HEADLINE: SHOULD THE U.S. NORMALIZE TRADE RELATIONS WITH CHINA ? Granting Normal Relations To China Helps U.S. Exports Pro
Knight Ridder Newspapers
14 May 2000
The Charleston Gazette
For 50 years, China has been trying to join the community of nations.
Rejecting normal trade would be seen in Beijing as a slap in the face.
Moreover, it would be a historical blunder to miss this chance of
further integrating China into the global economy.
WASHINGTON - Not surprisingly, particularly in an election year,
political considerations have obscured the pending congressional vote
to grant China permanent normal trade relations. </FD:"Lead">
Furthermore, many Americans are confused about the heart of the matter:
The question is not whether China should be a member of the World Trade
Organization, but if American companies and their workers will have the
same market access in China as our competitors.
The economics of normal trade relations are perfectly clear: Opening
China's vast market to U.S. companies will benefit America's businesses
and consumers. Rejecting it will clearly damage the prospects for U.S.
exporters, and undermine the competitiveness of American firms
operating in China.
Economists estimate that normalizing trade relations will increase U.S.
exports by $10 billion over the next decade, and total U.S. output will
rise by $19 billion during this period. Without it, China has
threatened to withhold the market access concessions negotiated with
the United States.
A Hobbesian dilemma will result for U.S. firms: Facing a structural
disadvantage in China vis-a-vis Asian and European competitors,
American companies will favor investment in China over exporting from
the United States.
The annual trade misadventure, which creates uncertainty for U.S.
businesses and investors, is already hurting American manufacturers and
From 1990 to 1997, rest-of-world exports to China grew 22 percent
faster each year than U.S. exports to China. From 1990 to 1998, the
United States exported $61 billion less to China than Japan did, and
$43 billion less than the European Union.
The lost export opportunities are costly for American firms, and it is
unfair to ask U.S. companies to serve as political martyrs while their
competitors get a stronghold in the Chinese market. But, frankly,
normalizing trade relations will not affect the market-driven trend of
rising labor-intensive imports to the United States.
As economies mature, resources shift to more productive and efficient
activities. In the long run, normal trade ties to China will greatly
expand markets for U.S. agricultural products, durable goods and
high-tech services. Consequently, it will raise the incomes of family
farmers and working Americans.
Critics of normalizing trade are fond of reminding Americans about the
rising U.S. trade deficit with China. However, a significant portion of
the deficit with China can be attributed to large retailers that buy
from China to reduce costs for apparel, shoes, toys and similar
Furthermore, rising imports from China reflect shifts in comparative
advantage among Asian countries: it is estimated that half of China's
growing share of U.S. imports came at the expense of Taiwan and Korea.
Real concern over the U.S. trade gap with China should manifest in
enthusiastic support for normalization. By forcing China to abide by
the binding legal authority and market-based principles of the WTO, it
will provide U.S. exporters with greater access to the Chinese market.
Recently, economic development has led to a rising standard of living
for the average Chinese, and Americans should celebrate and promote
Like it or not, China will become a member of the WTO. The dispute is
over the terms of China's membership. Will the United States honor its
obligation as a member of the WTO to extend normal trade to all fellow
members? The litmus test for it should be based on economics, and by
this benchmark, Congress should permanently normalize trade with China.
Morici is senior fellow at the Economic Strategy Institute, a
nonpartisan think tank that explores and comments on public policy