The Trade Relationship Between China and the United States - Case Study Example

Introduction The trade relationship that exists between China and U.S cannot be said to be perfect, however, the benefitsattained from this trade have occurred to both states. Both China and the U.S have benefited from lowered costs in their commodities. U.S leadership in the world has over the years been underpinned by how strong the U.S economy has been. The U.S economy and its prospects for growth are some of the elements that maintain the trade relationship. Some of the political analysts in United States are of the opinion that the extent in which America becomes successful will be the determining factor that will shape the U.S and China trade relations. In my opinion, United States should continue to trade with China. Many challenges that the U.S economy faces are usually domestic in nature, however, it is still important for investment to take place and the two states to continue trading. Thesis Statement: While the trade relationship between China and United States is not smooth, the benefits reaped are far much worth. History of U.S and China Trade relationship Lovett, William, Alfred Eckes, and Richard Brinkman. U.S. Trade Policy: History, Theory and the Wto. New York: M.E. Sharpe, 2004. According to Lovett, William, Eckes and Brinkman, former British Colonies were the giants when it came to international trade. As the authors stated earlier America, was only one of the states which participated in trade. At that time, the economy of the American British colonies was only considered to be extractive. Most of the commodities such as fish, lumber among other commodities were only traded within the empire. Different types of trade and manufacturing were all prohibited in the British Empire; hence, people were required to purchase goods from Asia via the England route, rather than participating in direct trade with Asians. There was colonial unrest because most of the Americans were excluded from what most termed as successful China Trade. On page 36 of the book, the authors assert that the demand for goods from China grew even after the Revolution. The authors state that in 1850s, trade between Britain and its international partners from Asia grew. By 1890s, as the authors assert, Britain already owned more than half of all the trade exports. When the Americans saw that the Great Britain made so much profit from trade, the Americans became more than interested in trade and wanted to make such profits on their own. The Americans started trading directly with China, and with the volume being comparatively small, China was viewed as a crucial player in this trade. Chai, Joseph. An Economic History of Modern China. New York: Edward Elgar Publishing, 2011. Print. According to Chai, trade between China and other trading partners like the Americans declined in 1850s. Chai argues that the international environment only became favorable for the economy growth for a state like China in the year 1979 to 2009. The author points out on page 239 that the U.S and China trade troubles did not begin recently but years ago. Chain points out that the growing conflicts between China and states like the U.S grew because the foreign exchange from China’s reserve was growing due to trade. As a result of this, China also became a trade giant when it overtook the U.S and other European states and became one of the largest exporters. Chai affirms on page 239 that despite China making great profits from the booming trade, Europe was still a leader because it offered different states a market that was more receptive for goods from America. The U.S foreign trade grew enormously, but China’s trade only remained at a favorable but constant level. According to Chai, China is there today because it maintained an exchange rate that was fixed. This is the exchange rate that has led to the emerging symptoms of currency undervaluation. In the year 2008-2009, China accounted for about 39% of the total trade gap with the U.S. This issue, according to Chain was one of the contributors of China being under constant pressure from America and being accused of manipulating the currency. Reasons Why U.S and China Should Continue Trading Crane, Philip. United States-China Trade Relations and the Possible Accession of China to the World Trade Organization. New York: DIANE Publishing, 2001. Crane argues that China and the U.S should continue trading because the existence of a sound economic and trade relationship is more important. According to Crane, the cooperation between these two states has in the recent years promoted so many benefits for not only one of them, but for both states. In the years 2009, the author argues that China became one of the key markets for the exports that the U.S was making. Crane bases his argument on the fact that in the last few years, the American companies have invested billions of dollars in projects based in Chin and as a result reaped so much profit. Crane estimates that the American investors in China have reaped profits that are worth almost $8 billion most particularly in the year 2008. Woo, Wing. "Understanding the Sources of Friction in U.S._China Trade Relations: The Exchange Rate Debate Diverts Attention from Optimum Adjustment." Journal of Asian Economic Papers. 7.3 (2008): 61-95. On page 62 of his book, Woo is quick to point out that the national interest of both states should be pursued no matter the current emerging issues. Since there has been an increase in regard to financial crisis, China has been on the forefront to support the American people to solve their problems. China increased the imports from United States, while the exports in America dropped in the year 2009. However, the exports made to China did not decrease so much. The point that Woo wants to drive across to his readers is that most firms from the U.S. have escaped to the China markets and escaped from the international monetary storm that every global firm fears. In addition to this, Woo supports the idea of trade between the two states because there is good value for money and the fact that China exports labor which has improved the cost of living for the average American. Hence, without such consumer goods from China, the price index for United States is likely to increase in almost every year. Tung, Rosalie. "U.S.-China Trade Negotiations: Practices, Procedures and Outcomes." Journal of International Business Studies. 13. (2000): 25-37. Based on the research results obtained from Tung’s article, the implication that this trade has on the management of global companies was evidently outlined. The continued trade between the two states was seen to promote effective management teams in different firms. This was also based on if certain types of programs were used or the negotiation skills used. On page 36, Tung points out that the reason why the two states should continue to trade together is also attributed by the fact that China is a state that always seeks to maintain a balanced trade. Tung concludes that it is only the trade between these two states that is likely to promote development and a situation where both states benefit. The achievement of this mission is not only possible when China continues with its exports to America, but also when the U.S makes its exports to China. Alyson , Ma, and Rossizta Wooster. "The effects of U.S.