Trade with China

Trade with China

The U.S. trade deficit with China skyrocketed for the eighth consecutive year in 2008 (the last year for which annual data is available), reaching a record high of $268 billion—nearly 40 percent of the overall U.S. trade deficit. The sheer size and permanency of this deficit raises serious questions about its causes, including to what extent the deficit is driven by government interventions in the Chinese economy.

In particular, the People’s Republic of China maintains numerous policies, including state-sponsored subsidies aimed at promoting investment, exports and employment. These policies have a direct role in increasing the U.S.-China trade imbalance and negatively affect the health of our domestically based manufacturers, service providers and farmers. When China became a member of the World Trade Organization in 2001, proponents argued it would herald a new age of opportunity and would expand market opportunities for U.S. companies.

But China continues to follow a policy of export-led growth to build up its manufacturing base at the expense of other countries. Almost 60 percent of China’s exports come not from Chinese firms but from foreign-invested enterprises. Many of these companies set up operations hoping to serve the Chinese market, only to find a web of policies and practices to limit their opportunities there but incentives to export their products back to their home countries.

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