Trade With China: 7 Myths and Facing Protectionism

Thursday, August 2, 2007 10:03
Posted in category Red Tape, The Big Picture

In doing some research on the currency bill (post coming soon), the actors behind the movement, and the underlying issues, I cam across tow documents that are must reads: Seven Myths about U.S. – China Trade and Investment authored by the U.S. China Business Council and Facing Protectionism Generated by Trade Disputes authored by Wing Thye Woo and Geng Xiao of Brookings Institute.Seven Myths about U.S. – China Trade and Investment (PDF download here) is a simple 2 pages that breaks with members of the administration

  1. American companies invest in China to shift jobs there and export back to the United States
  2. China is causing the decline of American manufacturing
  3. China’s market is closed to American companies
  4. China WTO entry was a bad deal for America
  5. China doesn’t allow American companies operating there to be profitable
  6. China’s undervalued currency creates a large trade deficit and prevents American companies from selling more to China.
  7. China forces American companies into joint ventures

Simply put, USCBC is looking to shatter some of the most common myths that are found in the media today, and they have in 2 pages done a great job of covering the basics. For myself, I agree on all points as China actually does not force anyone to do anything, and if you look at the markets of China one will see that American products from every category can be found. the problem is that “American products” made in America and “American products” made in China are treated differently by the administration.

If I were going to add a myth buster of my own, it would be that the surplus that China counts is actually more relevant than the defect the United States reports as the U.S. lumps Hong Kong into the statistics. Maybe I am parsing the line, but the next report does make a strong case for me.

Facing Protectionism Generated by Trade Disputes (PDF download here) is a much more robust article at pages, and is one of the best piece I have read recently (partially because they back up my theory that historic trade statistic tools do not represent today’s reality – see here and here). Through this paper, the authors sought to answer the following:

1. What are the problems caused by the trade imbalances?
2. What are the problems revealed by the appearance of trade imbalances?
3. Is a large Yuan appreciation the best cure for the trade friction?
4. What is to be done?

Why this document is so powerful, and should be read by anyone interested in the trade deficit, is that unlike a lot of economist writings this paper is easy to understand, the logic is easy to follow, and they are plenty of statistics to support their conclusions

I could pull out a lot of information on the report, but I think it is best just to encourage readers to go and download the report. there is a lot of background, there are supporting stats, and unlike a lot of reports, it is very balanced in its approach and reasoning.

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4 Responses to “Trade With China: 7 Myths and Facing Protectionism”

  1. Law Office of Todd L. Platek says:

    August 4th, 2007 at 8:42 pm

    Many thanks for making these writings available on your site.

  2. Rich says:

    August 5th, 2007 at 1:47 am

    Happy to. Let me know if there are other areas of interest, or what your perspective is on the trade issue.. Have a good weekend.

  3. china trade - Trade With China: 7 Myths and Protectionism says:

    August 9th, 2007 at 11:49 am

    […] In doing some research on the currency bill (post coming soon), the actors behind the movement, and the underlying issues, I cam across tow documents that are must reads: Seven Myths about US – China Trade and Investment authored by the … by Rich at 1:52 PM […]

  4. Moonzie says:

    August 27th, 2007 at 10:40 am

    People discuss for a long time but these 7 myths are unable to stop America – China trade, because once such trade stops, perhaps can bring more myths.. I think what the author has been recommended report might give everybody some answer.. About the question of America – China trade, in fact two countries have been diligent all the time.
    For the China’s Food problem: The Chinese government has thoroughly investigated each case of its own substandard products,and took an action on it.

    For the the U.S. trade deficit with China : The U.S. deficit with China reflects that US need export more to China.Demand for many US products in China are very strong,but there are few, if any, effective methods for US SMF’s to access Chinese buyers and meet the demand. AC-Ali enables US businesses to list their company and product descriptions in English. AmeriChinaB2B will translate these descriptions in Chinese and put them on its China Business platform http://www.acb2b.cn. which attracts a large number of Chinese importers and distributors looking for American products to import to China.