- China trade on employment and wages in the U.S. Mexico border region." Journal of Contemporary Economic Policy. 27.3 (2009): 335-348. In the year 2008, more than 15% of America’s gross domestic commodities came from global trade. Alyson gives an estimate of about $450 billion in regard to the income generated by United States from its overseas investment. Alyson supports the continued trade between the two states giving the reason that the impact that China has made in trade is tremendous. Alyson points out that the benefits retrieved from this trade have lowered the rate of inflation, thereby leading to a reduced rate of interest. This has therefore contributed to an improved economy for both China and the U.S. Bradsher, Keith. "China-U.S. Trade Dispute Has Broad Implications ." New York Times 14 Sep 2009, n. pag. Web. 23 Feb. 2013. . Bradsher is quick to point that, as much as most trade disputes are always about weapons or other crucial commodities for most governments, the trade disputes between the U.S and China are more about cars and chicken. The two states are today under so much pressure to take a stand on each other regarding their financial issues. However, it is clear from the author when he points out that these trade frictions have to end if the China and the U.S are to solve security threat issues like those in North Korea and Iran. The trade between China and the U.S should continue because, as aforementioned in the two articles above, it is not only China which reaps great profits from the exports it makes to America, but also the U.S. This is a statement supported by Bradsher in his article in New York Times, when he states that the American politicians have takes more credit from due to the existence of this trade. According to Bradsher, politicians in United States take their stand by taking measures against Chinese exports, increasing their popularity more. In my opinion, when the author says that the president in the U.S has made a decision to impose tariffs on Chinese tires, it is not only a signal that the government plans to deliver its promise to the labor unions in the world, but also shows the U.S. and China will continue to trade. If the U.S did not want to trade anymore the President would not be imposing a trade tariff. This is a clear sign that China will continue to trade with the U.S despite the challenges that always arise unexpectedly. Reasons why U.S and China Should not Trade Morrison, Wayne. "China-U.S. Trade Issues." CRS Report for Congress Journal. (2012): 2-18. Print. The argument among the critics is that the trade between China and the U.S is only making the American people poorer. While in my opinion this not a valid argument, Morrison argues that the rate at which China is developing predicts that in the next few decades, it might be the next super-power. Morrison bases his fact on the year 2012, when WTO Appellate Body came to the conclusion that the export quotas from China in regard to some of the raw materials were not consistent with the require WTO obligations. In the years 2009, this case had originally been brought up by the U.S. In addition to this, Morrison points out on page 7 that the government of China has also showed that it plans to boost its spending on domestic products so as to reduce its dependence on exports. The exports it makes are mostly to the U.S and once China cuts off this link, it will be independent to trade with other states. Bown, Chad, and Rachael McCulloch . "U.S.–Japan and U.S.–China trade conflict: Export growth, reciprocity, and the international trading system." Journal of Asian Economics. 20.6 (2009): 669-687. One of the arguments is that China is a communist state that has a record of poor human rights. China is in the world record for having executed so many people than any other state in the world. Therefore, the argument that Bown and McCulloch present is that a state that has no record of excellent human rights cannot be allowed to be the world leader. Bown and McCulloch argue that if Cuba was singled out by America, then China should not be favored in any way. The authors’ opinion is the U.S trade with China simply occurs because the prices offered by China are low. The authors assert that the aforementioned unfair practices are the reason why there are low prices. Yager, Loren. U.S.-China Trade: Commerce Faces Practical & Legal Challenges in Applying Countervailing Duties. New York: DIANE Publishing, 2005. According to Yager, one of the reasons why this trade between these two states should not exist is because the existing U.S laws have no adequate provisions of commerce which will give authority to the implementation of the WTO commitment in China. The authors argue that the trade relationship should end because China will always be branded as the villain because of holding its exchange rate at a low pace thereby causing the American to run of huge trade deficits. Conclusion In conclusion, my point of argument still remains that China and the U.S should continue to trade. Though the fact is that China will always be greater in economic influence than the U.S, the fact is that there is no need for the U.S to worry because China will always be in a geostrategic position thereby making it difficult for China to be the global leader. This is because China’s neighbors will always be the strongholds of American supports. For example, Taiwan always supports the U.S. , hence it would be impossible for China to act without Taiwan realizing what it is up to and informing the U.S government. Works Cited Alyson , Ma, and Rossizta Wooster. "The effects of U.S.- China trade on employment and wages in the U.S. Mexico border region." Journal of Contemporary Economic Policy. 27.3 (2009): 335-348. Bown, Chad, and Rachael McCulloch . "U.S.–Japan and U.S.–China trade conflict: Export growth, reciprocity, and the international trading system." Journal of Asian Economics. 20.6 (2009): 669-687. Bradsher, Keith. "China-U.S. Trade Dispute Has Broad Implications ." New York Times 14 Sep 2009, n. pag. Web. 23 Feb. 2013. . Chai, Joseph. An Economic History of Modern China. New York: Edward Elgar Publishing, 2011. Crane, Philip. United States-China Trade Relations and the Possible Accession of China to the World Trade Organization. New York: DIANE Publishing, 2001. Lovett, William, Alfred Eckes, and Richard Brinkman. U.S. Trade Policy: History, Theory and the Wto. New York: M.E. Sharpe, 2004. Morrison, Wayne. "China-U.S. Trade Issues." CRS Report for Congress Journal. (2012): 2-18. Print. Tung, Rosalie. "U.S.-China Trade Negotiations: Practices, Procedures and Outcomes." Journal of International Business Studies. 13. (2000): 25-37. Woo, Wing. "Understanding the Sources of Friction in U.S._China Trade Relations: The Exchange Rate Debate Diverts Attention from Optimum Adjustment." Journal of Asian Economic Papers. 7.3 (2008): 61-95. Yager, Loren. U.S.-China Trade: Commerce Faces Practical & Legal Challenges in Applying Countervailing Duties. New York: DIANE Publishing, 2005. Read More