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Since the United States and China are at different levels of transformation, their industrial policies complement each other well. The two countries' comparative value complementarities in trade cooperation and bilateral economics are the most comprehensive and largest foreign cooperation and division of labor in the modern world. Trade between the United States and China has grown steadily since the two countries officially established bilateral diplomatic ties. This analysis describes the levels of trade between the two nations, the main goods of trade, the role of multinational corporations in global commerce, the impact of trade on the US and China, the effects of a possible cessation, and how technology affects levels of trading.
Despite a politically orchestrated cry foul in some quarters of the United States, the growth of trade observed between the US and China is unimaginable without mutual benefit.
The Levels of Trade between China and the United States
The Office of the United States Trade Representative (2017) states that between 1979 and 2010, trade between the United States and China has grown from $2.37 billion to $456.8 billion. In 2016, China was the largest supplier of goods to the United States as it was also the 3rd largest export market for products from the United States.
Total importation of goods from China in 2016 was $462.8 billion, which represents a 4.2% ($20.4 billion) decline from 2015, but a 60.8% raise from 2006. From 2001, U.S. imports have increased by 353%. Still, in 2016 importation of services from China were about $16.1 billion, 6.6% more than the figure in 2015, over 58% greater than the levels in 2006, and above 350% from 2001 (Office of the United States Trade Representative, 2017).
In 2016, exports to China were $115.8 billion, signifying a 0.3% ($297 million) decline from 2015, but an 115.7% and 504% increase from 2006 and 2001 respectively. About 8.0 % of U.S. exports are sent to China. Exportation of Services to China was about $53 billion in 2016, over 10.5% ($5.1 billion) greater than 2015, and 406% more than the levels in 2006. The 2016 exports were up by 896% from 2001 (Office of the United States Trade Representative, 2017).
Primary Goods and Raw Materials Traded Between the United States and China
Most US imports from China are consumer products as China mainly imports electronics and large machinery. In 2016, the top import categories of the US from China were: electrical machinery and other machinery ($226 billion), bedding and furniture ($29 billion), sports equipment and toys ($24 billion), followed by footwear ($15 billion). Imported agricultural products totaled $4.3 billion in 2016, and the primary categories are processed fruit & vegetables, fruit & vegetable juices, and snack foods. Also, top three services imports are transport, travel, and research and development (Office of the United States Trade Representative, 2017).
Office of the United States Trade Representative (2017) indicates that the top US export categories were: electrical machinery and other machinery ($23 billion), aircraft ($15 billion), fruits, seeds, grains ($15 billion), and vehicles ($11 billion). China`s importation of agricultural products totaled $21 billion in 2016, and the main categories include soybeans, coarse grains, hides & skins, pork & pork products, and cotton. The major services exports from the U.S., in 2015, were in intellectual property, travel, and transport sectors.
The Effects of Multinational Corporations in the United States and China on Trade
Multinational corporations (MNC) in both China and the US are saturating markets in developed countries, and the need for new customers and new markets drive the cooperation of global economic. MNCs from China and the US affect international trade since they target other foreign markets, create foreign subsidiaries, and invest in overseas. In the existing trade partnership between the two countries, MNCs search for new business opportunities to enhance their production and distribution by producing goods taken from one region and selling them in other areas. In the trade economy of the US and China, MNCs remain competitive and as a result work in producing high-quality goods and services (Hufbauer & Woollacott, 2013).
The Impact of Trade on China and the United States and their Citizenry
Economic cooperation and trade between the US and China have generated real and vast benefits for both countries and their citizens. For instance, since 1980 China has acquired more than 600 jumbo jets from America`s Boeing. Consequently, a hundred million dollars worth of every 747 jets gave rise to many job opportunities for Americans. On the other hand, a broad market of daily consumer products in the US also provides the Chinese with many employment opportunities. Besides, American companies in China produce about 40% of Chinese exports to the US. Hence, the revenues of their exports to the US are remitted by American enterprises to America, which empowers the American economy (Liu et. al, 2015).
Lower-cost goods produced in China and sold in the US benefit U.S. consumers, and American companies that assemble products in China lower their production costs. Hence, such trade cooperation helps to reduce the cost of living for Americans. Besides, consumer goods from China aid in stopping the American price index from going up extra two percentage points every fiscal year. Also, Chinese consumers buying American goods and services get access to a wide range of products that enhance customer experience and are otherwise not available (Liu et. al, 2015).
The Impact of a Cessation of Trade on both the US and China and their Citizens
A trade war between the US and China would harm both countries. As the US cuts on the importation of consumer goods from China, China could dump US Treasury securities, stop the purchase of US machinery and aircraft, and enforce an embargo on other US products. Moreover, such a cessation could fuel inflationary pressure in America which can drive the Federal Reserve to raise interest rates faster and higher. Therefore, a trade termination would depress equity markets, and cost both the US and China millions of lost jobs and revenue (Özer, Zheng, & Ren, 2014).
The Effects of a Cessation of Trade on the Stability of the Global Market
As Özer, Zheng, & Ren (2014) explain, trade is a vital contributor to growth, development, and job creation. Enabling business activities between modern economies in an integrated world defined by a global economic cooperation converts the potential of access to the world markets into strong opportunities for their organizations and people. Thus, a trade cessation would reverse the scenario and dismantle the global market.
The Effects of New Technology on the Levels of Trading
Innovation capacities provide companies with a competitive edge. New and improved technology can bring any firm from its developmental phase to a stage where it can compete globally. Countries that aim at improving their economies` productivity not only need to cooperate but also invest in new technology (Morrison, 2014). Technology transforms the competitiveness landscape of the world and increases the trade levels by expanding cross-border flows. With globalization and the introduction of new technologies in business, trade has gone beyond the practice of goods crossing borders. Now as factories cross borders separating emerging economies and advanced, every nation and organization is becoming a part of international commerce.
Global economic cooperation between the US and China has been around for many decades. Numerous treaties and laws have been enacted to strengthen their alliance, expand the trade, and also maintain self-dependence. The significance and impact of this engagement becomes more important as the world continues to develop, trade practices change and technology evolves. However, no single economy can prosper or sustain itself without establishing trade agreements with other countries. Hence, global economic cooperation is essential for survival as it enhances the quality and welfare of life for all people through interdependence, integration, and connectivity.
Hufbauer, G., & Woollacott, J. C. (2013). Trade Disputes between China and the United States: growing pains so far, worse ahead?. Brazilian Journal of International Relations, 2(1), 48-111.
Liu, J., Mooney, H., Hull, V., Davis, S. J., Gaskell, J., Hertel, T., ... & Li, S. (2015). Systems integration for global sustainability. Science, 347(6225), 1258832.
Morrison, W. M. (2014). China's economic rise: history, trends, challenges, and implications for the United States. Current Politics and Economics of Northern and Western Asia, 23(4), 493.
Office of the United States Trade Representative (2017). The People`s Republic of China. Retrieved on June 26, 2017 from https://ustr.gov/countries-regions/china-mongolia-taiwan/peoples-republic-china
Özer, Ö., Zheng, Y., & Ren, Y. (2014). Trust, trustworthiness, and information sharing in supply chains bridging China and the United States. Management Science, 60(10), 2435-2460.
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