Trends in Trade - Global Trade Magazine
  July 31st, 2018 | Written by

Trends in Trade

Sharelines

  • Since 2011, the majority of growth in US goods exports to China occurred in a few manufacturing sectors.
  • US aviation, semiconductor machinery, and medical devices led export growth to China since 2011.
  • The overall US trade deficit with in manufactured products has increased despite improvements in US exports.

China is one of the United States’ most important trading partners. In 2017, China was the United States’ largest goods trading partner, third-largest export market, and biggest supplier of imports.

How this state of affairs came about is chronicled is a report recently released by the US-China Economic Security and Review Commission.

The latest report analyzes patterns in the US-China trade relationship and updates a report published by the commission in 2012. The 2012 report found that China exported hundreds of billions of dollars’ worth of manufactured goods, but imported a much smaller amount of non-manufactured goods from the US. The majority of growth in US exports to China in the 2000 to 2011 period came from exports of non-manufactured products like soybeans and scrap metal, while the largest source of the bilateral trade deficit was increased US imports of computer and electronic products.

Since 2011, the bilateral trade deficit has increased, and the composition of US goods exports to China has changed dramatically. Non-manufactured exports remained strong from 2012 to 2017, but the majority of growth occurred in a few select manufacturing sectors, most notably aviation, semiconductor machinery, and medical devices. The composition of US imports remained concentrated in high-tech and industrial sectors, including computers and electronics and machinery. The nature of US-China trade over the past six years points to crucial dynamics in the bilateral relationship with important implications for the US economy and future competitiveness.

China is moving up the value-added chain. In the initial period of its export boom, from 2002 to 2011, China relied on imported inputs. A large portion of the value of Chinese exports to the United States and elsewhere was added outside of China, specifically in South Korea, Taiwan, and Japan.

China’s leaders want to change this situation and are implementing policy measures to ensure Chinese companies become more competitive in high-tech industries, first at home, and then in international markets. The Made in China 2025 initiative is the latest in a series of plans identifying key industries for government support and promotion. This support can take many forms, from low-cost and no-cost capital to localization requirements that compel foreign companies to manufacture a share of their inputs in China or source locally.

US export growth is limited by China’s protectionist measures. The policies implemented by the Chinese government often unfairly restrict US exports. Chinese authorities continue to use their regulatory power to the advantage of domestic firms over US exporters. These regulatory measures also allow Chinese high-value-added information technology and services providers better access to China’s growing consumer base, which in turn makes them more competitive internationally. The Chinese government’s drive to create and acquire more intellectual property and to claim domestic and global market share for Chinese companies in cutting-edge industries means more unfair competition for US importers and exporters over a larger portion of value-added industries.

Rising imports of manufactured goods from China had a negative impact on segments of US manufacturing employment. Several recent economic studies have found that while increased US exports were a boon for agriculture and other non-manufactured commodity industries, the large influx of cheap manufactured goods from China displaced millions of US jobs. Job creation in the industries that benefited from increased exports did not make up for the millions of jobs lost due to large inflows of cheap manufactured goods. A review of bilateral trade data makes clear that the overall deficit in manufactured products has only increased, despite substantial improvements in US exports of several manufacturing product types.


%d bloggers like this: