U.S.-CHINA RELATIONSTrade, Human Rights & Global Influence

U.S. Debt & Deficit

China is the top foreign holder of U.S. Treasury securities ($1.15 trillion through July ‘12)

Surpassed Japan as the largest foreign holder in 2008

The U.S. depends on China to finance its debt. Could China use that position to influence U.S. policies?

Trade Deficit

A trade deficit occurs when the value of a country’s imports is greater than what the country exports

The U.S. has an overall trade deficit with the world.

The U.S. has a trade deficit with China ($262 billion through October ‘12)

What do we buy from each other?

Top Five U.S. imports from China:

1. Electronic equipment

2. Machines, engines, pumps

3. Toys, games

4. Furniture, lighting, signs

5. Footwear

Top Five U.S. exports to China:

1. Soybeans

2. Civilian aircraft, engines, equipment

3. Cars

4. Semiconductors

5. Copper

History of Trade Policy

Since WWII, the U.S. has backed free trade & reduced tariffs (taxes on imports)

Tariffs are designed to make imports more expensive, protecting domestic industry

Until recently, China had imposed tariffs averaging over 30%

World Trade Organization

Founded in 1995, the WTO sets many ground rules for global trade.

Emphasis on the reduction of trade barriers (tariffs, quotas, subsidies)

Its a forum for trade negotiations & hears trade disputes between member countries.

Not everyone is a WTO fan

Arguments For Free Trade

• Opens markets, creating jobs in U.S. & developing countries

• Profits from trade support R & D, which strengthens the U.S. economy

• More products & choice good for consumers; lower prices

Arguments Against Free Trade

• U.S. & European firms move production; lower wages & lower regulations

• Outsourcing & lower wages reduce consumer buying power in the U.S.

• Concern that “strategic industries” (defense, tech) need to be protected

Restrictions Allowed Under WTO

Most trade restrictions are not allowed under the WTO

WTO members can restrict products if:• Made with prison labor• Threat to an endangered

species• Follows a UN boycott or

sanctions• Follows a boycott due to

national security concerns

What Can (and Can’t) Be Banned

A product can’t be banned unless there is a proven health or safety risk (“Mad Cow” disease, lead paint)

Typically can’t judge imports based on how or where they were made

Use of child labor; harsh political regimes

China in the WTO

China joined in 2001

U.S. supported Chinese membership, believing it will help American business; free market forces will democratize China

Opponents believe the U.S. hasn’t done enough to push China to make reforms

U.S.-China Trade Issues: Piracy

Piracy (illegal copying) of intellectual property is big business in China

Music, film & software

The U.S. argues Chinese officials don’t do enough to enforce copyright laws & protect U.S. businesses

Trade Issue: Dumping

Do Chinese manufacturers sell goods below cost on the international market?

U.S. officials say yes, in the clothing market especially

Dumping cheap goods into a market puts competitors out of business (clothing, agriculture, etc.)

Use of Subsidies

Subsidies—cash payments from a government—allow manufacturers to sell products for a lower price

Violation of WTO rules?

Both U.S. & China allege unfair use of subsidies (China—clothing, “green” tech; U.S.—farm, steel)

Trade Issue: Product Safety

In 2007, a series of recalls on Chinese-made products (toys, pet food, toothpaste)

Questions about safety & ethics in Chinese factories; lack of inspection by China officials & U.S. companies

Corruption concerns at the local government level