USCBC Trade Agenda Report

CHINA AND THEU.S. ECONOMY:ADVANCING A WINNING

TRADE AGENDA

What Americans Should Know about the US-China Commercial Relationship

January 2013

The US-China Business Council (www.uschina.org) is the leading organization of US companies engaged in business with the People’s Republic of China. Founded in 1973, USCBC provides extensive non-partisan

China-focused information, advisory, program, and advocacy services to roughly 240 US corporations.

1818 N Street, NW, Suite 200, Washington, DC 20036

TEl: 202-429-0340 | FAx: 202-775-2476 | E-MAIl: [email protected] | www.uschina.org

CHINA AND THE U.S. ECONOMY ©2013, The US-China Business Council 2

ExEcutivE Summary: china and thE uS Economy• Defining a 21st Century agenda. Few issues loom as

large on America’s economic and foreign policy agendas as ourrelationshipwithChina.ThisisadefiningglobalstrategicissuefortheUnitedStates.Chinaisa$250billionmarketforAmericancompanies—andshouldbemore.

(PAgE 3)

• US exports to China continue to grow. China is the UnitedStates’third-largestexportmarket,behindonlyCan-adaandMexico.Weneedtobuildonoursuccessbypushingfor furthermarketopenings forAmericancompaniesdoingbusinesswithChina.

(PAgE 5)

• China’s currency: Time to move on. Yes, an exchange ratethatbetterreflectstradeflowsisimportant.Yes,amulti-lateral,comprehensivelookatglobalimbalancesisnecessary.ButChina’sexchangerateisnotthesignificantfactorintheUS tradedeficitorUSemployment thatmanymake itouttobe.Therenminbi(RMB)hasappreciatedover30percentagainst the dollar since 2005. Let’s move on to issues that do matter.

(PAgE 8)

• The US economy is far larger than China’s. In the past twodecadesalone,theUSeconomygrewbytheequivalentof theentireChineseeconomy.Chinaisrapidlydeveloping,butthe United States has a much stronger foundation upon which tobuild.Infact,theUSandChineseeconomiesaregreatlyin-terdependent and need each other to succeed. Further, with a populationof morethan1.3billionandincreasingconsumerwealth, it is only natural that the Chinese economy will one daybelargerthanours.Ratherthanbeingviewedasathreat,thisshouldbeviewedasanopportunityforUScompaniestoparticipate,andbenefit,fromthatgrowth.

(PAgE 11)

• US manufacturing faces an array of challenges, but our competitive future mainly depends on us, not China. Despite the headlines, the United States remains the world’slargestmanufacturer.Butstepsneedtobetaken,espe-cially here at home, to ensure that the US retains its competi-tive edge.

(PAgE 13)

• Investment from China supports jobs in America. US governors and mayors know this better than anyone,whichiswhytheyactivelyseekChinesecompaniestoinvestin their communities.

(PAgE 15)

• China’s ownership of US government debt is a non-issue. Chinaownsabout7percentof the federalgovern-mentdebt.ConcernsaboutChina’s leveragearemisplaced.If anything,China’sholdingsof USdebtgivethemavestedinterest in our economic success.

(PAgE 17)

• US services exports to China are growing and hold the potential to get even stronger. The United States has a services trade surplus with China, and services indus-triesaccountfor80percentof privatesectorjobsinAmerica.These include high-quality, high-wage jobs in the financial,logistics, and legal sectors, to name a few.

(PAgE 18)

• US companies in China: In it to win…market share. MostAmerican companies dobusiness inChina, includingmanufacturing goods there, to access its localmarket—andthose operations strengthen US companies here at home.

(PAgE 20)

• We have options when China doesn’t play fair. Direct negotiationwithChinaisthebestfirstapproachtodealwithproblemsAmericancompanieshavewithChina.Butwealsocan use other sound legal tools—such as anti-dumping inves-tigationsandWorldTradeOrganization(WTO)cases—andhave done so successfully.

(PAgE 22)

• US companies are a positive influence in China. From human resources practices to environmental issues, the impact of UScompanieshasbeenbeneficial.TheUSbusinesspres-ence will continue to positively affect the development of the ruleof law,civicinstitutions,andspecificissuessuchasfoodand product safety in China.

(PAgE 24)

• Most of the answers are here at home. To succeed in the years ahead, we need smart policies on taxation, energy, education, infrastructure, trade, investment, and innovation to maintain the competitive leadership of American companies andworkers.

(PAgE 26)


dEfining a 21St cEntury agEndaFew issues loom as large on America’s economic and for-eign policy agendas as our relationship with China. The current global environment may offer more immediatecrises clamoring for attention, but China is the endur-ing challenge—and opportunity—for the United States duringthiscentury.Thereismuchtobegained,inbotheconomic and strategic terms, if we get the relationship right—buteconomicandstrategicdifficultieslieaheadif we don’t.

AcarefullookatthefactsshowsthatwhileChinaisrap-idlymaking itsway up the ladder of global economicand political importance, it is still at a stage where its domesticand internationalpracticesarebeing shaped.China’s once-a-decade transition to a new leadership, now underway, underscores this point and the need to expand our engagement with China across all facets of the relationship.

Chinaisa$250billionmarketforAmericancompanies—andshouldbemore.Chinaisnowthethird-largestbuyerof US exports.US companies exported $140 billion ingoods to China and Hong Kong in 2011. American com-panieswithoperationsinChinasoldanother$169billion.Add it all up, eliminate the overlaps, and it’s easy to see why getting the China relationship right is important to oureconomyandworkers.Weneedtoreducemarketac-cess and other barriers inChina soUS companies cancompeteonanequalplayingfield.

UScompaniesareestablishingrootsinChinatoselltotheChinesemarket,andintheprocesstheyarebringinghigh-quality global standards and business practices toChina’s still-evolving social order. Though much is made of China’s rise, realizing that America’s per capita GDP is still nearly nine times larger than China’s puts things in perspective.

AndthoughmanyfocusontheUStradedeficitwithChi-na,theproportionof ourglobaldeficitcomingfromAsia,includingChina,isaboutthesameasitwas10yearsagoandlargelyreflectsachangeinourpatternof tradewiththe region. The current economic challenges may cause temporaryshifts,butthelong-termtrendsareclear—andtheneedforaclear-headed,stableapproachtoChinaismore important than ever.

We’re not in this alone. China is in the same place—their economic and strategic success requires working withAmericaonmajorissuessuchasglobaleconomicandfi-nancial policies, energy, the environment, consumer safety, and regional security issues.

TheUnitedStateshasanopportunitytobuildanendur-ing and constructive relationship with China. To reach that goal, we need policies that are based on facts, notfears;thatfosterandfollowruleof law;andthatbolsterand thenbuildupon thedeeply rooted strengthsof USindustrial and technological innovation.

TheUS-ChinaBusinessCouncil looksforwardtowork-ing with the administration and Congress as they develop policies that will achieve our nation’s goals.

