U.S.-China Trade Relations: Mutually Beneficial
By: Thomas Saw Aung
With the economy tottering on a balancing beam, many people blindly seek a reason for America’s recent woes. The desperate struggle to repair an unstable economy has led some to blame the United States’ trade partnership with China. The trade between the United States and China is actually beneficial. On the contrary, the trade between the two nations has provided an overabundance of monetary profit.
Currently, the United States has held a position as a superpower in world monetary affairs. However, China’s quickly rising industries has brought that superiority into question. The two nations vying for economic power began a mutual trade years ago, in order to reap the benefits of comparative advantage.
After the Tiananmen Square incident of 1989, America condemned China’s involvement with the incident and placed numerous economic sanctions on China. The following year at the G7 Houston Summit, with the Tiananmen Square incident still fresh in the minds of many countries, western nations called for reform of China’s human rights. The sanctions placed on China ranged from suspending new trading activities to banning the importation of arms. Needless to say, the relations between the United States and China were severely strained during this time period.
The September 11 attacks on the Twin Towers drastically changed US-China relations. Many Chinese citizens were killed or injured in the attacks, causing mainland companies to send condolences to their American counterparts. Following the attacks, China offered strong support for America’s War on Terrorism and voted in favor of the coalition campaign in Afghanistan. China went even further to provide $150 million in bilateral assistance. The War on Terrorism shifted original suspicions and tensions between the United States and China to the Middle East. Continuing efforts by both sides to cooperate led to improved US-China relations.
Following President Obama’s election victory against John McCain, China held a positive outlook. Obama’s presidency has generated hopes for greater friendship between the two nations. One issue that created favorable reviews from both sides was Obama’s commitment to altering American climate change policy. The new focus on the green jobs sector would provide growth needed to combat recent economic decline.
The current situation that the country finds itself in is one of mutualism. The United States enjoys cheap goods, low interest rates and low taxes. The influx of cheap imported goods has driven prices down, allowing Americans to gain more for their dollar. However, the imbalance of trade has led to deficits that placed a majority of US debt under China’s control.
Roxanne Previty, an economics teacher, easily summed up the situation, stating, “We are Americans; we get fatter and deeper in debt every year!”
To keep the economy running, Congress enacted stimulus bills and increased federal spending, which drive down interest rates and taxes. Lower interest rates and taxes increase consumer spending, consequently increasing the US gross domestic product (GDP).
China enjoys oversea markets, low unemployment, increasing GDP and rapid industrial development. The production capabilities of China have allowed the country to mass produce a variety of export goods. Along with increased exports is a drastic rise in employment as workers toil in factories by the thousands. The enormous gains in capital are then used to fund development projects throughout the entire nation.
The trade relationship is not too rosy though, as current economic woes threaten to destabilize mutual trade benefits. The growing US debt has reached unimaginable heights, currently at around $16 billion out of more than $250 billion in foreign debt. As American consumers continue to buy Chinese goods, China continues to obtain more IOUs from America.
Vincent Chow, a senior, stated “The US already owes large sums of money to China. The only reason the Chinese haven’t asked for their money back is because they wish to continue trading.”
However, the misconception that China overpowers the US is dominant among Americans. In reality, China and the US are deeply connected, so much so that both stand to suffer from each other’s woes. In fact, China stands to lose the most since the massive amounts of US IOUs could be defaulted, leaving China with scraps of useless papers. At the same time if, China decided to stop exporting its low cost goods to the US, the rising prices would cause problems for Americans used to getting low price products. Wages would not suffice to maintain an “American” standard of living. So despite common belief that China completely controls US economics, the two countries are currently united together to fall together.