US-China trade ben­e­fits ig­nored: USCBC

China Daily (USA) - - FRONT PAGE - By CHEN WEIHUA in Washington chen­wei­hua@chi­nadai­

The rhetoric about the neg­a­tive im­pact of China on the US econ­omy heard dur­ing the US pres­i­den­tial cam­paign is both mis­lead­ing and ex­ag­ger­ated, ac­cord­ing to a re­port re­leased on Tues­day by the US-China Busi­ness Coun­cil.

The re­port shows that while US-China trade has of­ten been de­scribed by politi­cians as “bad”, the trade re­la­tion­ship ac­tu­ally sup­ports some 2.6 mil­lion jobs in the United States across a range of in­dus­tries, in­clud­ing jobs that Chi­nese com­pa­nies have cre­ated in the US.

A s the Chi­nese mid­dle class con­tin­ues its rapid ex­pan­sion over the next decade, likely ex­ceed­ing the en­tire US pop­u­la­tion by 2026, US com­pa­nies face sig­nif­i­cant op­por­tu­ni­ties to tap into a new and lu­cra­tive cus­tomer base that can fur­ther boost em­ploy­ment and eco­nomic growth, ac­cord­ing to the re­port, ti­tled Un­der­stand­ing Re­la­tion­ship.

The re­port, com­mis­sioned by USCBC to the Ox­ford Eco­nom­ics, an in­de­pen­dent re­search and ad­vi­sory firm, shows that na­tions trad­ing closely with China out­per­form na­tions with less in­te­grated trade ties and the trend will con­tinue.

The USCBC, founded in 1973, is a pri­vate, non­par­ti­san, non­profit or­ga­ni­za­tion of more than 200 Amer­i­can com­pa­nies that do busi­ness with China.

John Fris­bie, pres­i­dent of the USCBC, said the im­pact of China on the US econ­omy has been widely dis­cussed in the past elec­tion cy­cle, but a bal­anced as­sess­ment of that im­pact on the US econ­omy has largely been miss­ing.

“Much was said about the neg­a­tive im­pact of trade with China, with es­ti­mated job loss re­ceiv­ing con­sid­er­able at­ten­tion. But the pos­i­tive ef­fects of the com­mer­cial re­la­tion­ship with China were largely ig­nored, and there­fore there re­ally hasn’t been an over­all con­text of as­sess­ment pro­vided,” he told a con­fer­ence call on Tues­day.

Both Pres­i­dent-elect Don­ald Trump and Democratic nom­i­nee Hil­lary Clin­ton blamed China for US job losses and other eco­nomic woes dur­ing their cam­paigns.

Fris­bie warned that pre­sent­ing only the neg­a­tive im­pact and ig­nor­ing jobs cre­ated and lower in­fla­tion and other ben­e­fits of trade with China can lead to poli­cies based on in­com­plete or mis­lead­ing in­for­ma­tion.

The re­port finds that China pur­chased $165 bil­lion in goods and ser­vices from the US in 2015, rep­re­sent­ing 7.3 per­cent of all US ex­ports and about 1 per­cent of to­tal US eco­nomic out­put.

Although some US man­u­fac­tur­ing jobs have been lost be­cause of the trade deficit, US firms sell high-value prod­ucts to China, in­clud­ing cars and trucks, con­struc­tion equip­ment, and semi­con­duc­tors, which sup­port jobs.

Ac­cord­ing to the re­port, US firms also ex­port busi­ness and fi­nan­cial ser­vices, to­tal­ing $6.7 bil­lion in 2014 and $7.1 bil­lion in 2015. By 2030, US ex­ports to China is ex­pected to rise to more than $520 bil­lion.

The re­port also shows that the US trade deficit with

China, men­tioned by Trump re­peat­edly, is mis­lead­ing.

It says that as China has be­come an in­te­gral part of the global man­u­fac­tur­ing sup­ply chain, much of its ex­ports are com­prised of foreign-pro­duced com­po­nents de­liv­ered for fi­nal as­sem­bly in China. If the value of these im­ported com­po­nents is sub­tracted from China’s ex­ports, the US trade deficit with China is re­duced by half, to about 1 per­cent of GDP — about the same as the US trade deficit with the Euro­pean Union.

China has now grown to be­come the third-largest des­ti­na­tion for US goods and ser­vices, com­pared with be­ing the 11th largest mar­ket in 2000, ac­cord­ing to the re­port.

In 2015, US ex­ports to China di­rectly and in­di­rectly sup­ported 1.8 mil­lion new jobs and $165 bil­lion in GDP. When the eco­nomic ben­e­fits gen­er­ated from US in­vest­ment in China and Chi­nese in­vest­ment in the US are com­bined, the to­tal amounts to 2.6 mil­lion US jobs and about $216 bil­lion of GDP, the re­port says.

The re­port shows that China is a lead­ing pur­chaser of US agri­cul­tural prod­ucts. In 2015, China pur­chased an es­ti­mated $15 bil­lion in agri­cul­tural goods.

It says that Chi­nese man­u­fac­tur­ing low­ered prices in the US for consumer goods, damp­en­ing in­fla­tion and putting more money in Amer­i­can wal­lets. At an ag­gre­gate level, US consumer prices are 1 per­cent to 1.5 per­cent lower be­cause of cheaper Chi­nese im­ports. The typ­i­cal US household earned about $56,500 in 2015; trade with China there­fore saved these fam­i­lies up to $850 that year.

Michael Zie­len­ziger, man­ag­ing ed­i­tor of Ox­ford Eco­nom­ics, ex­pressed doubt that low-end man­u­fac­tur­ing will help bring US pros­per­ity, say­ing that even robots are in­creas­ingly used in China.

He em­pha­sized that China has con­trib­uted more to global growth over the last 15 years than the euro zone and the US com­bined. And China alone con­trib­uted one-third of global GDP growth in 2015.

De­spite the US re­ces­sion in 2008, it has ex­pe­ri­enced stronger growth than most other de­vel­oped coun­tries since 2000, a com­pound an­nual growth rate of 1.8 per­cent. “And a great deal of this growth is be­cause of US trade with China,” Zie­len­ziger said.

Fris­bie did not want to com­ment on why the pos­i­tive mes­sages about US-China eco­nomic re­la­tion­ship have been lack­ing from US gov­ern­ment lead­ers.

He noted that it is a re­la­tion­ship that is im­por­tant for the US to get it right, adding that there are a lot of chal­lenges pre­sented by China, ques­tions about China’s pol­icy di­rec­tions and the sag­ging con­fi­dence of US busi­ness com­mu­nity.

“So as Chi­nese econ­omy tran­si­tions, it serves an op­por­tu­nity for sig­nif­i­cant eco­nomic ben­e­fits for the United States pro­vided China moves for­ward with re­forms and open­ings,” Fris­bie said.

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