USCBC Members’ Top 10 Commercial Issues in China

1. human resources: talent recruitment and retention

2. administrative licensing, business and

product approvals

3. competition with chinese enterprises

(state-owned or private)

4. cost increases

5. intellectual property rights enforcement

6. uneven local enforcement and implementation

of laws and policies

7. investment restrictions

8. competition with foreign companies in china

9. competition with foreign or chinese companies

not subject to uS foreign corrupt Practices act

10. Standards and conformity assessment

For USCBC’s full report on company priorities in China, see https://www.uschina.org/info/members-survey/


Action Plan

In our contacts with Beijing, we should• Ensure the continued opening of China’s economy

to accelerate the rapid growth of US exports to China and enhance the role of US companies sell-inggoodsandservicesintheChinesemarket.ThishelpsUScompaniesandworkersbybolsteringthejobbaseintheUnitedStates.ItalsobringsUSbusi-ness standards and practices to China.

• WorktobringChina intoaconstructiveandmoreparticipativeroleasaglobalstakeholderoninterna-tionaleconomicissues.Thisisalong-term,step-by-step process.

• Size the government-to-government dialogue to fittoday’s larger and more complex commercial rela-tionship.Thereisnosubstituteforregular,high-level,well-coordinated, and forward-lookingengagementbetween top-level economic, trade, and other of-ficialsonmajor issues suchasmarketaccess, intel-

lectual property protection, energy, the environment, food and product safety, financial and currencypolicies,globaleconomics,andopeninvestmenten-vironments.Weshouldbuildon the successfulmixof the US-China Strategic and Economic Dialogue, the US-China Joint Commission on Commerce and Tradeandotherchannels,whiletakingstepstomakeit easier for American companies—including our small and medium-size companies—to sell to China.

• Coordinate with our allies to more effectively engage with China on economic and commercial issues of common concern.

• When good-faith dialogue with China fails to resolve problemswithChina,theUnitedStatesshoulduselegally sound trade remedies and dispute settlement mechanismssuchasWTOcaseswhenwell-defined,winnable,andsupportedbyindustry.

And on the home front, we should• Supportexecutivebranchagenciesandstategovern-mentsintheireffortstopromoteUSexportsabroadandbringneeded,job-creatinginvestmentsintotheUnited States.

• Further strengthen the leadership role of US compa-nies in the international economy, especially in tech-nologiesandinsectorsthatwillbecomeglobal21stcentury leaders.

• Takestepstobolsterthelong-termcompetitivenessof theUSeconomybyadopting smartpoliciesontaxation, energy, education, infrastructure, trade, in-vestment, and innovation.

• Helpdisplacedworkerstransitiontogrowthsectorsof the US economy with cost-effective programs that provide the tools to succeed in the internation-al economy.


uS ExPortS to china continuE to groW Boosting US exports is everyone’s goal. Selling more manufactured goods, farm products, and services creates muchneededjobsforAmericans.

Chinaisabigpartof reachingthatgoal.

US exports to China have been a bright spot in theAmerican economy over the last decade, reaching $140 billion in 2011 whenHongKong is included—nearlyone-tenth of total US exports. China is now the United States’third-largestexportmarket.USexportstoChinahavegrownabout542percentsince2000.TopAmeri-canexportsin2011,thelatestfullyearof dataavailable,included agricultural products, computers and electron-ics,chemicals,andtransportationequipment,primarilyaerospace and autos.

Forty-eight states have registered at least triple-digit ex-port growth to China since 2000, far outpacing growth in their exports to the rest of the world. Twenty of those stateshaveexperiencedquadruple-digitgrowth.Forinfor-mation on exports from all 50 states and 435 congressio-nal districts, including links to local news stories onUScompaniesdoingbusinesswithChina,seehttps://www.uschina.org/public/exports/2000_2011/.

WhileChinahasbecomeatopmarketforUSmanufac-turers, America’s farmers are benefitting, too. In 2011,Chinabought60percentof totalUSsoybeanexportsand30 percent of total US cotton exports. Farm exports to China will continue to grow as Chinese incomes increase.

USexportstoChinahelpabroadrangeof USbusinesses,from large multi-nationals to small, niche companies. Ac-cording to the US Department of Commerce, in 2010, smallandmedium-sizedenterprises(SMEs)accountedfornearly 35 percent of all goods exports to China, which is betterthantheir33percentshareof USgoodsexportstothe rest of the world.

We also export services, such as tourism—Chinese tour-ists visiting America counts in our export column. Chinese tourists on average spend $6,000 on each visit to the US, directlysupportingjobsintopdestinationssuchasCalifor-nia,NewYork,Florida,andNevada.Wealsoexporten-gineering services, as well as provide express delivery and health care in China, supporting thousands of additional jobshereintheUnitedStates.

American services providers are world leaders in their fields, somuch so that we have a services surplus withChina—we sell them more services than they sell us. At a time of economic challenge, encouraging and support-ingexportexpansiontothefastestgrowingmarketforUSproductsmakessense—formanufacturers,serviceprovid-ers,farmers,andworkers.

Action Plan

• Further open China’s economy to US exports. Lowering China’s import tariffs on luxury and consumergoodsandfurtherincreasingmarketaccessand increasing thenumberof revenue-sharing foreignfilms imported intoChina arejust two examples of how to help US companies growtheirbusinessinChina’smarket.

• HelpUSexportersbecomemorecompetitivein China.

º Direct the US Export-Import Bank tomakesupportof USexportstoChinaoneof its top priorities.

º Increase the Department of Commerce’s Foreign Commercial Service resources in China to support US company exports, especially small- and medium-sized com-panies’ exports.

• Continue to add capacity and implement more efficientprocessesatourconsularpostsinChinato reduce wait times and facilitate Chinese tour-ism visits to the United States.

• Work with China to adopt reciprocal five-year,multiple-entrybusinessvisastofacilitatetradeandinvestmentbetweentheUnitedStatesandChina.

• Expedite and fully implement the APEC Envi-ronmental Goods Agreement to ensure greater access toChina’smarket forUSclean energysector manufacturers.


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CanadaGermanySingaporeMexicoNetherlandsBrazilChina

uS ExPortS to china, continued

growth in uS Exports to china: 542% growth in uS Exports to rest of World: 80%

uS ExPortS to china (in uS$ BillionS)

groWth in uS ExPortS to toP 10 markEtS, 2000-2011

fig. 1

fig. 2

china’S Wto Entry

$16.3 $19.2 $22.1$28.4

$34.7$41.8

$55.2$65.2

$71.4 $69.5

542%

$91.9

$103.9

china is the 3rd largestexport market for uS goods.

uS exports to china significantly outperformed export growth to the united States’ top trading partners.

180%

95% 77% 76% 68% 59% 56%35%

1%

119%

Source: US International Trade Commission

Source: US Department of Commerce

CHINA AND THE U.S. ECONOMY ©2013,TheUS-ChinaBusinessCouncil 7

uS ExPortS to china, continued

toP uS ExPort markEtS, 2011 (in uS$ BillionS)

uS imPortS from china oftEn havE uS contEnt

fig. 3

fig. 4

china & hong kong liStEd SEParatEly1. canada

2. mexico

3. china

4. Japan

5. united kingdom

6. germany

7. South korea

8. Brazil

9. the netherlands

10. hong kong

What thE uS BuyS from china1. Electrical machinery

2. nuclear reactors, Boilers and machinery

3. toys, games, and Sport Equipment

4. furniture, Bedding, lamps

5. footwear and related materials

6. apparel articles and accessories (knit)

7. apparel articles and accessories (not knit)

8. Plastics and related materials

9. iron and Steel articles

10. vehicles and Parts (Excluding rail)

china & hong kong comBinEd1. canada

2. mexico

3. china & hong kong

4. Japan

5. united kingdom

6. germany

7. South korea

8. Brazil

9. the netherlands

10. Singapore

What thE uS SEllS to china1. nuclear reactors, Boilers and machinery

2. oil Seeds, misc. grain, fruit, Plants

3. Electrical machinery

4. vehicles and Parts (Excluding rail)

5. aircraft, Spacecraft, and Parts

6. optics, medical instruments

7. Plastics and related materials

8. Wood Pulp, Paper

9. copper and related materials

10. organic chemicals

$280.9

$198.4

$103.9

$65.7

$55.8

$49.1

$43.4

$42.9

$42.4

$36.4

$280.9

$198.4

$140.4

$ 65.7

$55.8

$49.1

$43.4

$42.9

$42.4

$31.2

china is the united States’ 3rd largest uS export market.

uS and china have an integrated bilateral trading relationship.

Note: Order based on the Harmonized System classification for 2011.Source: US International Trade Commission

Source: US Department of Commerce


china’S ExchangE ratE: JoBS, thE tradE dEficit, and thE uS Economy “Currency manipulation” is a term we heard often in the 2012 presidential campaign — and that if we cited China as a “manipulator” it would somehow help reduce the US tradedeficitandcreatejobs.Butwhatdoescurrencyma-nipulation mean? More importantly, what does it mean fortheUnitedStates,jobs,andtheeconomy?

SomeobserversarguethatChinaismanipulatingitsex-change rate to lower the cost of Chinese goods and servic-es and increase the cost of American goods and services. TheyarguethatthismakesAmericangoodslesscompeti-tiveglobally,increasestheUStradedeficit,andshipsUSjobs—specifically jobs manufacturing goods that wereonce made in the United States—to China.

While China does control the exchange rate of its cur-rency,therenminbi(RMB),thereislittleevidencethatithasmuchof animpactontheUStradebalanceorjobs.And even some of the harshest critics in past years now agreethattheRMBisnotsignificantlyundervalued.

Theexchange rate’s impacton theUS tradebalance isminimal becausemany of the goods theUnited Statesimports from China used to be imported from Japan,Taiwan, and other Asian economies. Over the past two decades, Asian companies have shifted their export manu-facturingbasetoChina.AsChina’sshareof theUStrade

deficithasrisenwiththisshift,theshareof theUSdeficitfromtherestof EastAsiahasdeclined.Thefigureonpage10 clearly shows this trend.

Action Plan

• Increase emphasis on multilateral discussions to enhance progress already made toward bringing the RMB’s value in line with theglobalmarketplace.

• Usebilateraltraderemedytoolsconsistentwithinternational rules, such as anti-dumping inves-tigations, and multilateral dispute settlement mechanisms such as WTO cases when well de-fined,winnable,andsupportedby industry, toeliminate unfair advantages and level the play-ingfieldforUScompanies.

• ContinuetofocusonChina’sfinancialreforms(including market openings to US financialservices providers) as the ultimate solution toachieving a fully convertible currency and atrulymarket-drivenRMBexchangerate.

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thE rmB-uSd ExchangE ratE ShoWS littlE corrElation WiththE BilatEral tradE dEficitfig. 5

2005-2008rmB strengthens dramatically, trade deficit grows.

2008-2010rmB exchange rate steady, trade deficit drops, then grows.

2010-2011rmB exchange rate continues to strengthen, trade deficit grows.

Source: US Bureau of Economic Analysis

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Thinkof itthisway:10or15yearsagowhenyouboughtaTV,thelabelprobablyread“MadeinJapan”andwasanimport. Today, that TV now says “Made in China”—and is still an import. To suggest, as some have, that if an item werenotimportedfromChina,itwouldbemadeintheUnitedStatesismisleading,atbest.

Assertionsabouttheimpactof China’sexchangerateonUS employment aremisleading aswell.TheRMB ap-preciated over 30 percent since 2005 as a result of steady engagementandnegotiation.Duringthisperiodof signifi-cantRMBappreciation, theUS tradedeficit continuedtogrow—underscoringourpointaboutthelimitedrela-tionshipbetweentheexchangerateandthetradedeficit.USunemploymenthasalsogoneupastheRMBstrength-ened,notdown, showing there is little linkbetweenUSjobsandChina’sexchangerate.Thereasonisclear:USemployment rates have more to do with the state of the US economy than it does with the value of another coun-try’s currency.

US companies selling to China also do not cite the ex-changerateasacompetitivebarrier—andour542percentgrowth in exports to China since 2000 underscores that. Everyyear,theUS-ChinaBusinessCouncil(USCBC)sur-veysitsmembersonthebarriersthatimpacttheirbusinesswithChina.Theexchangerateneverranksasatopissue

harmingtheirsales,andin2012againrankedlowonthelistatnumber27.

Clearly,therearefactorsthatmakeChina’sexportstotheUnited States cheaper than those produced in other coun-tries or, in some cases, domestic products. If those factors are due to unfair trade advantages, we should go after them with the appropriate trade tools. But focusing on the exchangeratetosolvethetradedeficitorcreatejobsisthewrong approach.

Legislation that imposes a tariff on imports from China to offset currency undervaluation will violate World Trade Organization (WTO)rulesandtaxUSconsumerswith-outgettingusanyclosertotheobjectiveof movingChinatowardamarket-drivenexchangerate.It’shardtofindawinnerinthistypeof action,buttheclearloserwouldbeAmerican households.

So,whatshouldbedone?

USCBCsupportsanexchangerate thatbetterrespondstoChina’sglobaltradeflows.Amultilateralapproachtoglobal imbalances, including exchange rate issues, hasbeen pursued by the last two administrations. This ap-proach has shown the results we want—that 30 percent appreciation. We should continue this successful ap-proach, in coordination with other countries.

uS Economy iS thE Primary drivEr of uS unEmPloymEnt ratEfig. 6

Source: US International Trade Commission and International Monetary Fund

--- rmB/uSd_ unEmPloymEnt ratE

overall rmB appreciation of over 30 percent since 2005—but uS unemployment rate remains high.

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uS tradE dEficit With china (in uS$ BillionS)fig. 7

Source: US International Trade Commission

rESt of World

Bilateral trade deficit is steadily growing, in part reflecting shift from asia to china.

WhenChina is found tobeflouting international traderules,weshouldseekdirectnegotiationstoresolvetheis-sue.If good-faithdialoguefails,weshoulduserules-basedtrade tools—such as anti-dumping investigations and WTOcases,whenwell-defined,winnable,andsupportedby industry—to seek redress. The US government hasdone thiswithWTOcases onChina’s export subsidies,

autopartsimportbarriers,financialnewsservicesmarketaccessbarriers,andintellectualpropertyrights.

