Trade is Good for China. Trade is Good for the United States.

Amid all of the recent noise about China’s currency, America’s trade deficit, and the state of world trade, policymakers and pundits alike seem to have forgotten a very important tenet that has served, for the last half century, as the foundation of global economic development: trade is good.

Global trade isn’t a new phenomenon. It has ebbed and flowed as long as history has been recorded (and earlier, surely). The principle has always been the same: one group of people has something that another group wants, and is willing to give it up in exchange for something that the other group has. It’s a mutually beneficial – win-win – process.

While all countries that seek to engage with others have important roles to play in the future of world trade, it is the United States and China who should be leading the way toward a more integrated global society.

How trade with China benefits the U.S.

  1. From Microsoft and Motorola to Wal-Mart and KFC, there are a number of American and multinational companies that operate in China and are more successful because of it. (And while these companies benefit from manufacturing in China for export elsewhere, they also benefit from selling to China’s consumer market.)
  2. Because trade makes the people in China more prosperous, they purchase more – and they purchase, in part, what U.S. companies make.
  3. “Made in China” products are often less expensive than products manufactured elsewhere – allowing consumers in America access to less expensive goods, from sweaters to computers.
  4. While economic integration may lead to job losses in the short-term, in the long run a greater number of higher-quality jobs are created as a result of integration than are lost.

How trade with the U.S. benefits China

  1. China’s economic integration – marked in part by the dramatic rise in China’s goods exports to the U.S. and the rest of the world – has lifted China’s per capita GDP relative to the U.S.’ 312 percent in thirty years.
  2. Perhaps the greatest benefit of China’s integration into the global economy has been the diffusion of knowledge and technical know-how from the foreign-invested enterprises (including American and multinational corporations) operating in China.
  3. At the same time, China has made substantial progress in protecting human rights, intellectual property, and the environment. Because economic integration makes developing countries, like China, wealthier, it gives the people there more freedom to focus on important issues like human rights and environmental protection.

Those who would say that trade is not positive are looking at a narrow group of stakeholders (employees who lose jobs as non-competitive U.S. industries move overseas, for example) over a short time frame (say, the time during which those workers are unemployed as they train to work in more competitive, and often higher-paying, industries). It is true that, in the short run, trade is not always positive for everyone affected by it. In the long run, though, we all benefit from greater economic integration.

What the experts are saying about trade

Ed Prescott, 2004 Nobel Laureate, W. P. Carey Professor of Economics at Arizona State University: “Economic integration is the path to riches and peace.”

Art Blakemore, Chair of W. P. Carey Economics at Arizona State University: “The question is not whether China will continue to grow while the U.S. ceases growing, but rather: Are we going to keep growing together or cease growing together?”

Peter Yam, Former president of Emerson Greater China and chairman of Emerson Electric (China) Holdings Co., Ltd: “Both [U.S.] lawmakers and the government must wake up and exert leadership in providing an environment for the US firms to become effective global competitors again and regain its strength on exports.”

Clyde Prestowitz, Founder and President of the Economic Strategy Institute: America needs to compete.  But that “is not about the U.S. stopping China from being successful.  It’s not a zero-sum contest.  It is instead about America doing what China has long done – competing, for its own self interest.  It is about America doing what is good for America.”

Bob Mittelstaedt, Dean of the W. P. Carey School of Business at Arizona State University: “Over the long-term, market flexibility – the ability of the education system to teach new skills, the ability of producers to produce different goods and services – is critical, because in a world with truly free trade comparative advantages constantly change.”

Jim Jarrett, former President of Intel China: “China will do what’s right for China, and that makes sense for them. And we have to do the same thing.  Fundamentally this isn’t a China issue; it’s a U.S. competitiveness issue.  The U.S. needs to take charge of its competitiveness in a much more active way than it has in the past.”

Related Articles: is a program of The Kearny Alliance