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Institute for Workplace Studies----------------- Professor Samuel B. Bacharach
School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies
Cornell University
16 East 34th Street, 4th floor---------------------- Stuart Basefsky
New York, NY 10016 -------------------------------Director, IWS News Bureau
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Congressional Research Service (CRS)

 

China-U.S. Trade Issues

Wayne M. Morrison, Specialist in Asian Trade and Finance

August 29, 2011

http://fpc.state.gov/documents/organization/174214.pdf

[full-text, 40 pages]

 

Summary

U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.-

China trade rose from $2 billion in 1979 to $457 billion in 2010. China is currently the secondlargest

U.S. trading partner, its third-largest export market, and its biggest source of imports.

Because U.S. imports from China have risen much more rapidly than U.S. exports to China, the

U.S. merchandise trade deficit has surged, rising from $10 billion in 1990 to $273 billion in 2010.

 

The rapid pace of economic integration between China and the United States, while benefiting

both sides overall, has made the trade relationship increasingly complex. On the one hand,

China’s large population and booming economy have made it a large and growing market for U.S.

exporters. Over the past decade, China has been the fastest-growing market for U.S. exports. U.S.

imports of low-cost goods from China greatly benefit U.S. consumers by increasing their

purchasing power. U.S. firms that use China as the final point of assembly for their products, or

use Chinese-made inputs for production in the United States, are able to lower costs and become

more globally competitive. China’s purchases of U.S. Treasury securities (which stood at nearly

$1.2 trillion at the end of 2010) help keep U.S. interest rates relatively low. On the other hand,

many analysts argue that growing economic ties with China have exposed U.S. manufacturing

firms to greater, and what is often perceived to be “unfair” competition from low-cost Chinese

firms. They argue that this has induced many U.S. production facilities to relocate to China,

resulting in the loss of thousands of U.S. manufacturing jobs. Some policymakers have also

raised concerns that China’s large holdings of U.S. government debt may give it leverage over the

United States.

 

China’s incomplete transition to a free market economy and its use of distortive economic

policies have contributed to growing trade friction with the United States over a number of issues,

including China’s refusal to allow its currency to appreciate to market levels, its mixed record on

implementing its World Trade Organization (WTO) obligations, its relatively poor record on

protecting intellectual property rights (IPR), and its extensive use of industrial policies and

discriminatory government procurement policies to subsidize and protect domestic Chinese firms

at the expense of foreign companies. The United States initiated three WTO trade dispute

resolutions against China in 2010, dealing with such issues as China’s use of subsidies to promote

its wind power industries, its use of trade remedy laws to protect domestic industries, and

restrictions on electronic payment services. Some Members of Congress have argued that, given

the slow rate of U.S. economic growth and the high rate of unemployment, China’s distortive

trade policies can no longer be tolerated and have called for tougher action to be taken against

China to induce it to eliminate policies that are deemed damaging to U.S. economic interests.

These trade frictions may intensify in the future as China attempts to implement policies to

increase the output of more advanced products.

 

Opinions differ as to the most effective way of dealing with China on major economic issues.

Some support a policy of engagement with China using various forums, such as the U.S.-China

Strategic and Economic Dialogue (S&ED). Others support a somewhat mixed policy of using

engagement when possible, coupled with a more aggressive use of WTO dispute settlement

procedures to address China’s unfair trade policies. Still others, who see China as a growing

threat to the U.S. economy and the global trading system, advocate a policy of trying to contain

China’s economic power and using punitive measures when needed to force China to “play by the

rules.” This report provides an overview of U.S.-China trade relations. It describes the trends in

commercial ties, identifies major trade issues, and lists major legislation in the 112th Congress.

 

Contents

U.S. Trade with China ..................................................................................................................... 1

U.S. Merchandise Exports to China .......................................................................................... 3

Major U.S. Imports from China................................................................................................. 7

Advanced Technology Trade With China.................................................................................. 8

China as a Major Center for Global Supply Chains .................................................................. 8

U.S.-China Investment Ties and Issues ......................................................................................... 11

China’s Holdings of U.S. Securities ........................................................................................ 12

Bilateral FDI Flows ................................................................................................................. 14

Other Investment Indicators .................................................................................................... 16

Investment Issues..................................................................................................................... 16

U.S. Concerns over China’s Investment Regime .............................................................. 19

Major U.S.-China Trade Issues...................................................................................................... 19

China’s Currency Policy.......................................................................................................... 20

China’s Obligations in the World Trade Organization............................................................. 21

WTO Implementation Issues ................................................................................................... 22

Pending U.S. Cases Against China.................................................................................... 23

Resolved Cases or a WTO Panel Has Issued a Ruling...................................................... 23

Violations of U.S. Intellectual Property Rights ....................................................................... 27

The U.S. WTO Cases Against China on IPR .................................................................... 28

Indigenous Innovation and Government Procurement Policies .............................................. 30

Indigenous Innovation Policies ......................................................................................... 31

Chinese Government Procurement Issues......................................................................... 31

China and U.S. Trade Remedy Laws....................................................................................... 33

The Chinese Tire Case....................................................................................................... 33

The U.S.-China Strategic and Economic Dialogue ................................................................. 34

The July 2009 Economic Track Session............................................................................ 34

May 2010 Economic Track Session .................................................................................. 35

The May 2011 Economic Track ........................................................................................ 36

Concluding Observations ........................................................................................................ 36

 

Figures

Figure 1. U.S. Trade With China: 2000-2010 .................................................................................. 2

Figure 2. U.S. Trade Balances with the World and Various Trading Partners: 2010 ....................... 3

Figure 3. Major U.S. Export Markets: 2010 .................................................................................... 4

Figure 4. U.S. Manufactures Imports from Pacific Rim Countries as a Percent of Total

U.S. Manufactures Imports 1990, 2000, and 2010 ....................................................................... 9

Figure 5. Share of U.S. Computer Imports from China: 2000-2010 ............................................. 10

Figure 6. China’s Holdings of U.S. Treasury Securities: 2002-2010 (year-end) ........................... 13

 

Tables

Table 1. U.S. Merchandise Trade with China: 1980-2010 and Projections for 2011....................... 2

Table 2. Major U.S. Exports to China: 2005-2010 .......................................................................... 4

Table 3. U.S. Merchandise Exports to Major Trading Partners: 2001 and 2010 ............................. 5

Table 4. Major U.S. Imports From China: 2005-2010..................................................................... 7

Table 5. Major Foreign Suppliers of U.S. Computer Equipment Imports: 2000-2010.................. 10

Table 6. China’s Holdings of U.S. Treasury Securities: 2002-2010 .............................................. 12

Table 7. U.S. Data on U.S. –China Bilateral FDI Flows: 2003-2009 and Cumulative

Value at Year-End 2009 .............................................................................................................. 15

Contacts

Author Contact Information........................................................................................................... 36

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