Video #18 - China: Yuan and US-China Trade
Tuesday, January 10, 2006BACKGROUND INFORMATION
The major trade conflict between the U.S. and China is over fair trade practices. On November 5, 2003, US Secretary of Commerce Donald Evans published "America Carries Out Fair Competition, How about China?" in The Wall Street Journal. In this article, the Secretary pointed out that the basic cause of friction between the United States and China involves reciprocity-not giving equal recognition to the other's rights. As an example, the article reported that software piracy rate in China was over 90 percent and inferred that Chinese government departments were overwhelmingly using pirated software. To punish China, Evans called for support of the two congressional proposals, one calling for revoking the permanent normal trade (MFN) status granted to China and the other suggesting a 27.5 percent tariff on all Chinese commodities exported to the United States. The Secretary demanded that China quickly open up its markets.
China's People Daily Online commented that the article was published a week after Evans's visit to China. It concluded that his meeting with Chinese officials was unsatisfactory, and that the U.S. will intensify its pressure on China to abide by its commitments in becoming a new member of the World Trade Organization (WTO). Those include: opening its agricultural market, establishing full liberalization of trading right and sales service; protecting intellectual property rights; and lifting excessive restrictions on financial service institutions. Bottom line: the US will continue to push for WTO members to press for China to implement an environment of fair competition.
Another reason for the US to consider a change of trade strategy with China may stem from the failure of US efforts to pressure China to revalue its currency-the Yuan. That has made it harder to prevent Chinese products from streaming into the United States. Furthermore, China's opposition to a US proposal to cancel agricultural subsidies and the upcoming U.S. presidential election make China a tempting target.
However, in testimony to the House International Relations Committee, Nicholas Lardy of the US International Economic Research Institute praised China's efforts at fair trade practices. According to Lardy, China's trade surpluses with American and European countries reflect that country's policy of welcoming direct foreign investment. He concedes that China gives trade protection to certain products, in violation of the WTO accession agreement. Nevertheless, he contended that China is one of the most open markets in the world today, even among the fastest-growing economies.
Mr. Lardy supported his claim by noting that the value of China's imports increased from US$53.4 billion in 1990 to US$295 billion in 2002, with the annual growth rate exceeding 15 percent. China's imports grew 40 percent in the first 9 months of 2003, and its imports for the whole year may exceed US$400 billion--making China the world's third largest importer, just behind the US and Germany. He also pointed out that China's import rate in 2003 is expected to come in at 30 percent. This is nearly 4 times that of Japan's 8 percent and more than 2 times that of America's 14 percent. Finally, he asserts that China's import tariff of 11.5% is a further manifestation of the degree to which China has opened its market. Before joining the WTO, China's average tariff had peaked at 55 percent in 1982. The next few months should be crucial to US-China trade relations.
SOURCES
"The cause of China-US trade disputes." People's Daily Online, November 21, 2003. http://english.peopledaily.com.cn/
"China-US Trade Moves Forward in Spite of Disputes." People's Daily, December 12, 2003. china.org.cn
Bartlett, Bruce, "Desirable Deficits." National Review, November 5, 2003. http://www.nationalreview.com/nrof_bartlett/bartlett200311050823.asp
Evans, Donald, "America Carries Out Fair Competiton, Why Not China," The Wall Street Journal, November 5, 2003
Lochhead, Carolyn, "China trade key issue in '04 race." San Francisco Chronicle, December 22, 2003. www.sfgate.com
Scherer, Ron, "US-China trade tensions rise." The Christian Science Monitor, December 2, 2003. http://www.csmonitor.com/2003/1202/p01s01-woap.html
Sparshott, Jeffrey, "U.S. report cites China's trade failures." The Washington Times, December 19, 2003. www.washingtontimes.com
LESSON PLAN
GRADE LEVEL/SUBJECT:
10-12 grade Economics, International Relations, World History, Geography, International Baccalaureate Programs (IB), Current Events.
PURPOSE:
To present activities to be used in a variety of classroom situations in order to enhance student understanding of the Asian economy and its significance globally.
OBJECTIVES:
Students will be able to:
- Describe the trade relationship of the U.S. and China in the past ten years.
- List the current issues being presented by each country in the current trade dispute.
- Evaluate possible solutions to the difficulties the two countries are facing.
MATERIALS:
- Background information provided.
- Resources on The People's Republic of China available at your school's Media Center and the Public Library System in your area.
- Background information available through Internet "search engines".
ACTIVITIES:
May be assigned as group activities or as individual tasks. They may also be designed as preparation for related presentations either by individuals or groups.
- Use charts and graphs to illustrate the trade relationship between China and the United States in recent years.
- Role play a trade summit including two teams of students prepared to represent each country.
- An additional team should research and role play the WTO in order to rule on the issues in conflict between the two nations.
- Assign a group of students to stay abreast of the negotiations throughout this US election year (as well as rhetoric about China trade from the US presidential candidates). Allow for periodic reports on the situation.
EVALUATION:
Individual assignments should be graded by the teacher using established criteria.
Group activities, presentations and projects may be evaluated by teachers and students using the following criteria and scale: Content 1 = Superior (A) Creativity 2 = Excellent (B) Clarity 3 = Good (C) 4 = Fair (D) 5 = Poor (F)
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