U.S.-China Economic Relations: Present and Future

By Richard H. Holton; Wang Xi et al. | Go to book overview

reaching $160 billion in 1987. Manufacturers increased their sourcing of components, raw materials, and semiprocessed goods from abroad. Foreign manufacturers of everything from machine tools to consumer electronics increased their share of the U.S. market. In part this was because the value of the dollar on the world market rose to such heights, peaking in 1985. But even after 1985 the imbalance in foreign trade continued longer than most economists had anticipated. It is feared that the United States is losing its competitive status perhaps not just because of the value of the dollar, but because of such factors as a slow growth in productivity per worker and a shrinking commitment to research and development programs. In any case, Americans have grown increasingly concerned about their country's ability to compete in world markets. As jobs "moved offshore" and competition from imports intensified, they became especially sensitive to the question of "fairness" in international trade

Two consequences affecting U.S. attitudes about economic relations with China that have sprung from these developments are of interest here. First, the voices speaking out for more protectionist measures appeared to be more numerous and noisy. And second, the United States became increasingly aware that technology is a resource that must be safeguarded from appropriation by others without appropriate payment.

The interplay of these developments has led to some continuing strain in China-U.S. economic relations. The Chinese, on the one hand, consider the American quota restrictions on the imports of textiles and textile products to be a gross violation of the principles of free trade. The Americans, on the other hand, still see China as essentially a planned economic system, one in which prices are set largely by fiat rather than by free market forces; thus, they would argue, the Chinese should not expect others to adopt free market policies if they are not prepared to do so themselves. The Chinese, of course, see the huge difference in income per capita between the two countries and ask why the United States should not feel compelled to assist Chinese economic development by opening up the U.S. market completely to their textile products or at least by providing a larger quota than at present.

The great majority of American economists would probably agree that the total welfare of the American people would be advanced if the United States were to have a policy of free trade in textiles. But the textile quota policy is not formed by American economists. It is a result of the political process in the United States Congress. Thus far the political influence of the representatives of the states with an interest in textile manufacturing have carried the day, so the textile quotas remain in place. They are the result of political power, not of economic logic focusing on the long-term economic welfare of the American public. We can expect the Chinese pressure

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