United States and China Talk Trade

The annual session of United States – China trade talks was held last week, in the Chinese city of Chengdu. These talks look for ways to improve economic ties between the countries, and focused on currency issues, intellectual property and market access issues.

These discussions are a nice break from U.S. official rhetoric that places confrontation with the Chinese ahead of community-building and strengthening trade relations. Obama’s recent visit to Australia, where he committed 2,500 U.S. Marines to “project power and deter threats to peace,” was clearly aimed at Beijing. China’s response was unsurprising: they questioned the move and declared that they would watch developments closely, and took President Obama’s words as provocation.

The trade talks, led by U.S. Commerce Secretary John Bryson and Chinese Vice Premier Wang Qishan centered around the notion that, as Bryson said, “many in the U.S., including the business community and the Congress, are moving toward a more negative view of our trading relationship.” Wang echoed those sentiments, while urging U.S. officials and lawmakers to ease restrictions on Chinese high-tech exports and grant market economy status to China — which would make its firms less liable to dumping statutes and provide better access for its producers.  In negotiating its accession to the World Trade Organization, China agreed to be treated as a “non-market economy” for 15 years, which leaves the country more open to charges of anti-dumping.

Both sides agreed on a few points. First, China will head up a new permanent office to enforce intellectual property and antipiracy regulations. U.S. officials said that they worked and progressed in getting Chinese markets access for U.S. new energy car makers and beef and poultry.

Issues not discussed include the yuan’s exchange rate, which U.S. lawmakers have decried as damaging to the U.S. economy. However, U.S. officials still maintain that the U.S. trade deficit with China needs to be addressed, and call it a trade imbalance. As U.S. Trade Representative Ron Kirk put it: “We would be missing a real opportunity to address other issues that contribute to the competitive imbalance between U.S. exporters and Chine if we were to singularly focus on currency.” Secretary Bryson echoed those sentiments by saying that addressing market-access issues in China would contribute to the trade deficit with China.

However, as we have posted on OpenMarket before, a trade deficit is not a symptom of a dysfunctional economy. Trade deficits are actually a signal that our economy has moved away from manufacturing into other more specialized and better remunerated industries.

The U.S. Department of Commerce should instead focus its on eliminating harmful and unnecessary domestic policies that hurt businesses and damage economic recovery.