Has the U.S. benefited from China's entry into the WTO in 2001?

Posted by scapozzola on 11/30/2012

A new staff research report by the U.S.-China Economic and Security Review Commission (USCC) looks at the pros and cons of U.S. trade with China since Beijing's entry into the World Trade Organization (WTO) in 2001.

When China entered the WTO, it was assumed that U.S. exports to China would increase due to reduced tariffs and increased market access.  This suggested a win-win for both U.S. and Chinese consumers-- a new market for American exports which would lead to a more open, modern society for China's citizens.

However, the USCC report examines trade data from 2000 to 2011 and finds a mixed bag of results in the decade since China’s accession to the WTO:

1. U.S. exports to China have more than quintupled in value but are dwarfed by the surge of Chinese imports into the United States, resulting in a steadily growing bilateral trade deficit;
2. A dramatic rise in the levels of non-manufactured goods (particularly agricultural products, raw materials, and mined natural resource products) exported by U.S. producers to China, to the extent that there is now a U.S. trade surplus with China in non-manufactured goods;
3. A dramatic rise in imports of Chinese-made manufactured goods into the United States, and a significant decrease in U.S. exports of manufactured goods to China as a share of total exports;
4. A steady move up the value chain for Chinese imports into the United States – most noticeably in computers and consumer electronics. However, in this latter category China often serves as an assembly and export platform for multinational corporations of components manufactured elsewhere in world, a fact that may not be clearly reflected in trade statistics.

The report concludes:

Although U.S. exports to China have increased substantially since China entered the WTO in 2001, the overall value of these exports has failed to keep pace with the concurrent surge in imports from China. This has resulted in a huge and growing trade deficit between the United States and the People’s Republic of China. The most obvious change in U.S. exports to China in 2011 versus 2000 is the dramatic rise in levels of non-manufactured goods. This includes both agricultural products to feed China’s increasingly affluent and urbanizing population, and raw materials to feed China’s growing industrial needs.  Whereas in 2000 the United States had a trade deficit with China in non-manufactured goods of around $283 million, by 2011 that had become a trade surplus of nearly $19.7 billion.

The most prominent change in U.S. imports from China in 2010 versus 2011 is a steady move up the value chain for products coming out of China. While the bulk of China’s exports to the United States still reflect China’s lower labor costs, an increasing share and quantity of these exports are in higher tech products – most notably, computers and electronics. Over the past decade, this may not have been indicative of a general movement by Chinese firms up the technological ladder— rather, it is possible that China has come to mainly serve as an assembly and export platform for foreign corporations, which took components manufactured elsewhere in world and put them together in China.

U.S. manufacturers continue to maintain a competitive position in many higher-technology products, but whether or not the United States can maintain this technological edge will rely greatly on future market trends, as well as U.S. and Chinese trade policies.

Read the full report.

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