Butwearedeceivingourselvesif wethinkthatfixingChi-na’sexchangeratewillsignificantlyaffecttheUStradedefi-cit,orthedecades-longdeclineinmanufacturingjobsdueto productivity increases.

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'11'10'09'08'07'06'05'04'03'02'01'00

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% of uS gloBal tradE dEficit

51%48%

27%

12%

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40%

EaSt aSia

china


iS china’S Economy rEally BiggEr than thE uS Economy? Surveys show many Americans thinks so. But the USeconomy is well over three times the size of China’s. On apercapitabasis, theUSeconomyisnearlyninetimesbigger. China’s population has a per capita GDP—theaverage Chinese citizen’s share of the country’s overall economy—of about$5,400,comparedto$48,100fortheaverage American. The longer-term trend shows that the UnitedStatesgrewbytheequivalentof theentireChineseeconomy in the past two decades.

TheUnitedStateshasasignificantstakeinseeingChina’seconomy continue to prosper. US manufacturing, agricul-tural, and services exports will grow as China’s economy develops and more Chinese move into the middle class. China’s consumer class is projected to grow to nearly 600 billionpeopleby2020—that’sabouttwicetheentireUSpopulationof todayandclearlyasignificantopportunityfor American companies.

Thereismuchtobegainedfromatradepolicythaten-couragesChinatobemoreopentoUScompanies,espe-ciallywhentheUSdomesticeconomyisseekingtogainsounder footing.

In fact, the US and Chinese economies are greatly in-terdependent. For instance, the United States is China’s second-largest exportmarket;China is our third-largestexportmarket.UScompaniesacrosseveryindustryhaveinvested in China, primarily to reach China’s domestic market;Chinesecompanies inturnarebeginningto in-vestintheUnitedStates,withtheprospectof creatingjobshere at home.

WeshouldmakeiteasierforChinatobuyfromus.Stream-lining the entry visa process for Chinese customers of US goods and services not only will help increase sales for US companies, it also will provide additional sales for US air-lines, restaurants, and other service sector companies that catertobusiness travelers.TheUSExport-ImportBankshouldmakelendingsupportforUSexportstoChinaatoppriority,forbothlargeandsmallenterprises.

Thegrowthof China’sdomesticmarketopensupamajornewavenueforUScompaniestogainstrengthbysellinggoods and services in China. Many of these goods may bemadeinChina,becausedistanceandleadtimesmeansome companies cannot serve customers in China from a USbase.Buteventheseproductandservicesalesrequire

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Action Plan

• Continue efforts to further open China’s econ-omytoUSexportsandreduceownershipbar-riers in China for US companies seeking toinvest there.

• Encourage China’s constructive involvement in globaleconomicpolicyissues.

• Introduce reciprocal five year, multiple-entryvisasforUSandChinesebusinesstravelers,tomakeiteasierforourcompaniestosellproductsand services.

• PrioritizeUSEx-ImBank support forUSex-ports to China, including those of small and medium-sizedenterprises(SMEs).

Which Economy iS BiggEr?fig. 8

Source: World Bank Group

the uS economy is more than 3x the size of china’s.

• uS

• china

• China’seconomyhasgrownseven-foldinthepast20years,andhasnearlytripledinthelastdecade.

• Chinaiscatchingup,buttheUShasaddedmorethanafull“China”toitseconomyoverthepast20years.

(gdP

in c

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2000

uS$

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$.49$1.3

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iS china’S Economy rEally BiggEr, continued

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ChinaMexicoGermanyJapanUnited States

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202020112006

gdP PEr caPita, 2011 (in currEnt uS$)

china’S groWing conSumEr claSS (in millionS)

fig. 9

fig. 10

Source: World Bank Group

Source: InterChina Consulting

Per capita, america’s economy is nearly 9x the size of china’s economy.

china’s consumer class is expected to nearly triple by 2020.

design or service support, or component supply, from US facilities; these sales strengthen companies’ core opera-tions—andjobbases—intheUnitedStates.

China’s economyonedaywillbebigger thanAmerica’s,simplybecauseChina’spopulationof 1.3billionpeopleisfourtimesbiggerthanours.Thatdayisstillfarinthefuture.

However, the conclusion should be obvious: Our eco-nomic success in the years and decades ahead is mutually dependent. We need more engagement and cooperation with China, not less.

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• uPPEr middlE claSS to affluEnt: > uS $12,000/yEar

• middlE claSS: uS $4,000 – $12,000/yEar


uS manufacturing, china, and JoBS US manufacturing has lost more than 2.7 million jobs to China since 2001.

How many times have you seen that statement? So many timesthatalotof peoplethinkitistrue.Butthesimplefact is that it’s not.

This“jobloss”calculationassumesthateveryproductim-ported fromChinawouldhaveotherwisebeenmade inthe United States, which is clearly wrong—several decades wrong, in fact.

Goback to theTVexample.Theyused tobemade inJapan—andwereanimport.LookatthelabelonyourTVnow.ItislikelymadeinChina—anditisstillanimport.

Much of what we import from China is replacing imports fromothercountries,notproductswemakeintheUnitedStatestoday.Undoubtedly,somejobshavegonetoChina,butstudiesthatignorethefactsandmakewildlyexagger-atedclaimsunderminetheirowncredibility.

And is it true, as some choose to portray the issue, that US manufacturingisbeingkilledoff byChina?

Whiletherehavebeenestimatessuggestingotherwise,theUnited Nations Industrial Development Organization (UNIDO)reportsthatthatAmerica’svalue-addedmanu-facturingreached$1.7trillionin2011,thelatestdataavail-able.China’soutputwassignificantlyless,at$1.2trillionin value-added output, when using constant dollars to ac-countforinflationandchangesintheexchangerate.Yes,China’soutputisgrowingquickly,asyou’dexpectfromarapidlyindustrializingeconomyof 1.3billionpeople.ButtheUnitedStatesmakesmore thaneverbefore,we justdo itwith fewerpeopleon the assembly line—and thatreflectsproductivityhereathome,nottheriseof China.

This is an issue where perceptions matter, however. Most Americansdon’tlookatthe“tag”onairplanesorchecktosee where the semiconductors in their electronic products were manufactured to see “made in USA.” Americans do oftenseethattheirclothes,plasticcontainers,orboxesof screws were “made in China,” or that their computer or iPodwas“assembledinChina.”

Based on US import statistics, China accounted for roughly one-third of all US consumer goods imports in 2011—thekindsof productsyouseeontheshelf whenyou go into a convenience or electronics store—and those consumer goods made up well over half of all US imports from China. The result is that US consumers have a mis-

leading picture of America’s competitiveness based onreadingthelabelsontheclothing,toys,orTVstheybuy.

ThereisacomplimentaryrelationshipbetweenUSman-ufacturers of components and manufacturing machinery thatChinesecompaniesusetomakeproducts.Ourtwoeconomiesmakedifferentthingswellandbenefitbytrad-ing with each other.

Infact,theSanFranciscoFederalReserveBankhasesti-mated that Chinese made goods and services account for only2.7percentof Americans’consumerspending.Basedon their calculations, the US content of products sold in America that are listed as “made in China” accounts for about55centsof everydollarspent.

