have created in America. And as the Chinese middle class continues its rapid expansion over the next decade, US companies face significant opportunities to tap into a new and lucrative customer base that can further boost employment and economic growth. While the growth in the U.S. by China, as increases the purchases of U.S. exports. Without a doubt, U.S. business, farmers, and ranchers aim to export more to China. However, increased U.S. exports, whether to China or elsewhere, need to be in response to market forces and then the demand of U.S. products increases.

The U.S.-China economic relationship delivers more benefits to the U.S. than is commonly understood. For example,

• recent data shows that U.S. exports to China support around 1.8 million jobs in sectors such as services, agriculture, and capital goods. However, trade with China has also led to job destruction in some U.S. industries—particularly low wage manufacturing. Despite these costs, the frequent focus by the administration on the bilateral deficit is not a meaningful yardstick for assessing U.S.-China trade or its impact on employment. The U.S. trade deficit is less a product of restrictions on U.S. imports than it is a reflection of a low U.S. domestic savings rate, which requires overseas capital to fund U.S. domestic investment needs and the growth in U.S. government debt. In addition, the trade deficit does not account for the activities of affiliates of U.S. and Chinese companies in each respective market, a calculus that shows the U.S. selling more to China than vice versa.
• As China has become an integral part of the global manufacturing supply chain, much of its exports are comprised of foreign-produced components delivered for final assembly in China. If the value of these imported components is subtracted from China’s exports, the US trade deficit with China is reduced by half, to about 1 percent of GDP—about the same as the US trade deficit with the European Union.
• America’s 11th-largest export market in 2000, China has grown to become the third-largest destination for American goods and services. US exports to China directly and indirectly supported 1.8 million new jobs and $165 billion in GDP in 2015. When the economic benefits generated from US investment in China and Chinese investment in the US are combined, the total amounts to 2.6 million US jobs and about $216 billion of GDP.
• China is expected to continue to be one of the fastest growing major economies, creating growth opportunities for American companies— provided China proceeds with economic reforms that will remove lingering market access barriers in many sectors.
• Chinese manufacturing also lowered prices in the United States for consumer goods, dampening inflation and putting more money in American wallets. At an aggregate level, US consumer prices are 1 percent - 1.5 percent lower because of cheaper Chinese imports. The typical US household earned about $56,500 in 2015; trade with China therefore saved these families up to $850 that year.
• Since 2003, productivity growth in US manufacturing outpaced most advanced economies. Oxford Economics calculates that US manufacturing productivity increased by 40 percent from 2003 to 2016, or 2.5 percent annually, compared with 23 percent in Germany. Meanwhile, rapidly rising factory wages and a rising currency make Chinese workers relatively less cost-competitive than their American counterparts. US factories are still 90 percent more productive than Chinese manufacturers. These trends may lead to some “reshoring” or retention of manufacturing jobs in the United States.

Conclusion: The U.S. and China have a complex economic relationship, which has borne benefits and costs for the U.S. While many U.S. producers and consumers have reaped billions of dollars of gains from the relationship, concentrated employment effects in manufacturing have been acute.