The presidential primaries are in full swing and that means one thing: It is a great time to bash China. Here is a primer on the key U.S.-China relations issues of trade, the South China Seas and climate change; what the candidates are saying; and the reality, which is often far more nuanced than the candidates let on.
Trade and market access
The issue: China should play by international rules on market access, trade and currency and not “take” U.S. jobs.
What the candidates say: China and international trade are ugly phrases in a populist year. Hillary Clinton, an architect of the Trans-Pacific Partnership, now opposes it. She rails against unfair currency manipulation. Bernie Sanders decries China’s economic and trade practices as taking away from U.S. workers to line the pockets of wealthy global corporations. Donald Trump wants to label China a currency manipulator and promises to bring back ‘tens of millions of jobs” lost to China. John Kasich has called for China to stop manipulating its currency, while Ted Cruz is focusing on eliminating taxes on exports to better compete with China.
What the candidates say: China and international trade are ugly phrases in a populist year. Hillary Clinton, an architect of the Trans-Pacific Partnership, now opposes it. She rails against unfair currency manipulation. Bernie Sanders decries China’s economic and trade practices as taking away from U.S. workers to line the pockets of wealthy global corporations. Donald Trump wants to label China a currency manipulator and promises to bring back ‘tens of millions of jobs” lost to China. John Kasich has called for China to stop manipulating its currency, while Ted Cruz is focusing on eliminating taxes on exports to better compete with China.
The reality: China has made progress in opening up its markets to U.S. goods, but slowly. The trade deficit with China reached $365 billion last year. This is primarily due to Chinese saving more than Americans and the types of goods the U.S. sells to China (capital goods such as airplanes and communicationsequipment) versus what China sells to the U.S. (which include low value electronics, furniture and clothing).
China’s impact on U.S. jobs is real but not what the candidates say; it is estimated that only 20 percent of the jobs lost in manufacturing in the 2000s were due to Chinese competition, with the rest from technology change and other factors. In fact, Germany has a per capita trade deficit with the U.S. that is three times higher than that of China. The hard truth is that most of the manufacturing jobs lost in the U.S. are not coming back from China or anywhere else. Creating new jobs in growing industries is what is going to matter for the next president.
On the currency side, most economists agree that China’s currency is no longer overvalued. In spite of what candidates Clinton, Sanders and Trump say for sound bites, the U.S. dollar has actually depreciated against the Chinese yuan by approximately 25 percent over the past decade, bringing the currencies back into fairer value. China must manage its currency because it is not floating. Calls to end manipulation miss the point — it is how China is manipulating its currency that matters.
So is China blameless? Hardly. China uses a wide view of what it considers national security priorities to limit or block foreign participation in various sectors where the U.S. is particularly strong, including financial services, education and media. It only recently opened up e-commerce to full foreign ownership and still manipulates grains and cereals through tariffs and direct payments to farmers. There is still room for improvement, but by and large China is not causing the stagnation in wages and lack of new opportunity being felt by less educated workers in the United States.