ItistruethatsomeUScompanieshaveclosedbecausetheycould no longer compete, and it is true that US companies facedaunting tasks competing internationally evenwiththeir distinct advantage in productivity. And when viewed fromtheperspectiveof jobs,productivitygainscanmeanthatittakesfewerpeopletomakethesameproduct.Butasnotedabove,wemakemorethanever,wejustdoitwithfewerpeople.Infact,USmanufacturingjobshavebeenin a steady, decades-longdecline that reflects thesepro-ductivity gains—and far predates China’s entry into the globaleconomy.

Maintaining America’s manufacturing strength has more to do with our policies and actions here at home than what happens in China.

Action Plan

• Bolster the long-term competitiveness of the USeconomyandUSenterprisesbyadoptingacomprehensive advanced manufacturing plan including smart policies on energy, tax, education, infrastructure, trade, investment, and innovation.

• Develop jobs by encouraging innovation andgrowthbyUScompaniesinindustriesthatwillbecome global 21st century leaders, such astechnology, energy, and related sectors.

• Strengthen cost-effective programs to help workers transition to growth sectors of theUS economy to help them succeed in the international economy.


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Source: US Bureau of Labor Statistics

the united States remains the world’s largest manufacturer, but china is catching up.

Productivity gains have led to greater output but with fewer workers.

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uS manufacturing,china, and JoBS, continued


Should WE BE concErnEd aBout chinESE invEStmEnt in thE unitEd StatES?WehearalotaboutAmericancompaniesdoingbusinessinChina,butwhatabouttheflipside—Chinesecompa-nies coming to the United States to set up shop?

For the moment, Chinese investment in America is low compared to investments from other foreign companies here.AccordingtoRhodiumGroup,whichhasdoneex-tensive research into inboundChinese investment,Chi-nesecompaniesinvested$6.5billioninAmericain2012.By comparison, US government data indicates that Brit-ishcompaniesinvested$442billionherein2011,Germancompaniesinvestedalmost$216billionandDutchcom-paniesinvestedover$240billion.

ButmoreandmoreChinesecompaniesarebeginningtolooktotheUnitedStatesasaplacethatthey’dliketohaveoperations—whichmeansnewjobsforAmericanswher-evertheydecidetoopenabusiness.

Foreign investment is a critical part of the US economy, especially given our current economic difficulties. Oneeconomist has estimated that we need an additional $3 billion in new investment each day tomaintain currentlevels of economic growth. Foreign investment in the US recyclesthemoneywepayoutforpurchasesabroadbackintooureconomyintheformof investmentsthatmakeusricher,strongerandbetterpositionedtocompetemoreaggressivelyintrademarkets.

Foreigndirectinvestment(FDI)inAmericasupportsabout2millionmanufacturingjobs.JobssupportedbyFDIoftenpaymore—in2008,thesejobspaidapproximately30per-cent more than other companies in the US.

Governors and mayors from across the country under-standbetterthananyonetheimportanceof foreigninvest-mentandhavebeenactively courtingChinese investorsfor their states. In the past year, governors from Michigan, Iowa, Maine and many others have travelled to China with the goal not only of increasing sales for their states’ companies,butalsoattractingnewmanufacturingfacili-ties tobebasedhere in theUS—creatinggood jobs forAmericans at a time when we truly need them.

It goes without saying that Chinese companies investing in theUnitedStatesor listingonAmericanstockexchangesmust fully comply with US accounting and disclosure rules. In addition, companies operating here, regardless of own-

ership, should maintain the highest standards of corporate governance.And,weneedtobesurethatforeigncompa-nies investing here are doing so without unfair advantages.

There are of course some industries in which the US lim-its foreign investment for national security concerns, such as telecommunications. For these sectors, the US has a processinplacetoreviewforeignacquisitionsforpoten-tial national security concerns. These reviews ensure that foreign direct investments in the US do not threaten our broadernationalsecurityinterests.

We should also keep inmind thathaving a global levelplayingfieldisimportant,too.If Chinesecompaniescaninvest in America without ownership limitations in almost everysector,thenUScompaniesshouldbeabletodothesame there. Companies’ global operations support jobshere at home and strengthen companies’ bottom lines.Thatmakesforeigninvestmentawin-winforAmericans.

Action Plan

• Support “sub-national” dialogues bringing to-gether state and municipal governments with theircounterpartsinChinatoattractjob-creat-ing investments here in the United States.

• Set clearer and more transparent guidelines for national security concerns related to Chinese investment in the United States, to de-politicize the investment review process and reduce un-certainty for Chinese investors.

• Encourage Chinese investors to consult rele-vant US government departments early in the processforpotentialmergersandacquisitions,in order to avoid negative outcomes.

• Ensure that Chinese companies listing on American stock exchanges fully comply withUS accounting and disclosure rules.

• Press China to reduce ownership restrictions on AmericancompaniesseekingtoinvestinChina.

• Prioritize negotiations of a meaningful Bilateral Investment Treaty with China.


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Should WE BE concErnEdaBout chinESE invEStmEnt, continued

chinESE dirEct invEStmEnt in thE unitEd StatES, 2000–2012*fig. 13

Source: Rhodium Group.

• m&a valuE, uSd mn (right axiS)

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CHINA AND THE U.S. ECONOMY ©2013,TheUS-ChinaBusinessCouncil 17

iS china’S oWnErShiP of uS dEBt a national SEcurity riSk? If youbelievewhatyouhearfrompoliticalcampaigns,Chi-na’s government owns so much of the United States’ gov-ernmentdebtthatithasleverageoverus—andiswaitingforthe right moment to sell it and undermine the US economy.

Relax.Chinadoesn’townasmuchof ourdebtasyoumightthink.Totheextentthatitdoes,theproblemisChina’s,notours.ThebiggerissueforAmericaisthesizeof ourfiscaldeficitanditslongtermimplicationsforoureconomy,notthelevelof China’sdebtholdings.

Consider the facts: as of September 2012, the UnitedStateshadover$16trillionindebt—thatis,howmuchtheUnitedStatesowestocreditorsforoverspendinginbud-gets over the years.

US government debt is financed in a variety of ways,including through the sale of Treasury bills, notes andbonds,USsavingsbonds,andothergovernment-backedsecurities. All of these are essentially promissory notes with pre-determined payment due dates.

Whobuysthesepromissorynotes?Awidevarietyof peo-ple and entities.About two-thirds of USdebt is ownedbyAmericans—localandstategovernments,institutionalinvestorslikebanksandmutualfunds,andindividualin-vestors.Theremainingdebt—aboutonethird—isownedbyforeigngovernmentsandinvestors.Chinaisthelargestforeigndebtholder,withabout21percentof theforeign-owneddebt.However,thisamountstoonlyabout7.2per-centof totalUSdebt,wortharound$1trillion.

What does all of this mean? Most importantly, it means theUnitedStateshasalargefiscaldeficitthatcontinuestocontributetoourdebt.ThisisanissuethataffectstheUSeconomy in a variety of ways, few of them positively, and it is something that we as a nation must address.

