Bilateral Trade Between the USA and China – Free Essay Examples

Bilateral Trade Between the USA and China

Introduction

Bilateral trade has been existent between the U.S and China but it has rapidly risen in recent years. From the China customs statistics, the country’s exports to the U.S rose from US$52.1 billion in 2000 to US$162.9 billion in 2005. On the other hand, U.S exports to China also rose from US$16.2 billion in 2000 to US$41.8 billion in 2005.

From the US statistics, China is the country’s fourth-largest trade partner, which implies that it is the fourth largest import partner and the eleventh largest partner in export trade. As of 2005, this has greatly changed, as China has become the third-largest trade partner. Because of these, both countries have been strategic in the way they trade with each other.

Since the figures from trade between the two countries have increased significantly, it is evident that they are big markets for each other. The US Department of commerce that even lists China to be ahead as far as the country’s new emerging markets are concerned has confirmed this. In addition to these the trade tends have increased over the last 10 years.

A very important aspect of the trade between the two countries is the fact that capital markets are hard to ignore. Without proper profits in the capital market trade will collapse. The US investment in China has reached a $51 billion mark as of 2005. In other words, China has become a large consumer and market of US capital.

Effects

The two countries have achieved a lot in financial co-operation. Treasury bonds in the Republic of China that belonged to the United States reached $254.4 billion. There was also a relatively good amount in private securities and stocks. On the other hand, most of Chinas reserves (60%) were in the US capitals.

In recent years though, the relationship between the two countries in terms of trade has had some friction. This is because of the increasing conflicts that the two countries are experiencing. It has also been projected that as the world sees some realignment this relationship will be hurt further (majorly in the economic and trade areas). Some areas that will be highly manifested include; trade balance, textile trade, and intellectual trade rights.

The problems between the two countries may have a solution, as they are conflicts of economic interest. These conflicts revolve around the industrial sectors of the economies. These conflicts are minor and therefore are not supposed to affect trade and economic cooperation between the two trading countries.

To resolve such issues the countries are supposed to deal with the issue from a far-reaching perspective. For trade to thrive there is supposed to be mutual benefit and equality, which are the foundations of trade and economic cooperation. In this relationship, both countries should be complementary partners.

China and the US can solve these frictions and disputes through friendly negotiations. It is not advisable to use threats and sanctions to keep the partnership well-groomed. The restrictions imposed in the textile industry between China and the United States are a good example. However, we seem to have gotten the solution as negotiations are in place and it led to the signing of the MOU.

This MOU only reflects on the cooperation and mutual understanding and benefit which is a good example of how to solve frictions in the future. Currently, there is a trade imbalance between the US and China. This is evident, considering the Chinese customs statistics, which says that the trade surplus now stands at US$114.2 billion.

The US chamber of commerce says that its trade deficit with China is at its highest at US$201.6 billion. From this information, it is evident that the US has benefited a lot from the daily necessities that it imports. This is because they are of high quality and low price well suited for the market. In the end, they have eased inflation and adjusted the industrial structure and development.

Considering the market needs is the best way of looking at the trade deficit. This is because a trade deficit is in itself a trading behavior. For example, there was an exchange of a Boeing for 50million shoes that the US did with the Chinese. The underlying assumption here is that a developing country can get trade advantages from exporting a large number of consumer goods.

The United States always gets the upper hand in the trade as well as economic cooperation’s between countries. The trade deficit has been due to the US’s advantage of inefficient technology. Technological management is one of the things that could reduce the surplus that China produces. The US can well affect this to improve trade between these two countries.

The world labor division is seen to be responsible for the US trade deficit. This is because of economic global trends and the redefining of the world’s industries to give them a new lease of life. The US is a recipient of processed products from China, which is almost at 70%, which only allows China to get a small fee because of the processing.

There is also a shift in trade imbalance in the Chinese mainland because of foreign investments from Asia, which account for almost 70%. The long-term effect of this has been the sharing of the trade surplus by the countries in Asia, which has greatly compromised the US position in this case.

To explain this, the US chamber of commerce found out that those imports from these regions that have invested in China had dropped drastically by 2.5%. On the other hand, as this was going on imports from China jumped by 140% over that period. In looking at the trade and economic relationship between the US and China we focus on four areas.

These areas include; technology exchange, trade-in common produce, two-way investment, and trade of services. The US has been gaining a lot from this trade over the last three years as the figures have been rising in its favor. At the end of the day all, these products made by these businesses find a place in the Chinese consumer market.

Due to increased demand in the Chinese market, companies like General Motors as well as Motorola have seen china reduce its imports especially in motor vehicles and telecommunication accessories. The US trade deficit comes from such areas as the businesses invest the profits on growth and remit the remainder back to the US.

An increase of sales to $75billion by the firms that have originated from the US is an indicator of the move made to reduce the US to China trade deficit. In 2005, China imported goods worth US$2.173 trillion, a trend that will increase and in the process create a large market.

There is a need for the deregulation of export management so that small enterprises can be able to increase the market share in this large economy. These countries have an industrial structure that complements others. On this scale these promises a great future where the two countries can have a broad trade and economic co-operation.

The US has a good position with capital, management experience, and technology that should be of benefit to China’s low-cost labor and a huge market. For China to develop well the country needs to promote and provide for developments. The participants and representatives of other companies can be very important in ensuring that the relationship is improved.

