China-U.S. Trade Issues.pdf

CRS Report for Congress Prepared for Members and Committees of Congress China-U.S. Trade Issues Wayne M. Morrison Specialist in Asian Trade and Finance December 27, 2010 Congressional Research Service 7-5700 RL33536 China-U.S. Trade Issues Congressional Research Service Summary U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.- China trade rose from $2 billion in 1979 to an estimated $459 billion in 2010. China is currently the second-largest U.S. trading partner, its third-largest export market, and its biggest source of imports. Because U.S. imports from China have risen much more rapidly than U.S. exports to China, the U.S. merchandise trade deficit has surged, rising from $10 billion in 1990 to an estimated $273 billion in 2010. The rapid pace of economic integration between China and the United States, while benefiting both sides overall, has made the trade relationship increasingly complex. On the one hand, China’s large population and booming economy have made it a large and growing market for U.S. exporters. Over the past decade, China has been the fastest-growing market for U.S. exports. U.S. imports of low-cost goods from China greatly benefit U.S. consumers by increasing their purchasing power. U.S. firms that use China as the final point of assembly for their products, or use Chinese-made inputs for production in the United States, are able to lower costs and become more globally competitive. China’s purchases of U.S. Treasury securities (which stood at $907 billion in October 2010) help keep U.S. interest rates relatively low. On the other hand, many analysts argue that growing economic ties with China has exposed U.S. manufacturing firms to greater and what is often perceived to be, “unfair” competition from low-cost Chinese firms. They argue that this has induced many U.S. production facilities to re-locate to China, resulting in the loss of thousands of U.S. manufac