Beyondthat,italsomeansthatChinaisastakeholderintheeconomicsuccessof theUnitedStates.Likeanyinves-tor, China wants its assets to gain value, not lose it. In other words, it wants the US economy to get stronger and con-tinuetoprosper,becausethatmeansChinawillbeguar-anteed a good return on its investments here. A decision byChinatoselloff itssharesof USdebtwoulddojusttheopposite: send theAmerican economy into adownwardspiral, harming not only the value of China’s investments,

butalsoChina’ssalesof productstotheUnitedStatesasthe economy faltered.

ThePentagondid its ownevaluationof the risksposedbyChina’sownershipof USdebtandcametothesameconclusion:“AttemptingtouseUSTreasurysecuritiesasacoercivetoolwouldhavelimitedeffectandlikelywoulddomore harm to China than to the United States.”

Ultimately, China has become proof of an old adage:Whenyouoweyourbankthousandsof dollars,it’syourproblem,butwhenyouoweyourbankmillionsof dollars,it’syourbank’sproblem.WeoweChinaaround$1trilliondollars,sountilwecometotermswithbalancingtheUSbudgetandpayingdownourdebt,Chinawillcontinuetohave a vested interest in America’s prosperity.

Action Plan

• The United States needs to effectively address itslongtermfiscalchallenges.

oWnErShiP of uS trEaSury SEcuritiES (SEPtEmBEr 2012)fig. 14

Source: US Department of the Treasury

• uS

• china • othEr forEign countriES

• JaPan

66%

20%

7%

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total uS Securities: $16.06 trillion


SErvicES: oPPortunity for groWth AmericanstendtofixateonourtradedeficitwithChina,usually just on the goods side. But no one talks aboutourmorethan$15billionsurplusinservicesexports.In2011,theUnitedStatesexportedmorethan$26billioninservicestoChinaandimportedjust$11billion.

Andthereisroomforsubstantialgrowth.

The United States is the world’s largest services economy, and trade and investment in services with China translates directlyintohigh-wageUSjobs.UScompanies’increasedprofitsfrominvestmentsinChinaalsoleadtofurtherin-vestmentandjobcreationintheUnitedStates.

But for companies to continue this expansion, the Chi-nesemarketforUSserviceprovidersmustbecomemoreopen.Chinamaintainsmarketaccessbarriersinservicessectors including caps on foreign ownership and licens-ing restrictions in industries ranging frombanking, se-curities, and insurance to express delivery, healthcare, and product testing. For China to meet its stated goal of increasing the services sector share of its economy, these barriersneedtocomedown.

The dramatic expansion of trade and investment in ser-vices between China and United States has benefitedbotheconomiessubstantiallyandwillcontinuetodoso.Trade in manufactured goods is often viewed, rightly or wrongly,asbenefitingoneortheothercountryintermsof jobsandbalanceof paymentsimpact.Tradeandin-vestment in the services sector is overwhelmingly positive forbothcountries.

Who are these service providers? They include major US banksandfinancialinstitutions,lawfirms,insurancecom-panies,engineeringfirms,andprovidersof tourism,busi-ness advisory, computer, express delivery, and medical and healthcare services, among others. Collectively, services industriesaccountfor80percentof privatesectorjobsintheUnitedStates.Increasingly,thesecompaniesarebeingallowed to set up operations in China for sales in China. Expanding US services provided to customers in China createsorsupportsjobshereathome.

Forinstance,whenaUSengineeringfirmbuildsapowerplant or manufacturing facility in China, much of the high-value conceptual design and engineering—which is considered a services export—is done in its American offices,andthedetaileddesignmightbedevelopedinitsoffices inChina. In addition, the firmwill send projectmanagers and support personnel from the United States to manage the project’s construction, without which the engineeringmightnotbeexported.

UPS,thegloballogisticsandshippingcompany,notesthatforevery22packagesimportedorexportedperday,onenew job iscreatedor sustainedatUPS.This is justoneexampleof aUScompanybenefittingfromtheirservicesexports—there are countless more.

But it’s not only services exports that help grow Ameri-ca’s economy; it’s also services provided here in the US. As one example, Chinese tourists spend nearly $6,000 on each visit to America. That spending directly sup-portsjobsintopdestinationslikeCalifornia,NewYork,Florida, and Nevada.

The United States has a rapidly expanding services trade surpluswithChina;themoretheChinesemarketopenstoUSserviceproviders,themoreUSservicescanbesoldin China.

Action Plan

• Press for continued openings for US service companies to operate in the Chinese economy.

• Continue to expand the capacity of US consular posts in China to issue visas to Chinese tourists.


EconomiES By SEctor, 2012

uS-china SErvicES tradE BalancE With china (in uS$ BillionS)

fig. 15

fig. 16

Source: CIA World Fact Book 2012


over half of china’s economy is in industry and agriculture; growth in the services sector share is expected over time.

the uS runs a rapidly growing services trade surplus with china.

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SErvicES: oPPortunityfor groWth, continued


uS comPaniES in china: in it to Win… markEt SharE Business opportunities in China for US companies ex-ploded during the last decade, with tremendous growth in both exports to and local sales in China that havebroughtrealvaluebacktotheUnitedStates.

While exports to China are growing rapidly, there also is much to gain from US companies setting up operations in Chinatosellgoods to theChinesemarket.Withoutop-erationsinChina,companiesmightnotbeablesellsomegoods there at all due to higher transportation costs and longer lead times for delivery. Companies that are in Chi-natoselltotheChinesemarketnotonlybenefitUScom-paniesandtheirinvestors—theyalsosupportjobsathomethatarepartof acompany’sglobaloperatingsystem.

First, some context.

Atacumulative$21billion,Chinawasthefifth-largestfor-eignlocationof USmanufacturingfixedassets(property,plantsandequipment).That’scomparedto$907billioninfixedassetinvestmentsownedbyUScompaniesintheUnited States. In other words, only a fraction of US man-ufacturing investments are made in China.

That doesn’t mean that the growth of US manufacturing operations in China is not important—it is, and mostly in a positive sense.

What is driving manufacturing and other investment growth inChina? Put simply, it’s a hugemarket that israpidly growing in wealth. The Chinese people want to buythingsandareincreasinglyabletodoso.

Though some claim that US companies only produce goodsinChinaforexportbacktotheUnitedStates,dis-placing manufacturing here at home, the facts say other-wise.In2010,thelatestyearof availablestatistics,only8percentof totalproductsalesbyChina-basedUSfacilitieswereexportedbacktoAmerica.That’sright—8percent.By contrast, the vast majority of sales of US companies inChina—74percent—werewithinChina’slocalmarket.So where do all those “made in China” goods come from on American shelves? A lot come from Asian suppliers who have moved their export manufacturing to China.

UScompaniesinChinasoldnearly$125billionworthof goods and services in China in 2010. Those sales support jobsintheUnitedStates,becauseof exportsof compo-nents that are incorporated in goods finished inChina,andthetechnical,marketing,legal,design,andotherjobsrequiredtosupportoperationsinChina.

Furthermore, there is enormous potential for growth—some estimates indicate that China’s annual consumption willincreasemorethansixtimesby2027toasmuchas$10 trillion annually. Another estimate predicts China’s consumer class will grow from 200 million persons in 2011 to575millionpersonsin2020—nearlytwiceasbigastheentire US population today.

