https://www.fas.org/sgp/crs/row/RL33536.pdf
The link will take you to this Sunday’s paper, issued last December 5th, from the Congressional Research Service (Informing the legislative debate since 1914) by Mr. Wayne M. Morrison, Specialist in Asian Trade and Finance.
In it Mr. Morrison does a thorough job of reminding readers of the history of America and China’s trading relationship over the last 30-odd years. Over this time trade between the two has risen from U$2bn in 1979 to U$562bn in 2013 and China is now America’s second biggest trading partner (behind Canada).
For trivia lovers there’s a lot here. Did you know that GM sells more cars in China now than the US? Or that China’s holdings of US Treasury notes is 20% of the total of all foreign held; BUT foreign held Treasury notes only account for 7% of the total? Thus the idea they may strategically dump just isn’t credible.
If there’s one message that comes out clearly it’s the frustration that the US now has with a more muscular, assertive and in some ways more protectionist China. A place less welcoming of FDI and more interested, by hook or by crook, in making its way up the value added/technology curve.
My own two pennyworth would be to recommend to Mr. Morrison one of the best books I’ve read on development economics written in recent years that helps explain the Japan/Korea/Taiwan model that China is currently progressing. In ‘How Rich Countries Got Rich …and Why Poor Countries Stay Poor*’ Professor Erik S. Reinert explains how the world really works when it comes to trade. He points out that to get rich a degree of protectionism is a must; and, in fact, that’s exactly how the West did it.
If you only have bananas and you trade freely with smartphone makers you’ll never be anything other than a banana producer as free trade only works if the economies involved are at the same level of development. Messy, but reality nonetheless.
If blow-dried blow-hards within the beltway would/could accept this they’d have a clearer understanding of the necessity and, more importantly, the why behind much of China’s trade policy?
Politicians see another’s point of view? Forgive me, what was I thinking?!
Happy Sunday
*http://www.amazon.com/How-Rich-Countries-Poor-Stay/dp/1586486683