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US-China Trade Gap

Max Salvatore and Samantha Yassine, Econ 340
by

Samantha Yassine

on 18 July 2013

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Transcript of US-China Trade Gap

Ideas
Ideas
Ideas
Trade Gap
A Trade Balance
A New Lens
The realities of global supply chains
Conventional trade figures
One country
More accurate to measure value-added
Each step in the production process
China: final stages of production
Chinese exports are inflated
Reduces the deficit by 33%
An Analysis of the U.S.-China Trade Gap
by Max Salvatore and Samantha Yassine
History of the Trade Gap
China Enters the WTO
China's growing consumer market
China enters the World Trade Organization in 2001
Increase U.S. exports
Create U.S. jobs
Improve trade deficit with China
"Creates a win-win result"
Failures of the WTO agreement
Currency manipulation
Distorting trade
Currency Manipulation
China pegged its Yuan to the U.S. Dollar
Bilateral trade surplus with the U.S.
Foreign exchange reserves
As of June 30, 2013: $3.24 trillion
Artificially cheap
Subsidizes Chinese exports
Dramatic effects
Chinese and U.S. domestic economies
Competition With Low Wage Workers
Rising U.S. Unemployment
Displaced Jobs
Value of the Yuan
Accusations of China suppressing the Yuan's value
Last week's annual US-China Strategic & Economic Dialogue
Market determined exchange rate
Deflate the trade deficit
Political Implications
U.S. debt to China: $1.264 trillion Treasuries
23% of the total U.S. public debt
Loan as political leverage








U.S. in the Global Marketplace
Competition with cheap Chinese goods
Forced out of business
Forced to lower costs
Outsource jobs
Increased U.S. unemployment
Ex: U.S. manufacturing industry
U.S. less competitive in the global marketplace
Conclusions
Serious implications
Political sphere
Domestic economy
Global marketplace
Exaggerated trade gap





References
U.S.-China Imports and Exports
U.S. Imports from China
U.S. Exports to China
Trade Between the U.S. and China
MADE IN CHINA
Cumulative Trade Balance: 1980-2008 using data from International Monetary Fund
What is a trade gap?
Net Exports
US-China Economic and Security Review Commission, February 2013 Report
US-China Economic and Security Review Commission, February 2013 Report
US-China Business Council, 2011
Trade Balance
Eckert, Paul, and Anna Yukhananov. "U.S., China Agree to Restart Investment Treaty Talks." Reuters. Thomson Reuters, 12 July 2013. Web. 15 July 2013

Gagnon, Joseph E. "Combating widespread currency manipulation." Peterson Institute for International Economics (2012): 12-19.

Krugman, Paul R., et al. "The persistence of the US trade deficit." Brookings Papers on Economic Activity 1987.1 (1987): 1-55.

Paulson Jr, Henry M. "A strategic economic engagement: strengthening US-Chinese ties." Foreign Affairs (2008): 59-77.

Robert, Scott E. "The China Toll." Economic Policy Institute. Economic Policy Institute, 23 Aug. 2012. Web. 17 July 2013.

Sposi, Michael and Koech, Janet. "Value-added data recast the U.S.-China trade deficit." Dallasfed (2013): Vol. 8, No. 5.

"Trade Statistics: IPadded." The Economist. The Economist, 21 Jan. 2012. Web. 17 July 2013.
Further Considerations
Effects of trade surplus on China
Consequences of a market determined exchange rate
Shift from manufacturing to service based economy
US Census Bureau
Full transcript