SOURCE: The US-China Business Council

March 08, 2007 10:11 ET

USCBC Urges Steps to Increase US Competitiveness as Part of Balanced Approach to Trade Relations With China

WASHINGTON, DC -- (MARKET WIRE) -- March 8, 2007 -- US-China Business Council (USCBC) President John Frisbie, testifying before the US International Trade Commission today, highlighted the need for a balanced approach to trade relations with China.

Expanded trade between China and the United States has benefited the US economy through increased exports, lower prices, and higher productivity, Frisbie said, adding that steps should be taken to increase US competitiveness while addressing continuing unfair trade practices.

Frisbie testified that recent increases in the US trade deficit with China are largely the result of Asian economic integration. East Asian economies have invested heavily in China over the past decade and transferred to China much of the production of goods destined for the US market.

Frisbie also urged policymakers to view trade with China in a global context. "As the US trade deficit with East Asia shifted from these economies to China, our bilateral trade deficit with China increased dramatically. But just looking at the bilateral trade balance would miss this clear story of the East Asia manufacturing shift to China," he said. The US trade deficit with East Asia as a whole -- including China -- as a proportion of the total US deficit declined during the past decade from 70 percent to just 46 percent.

"These trends suggest that if the United States has a trade deficit problem, the causes are much broader than just imports from China or other Asian economies," Frisbie said.

US exports to China are growing faster than to any other major market for US goods. "In 2006, China and Hong Kong combined ranked as the third-largest US export market, with exports of goods totaling more than $73 billion. US exporters sold more only to Canada and Mexico," Frisbie said.

The United States also has a small but rapidly growing services trade surplus with China -- about $2.6 billion in 2005. As US companies start to take advantage of service sector openings mandated by China's World Trade Organization entry, the US surplus is projected to grow to $15 billion by 2015, according to research by Oxford Economics for the China Business Forum, the USCBC's educational and research arm. If China were to open its service sectors fully, the US surplus could be as much as $60 billion.

More broadly, Oxford Economics' research found that US trade and investment with China will result in a 0.7 percent increase in US GDP and a 0.8 percent decrease in US prices by 2010 -- the combined effect of which will be an annual increase of up to $1,000 in real disposable income per US household.

Frisbie said, "Certainly, some sectors or companies in the US economy have come under pressure as our trade with China and other low-cost producers has grown. If unfair practices are responsible, we need to address those. However, we should also make sure we are taking steps to promote American competitiveness, rather than erect trade barriers. Our less-competitive sectors may need greater assistance to transition to new fields."

The full testimony is available at

http://www.uschina.org/public/documents/2007/03/itc-testimony.pdf

The USCBC (www.uschina.org) is the leading organization of US companies engaged in business with the People's Republic of China. Founded in 1973, the USCBC provides extensive China-focused information, advisory, and advocacy services, along with events, to nearly 250 US corporations operating within the United States and throughout Asia.

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