In summary, all of the data indicates that little of US companies’manufacturing in China is shipped back tothe United States and instead is sold in the local Chinese market.Inmanycases,manufacturinginChinatoservethe local market makes the most business sense—as inthecaseof consumergoods,whereshippingcostsmakemanufacturing in the United States and sending to China unrealistic.Intheend,UScompaniesgotoChinatofightformarketshareintheworld’sfastest-growingmarket.

Action Plan

• Ensure the continued opening of China’s economy to accelerate the rapid growth of US exports to China and enhance the role of US companies selling goods and services in the Chinesemarket.

• Further strengthen the leadership role of US companies in the international economy, especially in technologies and sectors that will becomeglobal21stcenturyleaders.

• Press China to reduce ownership and other barriersthatpreventUScompaniesfromsettingupoperationstoreachtheChinamarket.


uS comPaniES in china, continued

location of uS manufacturing aSSEtS (cumulativE, in uS$ BillionS)

dEStination of Product SalES By uS affiliatES in china, 2010

fig. 17

fig. 18



uS companies’ manufacturing fixed assets are overwhelmingly in the united States.

over 90% of what uS companies make in china is sold in china or elsewhere—not exported back to theunited States.

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WE havE oPtionS WhEn china doESn’t Play fair Despitethebenefitsof ourcommercialrelationshipwithChina, there are plenty of issues, too. The US-China BusinessCouncil’s 2012member survey found that de-spitemarket growth, companyoptimismaboutbusinessoperations inChinawas tempered by domestic compe-tition,continuingregulatoryandmarketaccessbarriers,as well as rising costs. Issues related to favoritism toward Chinesecompaniesappear infiveof companies’ top10challenges identified in the survey.Those issues includeadministrative licensing, competition with Chinese enter-prises, uneven enforcement and implementation of laws and policies, investment restrictions, and standards and conformity assessment.

What can the United States do when China unfairly com-petes with or discriminates against American companies?

Whengood-faithdialoguefailstoresolvethesekindsof is-sues,countriescantakeeffectivestepsshortof jumpingtostridenttraderetaliationmeasuresthatoftencanbecoun-ter-productive. The United States has a variety of legally sound trade remedies and dispute-settlement mechanisms thatitcanusetoleveltheplayingfield.

US anti-dumping investigations are one proven method to dealwithbelow-marketpricing.BecauseChinaisa“non-market economy” under US trade rules, we use third-country,market-basedpricingtoassesstariff remediesonunfairly traded Chinese products—which also addresses anyexchangeratedistortionsthatmaybepresent.

Inaddition,membership in theWorldTradeOrganiza-tionprovides countrieswith recoursewhen theybelieveother trading partners have treated them unfairly. These casescanbeveryeffectivewhenwell-defined,winnable,andsupportedbyindustry.LegalprecedentssetbythesecasesbenefitUScompaniesinthesectorscoveredbythecasesandmorebroadly.

Asof September2012,theUnitedStateshastaken15casestotheWTOagainstChinaandhaswonsix;fiveotherswereresolvedbyChinabeforeWTOactionwas requiredandfour others are ongoing. It is clear the WTO has provided animportantavenuefortheUnitedStatestoseekmeasur-ablechangeswhenChinaviolatesitstraderules.

Success in these cases demonstrates the usefulness of the rules-based approach to engaging Chinese leadershipon international trade issues. China is also getting more comfortablefilingitsowncasesattheWTO.Thisisalso

a positive step—the use of neutral, third-party dispute settlementmechanismsispreferabletoseeingChinatakeretaliatory trade actions outside of the WTO.

Action Plan

• Build upon the successful and expanded structure of engagement of the last two US administrations.

• Seekdialogueandnegotiationsoncommercialand economic issues.

• Whendirectnegotiationsfailtoresolveproblems,the United States should use legally sound trade remedies, such as anti-dumping investigations, and dispute-settlement mechanisms, such as WTOcases,whenwell-defined,winnable,andsupportedbyindustry.

• Coordinate with allies on issues of mutual concern.

USCBC Members’ Top 10 Commercial Issues in China

1. human resources: talent recruitment and retention

2. administrative licensing, business and

product approvals

3. competition with chinese enterprises

(state-owned or private)

4. cost increases

5. intellectual property rights enforcement

6. uneven local enforcement and implementation

of laws and policies

7. investment restrictions

8. competition with foreign companies in china

9. competition with foreign or chinese companies

not subject to uS foreign corrupt Practices act

10. Standards and conformity assessment

For USCBC’s full report on company priorities in China, see https://www.uschina.org/info/members-survey/


hoW dialoguE hElPS rESolvE iSSuES With chinaFor many Americans, the US-China commercial re-lationshipappearsfrustrating,markedbyongoingdis-putes that requireundue timeandeffort.Some fric-tion is to be expected in a relationship that involvesthe world’s two largest economies. While dialogue is viewedbysomeasanineffectivewaytoresolveissues,direct engagement with China and close coordination with other trading partners is producing meaningful re-sultsonissuesthatimpactUSworkersandbusinesses.

Inthepasttwoandhalf years,USPresidentBarackObama andPRCPresidentHu Jintao have visitedeach other’s countries to discuss political, strategic, and economic issues. These visits help set the overall tone in the US-China relationship. They also provide a chance to raise primary trade and economic con-cerns, since the two sidesbeginworkingmonths inadvance on the results announced at the conclusion of thesemeetings.Vicepresidentialandcabinet-levelvisits serve a similarly important purpose. US secre-tariesandPRCministersalsomakefrequenttripstoeach other’s countries to supplement the internation-al meetings at other times of the year.

Among the other ways that the United States has useddialoguetoeffectivelyaddressproblemsinourtradingrelationshipwithChina:

• The US-China Strategic and Economic Dialogue (S&ED) brings together top economic and foreignpolicy officials across both governments to addressthelargerissuesinbilateralrelations.TheUSSecre-taryof StateandthePRCStateCounciloroversee-ingforeignaffairsco-chairthestrategictrack,whichdiscusses issues ranging from military relations to cli-mate change. The US Secretary of the Treasury and thePRCVicePremieroverseeingtradeandfinancialissuesco-chairtheeconomictrack.

• The Joint Commission on Commerce and Trade (JCCT) is an expansivedialogue that is co-chairedontheUSsidebytheUSSecretaryof Commerceand theUSTradeRepresentative. It is chairedonthe PRC side by theVice Premier responsible fortrade and investment policy. Given the scope of the

commercial relationship, other agencies not under thedirect jurisdictionof the chairs frequentlypar-ticipate.TheagendafortheJCCTreflectsfeedbackfrom American companies and trade associations on theirtopconcernsondoingbusinessinChina.

• Investment issues are particularly important to US companies.Asaconsequence,theUS-ChinaInvest-ment Forum provides an essential opportunity to dis-cuss reductions in these limits and other investment-related concerns.The forum is chairedby theUSDepartmentof theTreasuryandthePRCNationalDevelopment and Reform Commission. Otherinvestment-related discussions occur during nego-tiations for a US-China Bilateral Investment Treaty (BIT).A high qualityBITwithChinawould helpreducebarriersforUScompaniesdoingbusinessinChina and would encourage Chinese companies to invest here in theUnitedStates—creating jobs forAmericanworkers.

• The United States is not alone in the challenges it faceswithChina.ManydiscriminatoryPRCgovern-mentpoliciescreateanunevenplayingfield forallforeign companies. The European Union, Japan, Brazil,andothernations frequentlyshareUScon-cernsaboutcommercialbarriersinChina.EffectivemultilateraloptionsareavailabletoconfrontChinaon issues seeing insufficientprogress throughbilat-eral efforts. The United States also has used regional and international forums such as the Asia-PacificEconomicCooperation (APEC)and theGroupof 20(G-20)asopportunitiesforhigh-levelbilateralex-change with China at the margins of their annual meetings, as well as with other trading partners that share US concerns.

With such an array of quality tools available, theUnited States should avoid employing unilateral sanctionsthatareinconsistentwithinternationalobli-gationsandunderminethecredibilityof USeffortstopromotearules-basedtradingsystem.Bystrategicallyengaging with China and other trading partners, the UnitedStateshasabetterchanceof makingprogresson issues impacting its economic interests.


uS comPaniES: a PoSitivE influEncE in china AmericancompaniesdonotgotoChinatoberolemod-elsormissionariesof change,butbytheirverypresencethey do offer a model for Chinese enterprises that are newtotheworldof modernglobalcommerce.

By simply being there, American companies and em-ployeesbringnewideas,newwaysof doingthings,andnew experiences, and the best of a company’s humanresource practices and proper environmental practices. They bring day-to-day, working-level, unplanned, un-controlledbutpervasiveexamplesof betterways todothings. It is not always perfect, and there are always an-ecdotestothecontrary,buttheAmericancompanypres-enceinChinahasbeenoverwhelminglypositive.

AmericancompaniespaybetterwagestotheirChineseem-ployees than Chinese companies do. American companies bringbetterworkingconditionstotheirfacilitiesinChina—globalclassworkersafetyandenvironmentalprograms.

In general, the experiences of US-China Business Coun-cilmembercompanieshaveshownthatthemoreChinabecomesintegratedintotheinternationaleconomy,themorelikelyChinawillcontinuetomovealongapathof reform and development. That is good for the Chinese people and good for us.

WeshouldsupportagreaterpresencebyUScompaniesinChinaformorethanthebenefitthatflowstotheUSeconomy.TheyalsohelpbringimprovementstoChineseworkplacelaborandenvironmentalpracticesandimproveconsumersafetyinbothcountries.

Action Plan

• Support China’s efforts to evenly enforce its own laws and regulations, so that domestic companies adhere to the same labor andenvironmental rules as American companies do.

• Continuetop-levelandworking-levelgovernmentprograms to increase China’s food and product safetycapabilities.

• Encourage the PRC government to view UScompanies as part of the solution on food and product safety issues through education, training,andbestpracticesprograms.

avEragE WagES at forEign comPaniES comParEd to domEStic chinESE EntErPriSESfig. 19

• highEr than thE avEragE WagE

• SamE aS thE avEragE WagE

• loWEr than thE avEragE WagE

4%

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Source: USCBC 2012 Annual Member Survey


uS comPaniES: a PoSitivEinfluEncE in china, continued

EnvironmEntal, hEalth and SafEty (EhS) StandardSfig. 20

comPany BringS gloBal EnvironmEntal, hEalth and SafEty (EhS) StandardS to china

gloBal EhS StandardS vS.local EhS StandardS

4%9%

96% 91%

• yES

• no• ExcEEd china’S StandardS

• Similar to china’S StandardS

Source: USCBC 2012 Annual Member Survey


Staying atoP thE gloBal comPEtitivE Pyramid Maintaining the record of the United States as a strong manufacturingandserviceseconomywon’tbeeasy.Thecosts of energy canput a significant strain on even thehealthiestUSmanufacturers.Theextraburdensinthear-easof pensionsandhealthcarecarriedbyUScompaniesarewelldocumented.Theneedtobolstertheeducationsystemtomaintainthetechnicalsuperiorityof USwork-ers is also no secret, as is the necessity to strengthen the country’s transportation infrastructure.

Smart trade and investment policies are necessary to fos-terjobcreationhereathome.Incentivesforinnovationinnew and challenging areas are also important to maintain international leadership.

The futurewillbelong to thecountrywhosecompaniesinventanddevelopthenextgreatbreakthrough.

Where will the great breakthroughs in environmentaltechnology,energyefficiency,andsafeextractionof min-erals and natural gas come from? Who will develop the springboardfornanotechnology,buildthemoreadvancedrobotics,orgaintheupperhandincreatingmoresophisti-catedbiotechnologyproducts?Howcanwecapitalizeandexpand upon the US lead in computer technologies and informationprocessing,aswellasbuildupontheUSedgein aerospace manufacturing to dominate the space explo-ration industries of the future?

These are not China’s problems, however. They areAmerica’sproblems.

A smart China policy in the coming decade will continue tofocusonopeningmarkets,ensuringtransparency,andbuildingruleof law.AsmartpolicyforAmericawillfocuson getting our own house in order so that US companies cancontinuetobegreat.

Insteadof misguidedpoliciesbasednotonthefactsbutthefearsof trade,USpolicymakersneedtopursuewell-thoughtoutsolutionsthattakeintoaccountthecomplexi-tiesof theglobaleconomy.

To this end, the US government should increase resourc-es forUStradeagencies, suchas theOfficeof theUS

TradeRepresentativeand the InternationalTradeAd-ministration.Doingsowouldincreasetheabilityof USofficials to pursueUS rights under global trade agree-ments and through bilateral mechanisms such as theUS-China Joint Commission on Commerce and Trade (JCCT).Itwouldalsoexpandtheabilityof USForeignCommercialServiceofficerstohelpUScompaniesun-derstandtheChinesemarketandbuildconnectionswithChinesebusinesspartners.

ThebestwaytoachieveUSobjectivesonlingeringcom-mercialproblemsinChinaisthroughacombinationof high-level, comprehensive engagement such as the US-China Strategic and Economic Dialogue; good-faith negotiation on specific issues through existing vehiclessuch as the JCCT; and, when negotiations fail, the use of rules-basedtradetoolssuchasWTOcaseswhentheyarewell-defined,supportedbyindustry,andwinnable.

The federal government should also better coordinatewith state and local governments to support their efforts to boostjobcreationthroughexportsabroadandforeignin-vestmentintheUnitedStates.Congressshouldseekinputfromgovernors’andmayors’officesthatareonthefrontlines of dealing with trade, investment, and employment issues in their home states.

Americanworkersneedtheskillstokeeppacewiththisrapidly changing workplace environment. We shouldhelp them access training programs or enroll in vocation-alschoolstoimproveordevelopskillsthatareneededinthe industries that will lead our economy in the future. When American workers lose their jobs—because of trade, technology, or any other reason—we should focus onretrainingthemtohold jobs in thosegrowth indus-tries as well.

Though there are certainly challenges posed by the ac-tionsof ourglobalcompetitors,manyof theanswerstomaintaining America’s global economic leadership areright here at home.

USCBC Trade Agenda Report

Business

Transcript of USCBC Trade Agenda Report