As the two countries engage in trade, it has enabled the youths to be more hopeful. In recent years, the US has not been fully dependent on China to finance its debts. There has been an argument that consumption of Chinese products is highest in the United States. The countries especially, the US need to get real on deficit reduction, which is a result of the current account deficit and the rising public debt.

China does not make public its foreign reserves components and the data that they have received from the US has been misleading. In terms of the financial flow, the two countries have increased their flows. Financial assets that have the US name attached to them are one of the main links between the two countries.

Trade between the two nations has also come about with many trade disputes now and then. These have been costly waste a lot of time. The US has been forced to undertake a currency revaluation where it is obsessed with China’s exchange rate policy. They have believed that the value of the yuan has been artificially kept low so that the Chinese products end up costing less in the market.

Reforms

After experiencing many disputes due to the valuation of the yuan and others the two trading countries need to come up with reforms. The Chinese government can win back confidence by instituting some reforms in the way it values its currency as the majority of countries, the US included have seen it to be unfair.

China needs to open up its doors to allow other people to be engaged in constructing its economy, as this is a future trend that can be capitalized on. Export growth must be enlarged. This will maintain some sort of stability in social networks while at the same time expanding job opportunities to the people.

The Chinese government is supposed to continue with the massive monetary and physical stimulus program to improve the business environment within the country. Credit is supposed to be freely and cheaply available. This provides ripe conditions for an investment boom that will propel the economy.

US government should get real on deficit reduction. It should manage its debt and deficits urgently as they are responsible for dependence on funds outside and current account deficits. If it does not correct this problem then the government will have to contend with a worsening balance of payment as it trades with China.

To be more assertive, the united states need to carry out some reforms especially concerning its trades with china. It is not more on the defensive in the bilateral relationship. Just as it strengthens the Chinese currency, emerging markets need a hand of support from the US. Good currency flexibility will benefit China by allowing the country to rebalance its economy. Apart from enhancing China’s growth, this will also stabilize the international financial markets.

It is important that for enhancement of strategic and economic dialogue be enhanced. This is where the two countries will continue to foster high-level engagements among their leaders to come up with a solution. Whenever trust is built at such a stage minor conflicts and problems will be eliminated.

The introduction of new ways to manage affairs that revolves around trade is put into practice for smooth trade between the two countries. Proper management will reduce the costs of doing business, which translates to high profits that can increase business profitability or be used for expansion.

The government should also develop or come up with incentives that will encourage more trade amongst them and improve their relations. Through these specific areas of focus, this is achieved and it is easy to know where to improve.

There should be the expansion of funding for the US government agencies to monitor and seek enforcement of China’s compliance with WTO trade commitments as is stipulated. These will ensure conformity to the expected norms in international trade.

China is supposed to review its harsh investment restrictions. They always pressure investors to agree to contract terms that try to stipulate the way the firm will operate. This is not good for international trade that is trying to reduce as many laws as possible. The country is also prone to non –transparent trade rules and regulations, which are secretly formulated, unevenly enforced, and unpublished. These laws should be reviewed so that we do not have many complaints within China.

Conclusion

Since the figures from trade between the two countries have increased significantly, it is evident that they are big markets for each other. The US Department of commerce that even lists China to be ahead of the country’s new emerging markets has confirmed this. In recent years though, the relationship between the two countries in terms of trade has had some friction. This is because of the increasing conflicts that the two countries are experiencing.

Currently, there is a trade imbalance between the US and China. This is portrayed by the China customs statistics that say that the trade surplus now stands at US$114.2 billion. There is a need for the deregulation of export management so that small enterprises can be able to increase the market share in this large economy. These countries have an industrial structure that complements others.

As the two countries engage in trade, it has enabled the youths to be more hopeful. In recent years, the US has not been fully dependent on China to finance its debts. Trade between the two nations has also come about with many trade disputes now and then. These have been costly and wasted a lot of time that can be spent on other important issues.

Cite this paper

Reference

UniPapers. (2022, January 11). Bilateral Trade Between the USA and China. Retrieved from https://unipapers.org/free-essay-examples/bilateral-trade-between-the-usa-and-china/

Work Cited

"Bilateral Trade Between the USA and China." UniPapers, 11 Jan. 2022, unipapers.org/free-essay-examples/bilateral-trade-between-the-usa-and-china/.

1. UniPapers. "Bilateral Trade Between the USA and China." January 11, 2022. https://unipapers.org/free-essay-examples/bilateral-trade-between-the-usa-and-china/.


Bibliography


UniPapers. "Bilateral Trade Between the USA and China." January 11, 2022. https://unipapers.org/free-essay-examples/bilateral-trade-between-the-usa-and-china/.

References

UniPapers. 2022. "Bilateral Trade Between the USA and China." January 11, 2022. https://unipapers.org/free-essay-examples/bilateral-trade-between-the-usa-and-china/.

Reference

UniPapers. (2022, January 11). Bilateral Trade Between the USA and China. https://unipapers.org/free-essay-examples/bilateral-trade-between-the-usa-and-china/

References

UniPapers. (2022) 'Bilateral Trade Between the USA and China'. 11 January.