WHITE HOUSE ON TRADE FLOWS
March 30, 2000

The U.S.-China WTO Accession Agreement: Effects on Trade Flows The White House China Trade Relations Working Group

Online NewsHour Special Report: The China Trade Debate Q&A: PNTR Debate: * Free Trade * Human Rights * Labor Dec. 1, 1999: A discussion on China, trade and democracy Nov. 18, 1999: An interview with U.S. Trade Representative Charlene Barshefsky Nov. 15, 1999: A discussion on the U.S.-China Trade deal. July 30, 1999: Beijing cracks down on the meditation group Falun Gong. Feb. 26, 1999: The U.S. State Dept. releases its yearly human rights report. Dec. 30, 1998: A report on muzzling dissent in China. June 29, 1998: President Clinton challenges China on human rights. Online NewsHour Special Reports: The WTO and Global Trade The World Bank & IMF Complete NewsHour coverage of Asia     AFL-CIO Cato Institute Human Rights Watch International Brotherhood of Teamsters United States-China Business Council	Our Market Is Already Open To Chinese Imports. This Agreement Opens China To U.S. Exports. The U.S.-China bilateral accession agreement is a one-way deal that will open China's now largely closed market to U.S. exports. All we must do is maintain the market access policies we already apply to China by enacting Permanent Normal Trade Relations (PNTR) for China. If Congress enacts PNTR, the agreement is expected to provide a substantial boost for U.S. exports. If Congress fails to pass PNTR, American companies, workers and farmers will be denied the great bulk of benefits of the agreement we negotiated -- including broad new market access for critical services such as telecommunications and distribution, strong import protections, and the right to enforce China's commitments through WTO dispute settlement. This means fewer U.S. exports to China -- while China is likely to continue to enjoy its current access to the U.S. market. By contrast, our competitors in Europe, Asia and elsewhere would enjoy the full benefits of China's market opening WTO commitments. U.S. Exports Will Increase If Congress Grants PNTR: We expect trade to increase in both directions, but U.S. exports will be significantly higher if Congress enacts PNTR and guarantees American exporters the expanded market access rights we negotiated. For agriculture alone, USDA estimates that China's WTO accession would result in at least $2 billion annually in additional U.S. exports by 2005. Independent studies also suggest that our exports will increase. A report by an economist at the Institute for International Economics, for example, suggests that U.S. exports to China are likely to increase by at least $3.1 billion per year even in the short run. The Congressional Research Service, citing the results of a Goldman Sachs analysis, suggests that U.S. exports to China could rise by $12.7 billion to $13.9 billion a year by 2005. Increases In U.S. Imports From China Largely Reflect A Displacement Of Imports From Other Asian Economies. According to official U.S. estimates, our trade deficit with China was approximately $69 billion in 1999. Our exports to China totaled about $13 billion and our imports from China totaled about $82 billion. Our exports to China have more than doubled over the past decade, but our imports have grown more rapidly. As the Asian Newly Industrializing Economies (NIEs), consisting of Hong Kong, Korea, Singapore, and Taiwan, have developed, production of light manufactures has shifted to China. Over the past decade, China and the Asian NIEs have, in aggregate, accounted for a nearly constant share of U.S. imports -- and the share of U.S. imports from China and the Asian NIEs has been roughly 17% since 1992. If U.S. consumers were not purchasing these light manufactures from China, they would be purchasing them from other, less competitive, low-income countries. As a result, U.S. consumers could pay higher prices. Macroeconomic Forces Determine Our Overall Trade Balance. Strong growth in the United States, coupled with weak growth in other parts of the world, has produced our substantial overall trade deficit. These factors have increased U.S. demand for imports relative to foreign demand for our exports. Overall, however, open trade, in a rules-based multilateral system, dampens inflation, spurs innovation, and promotes economic growth. Our Bilateral Deficit Reflects China's Specialization In Consumer Goods. Consumer goods -- consisting largely of products like footwear, apparel, toys, and some consumer electronics -- account for nearly 70 percent of U.S. imports from China. Lower income households in particular benefit from the availability of these competitively priced products. The EU and Japan run bilateral deficits with China for similar reasons. Given China's comparative advantage in producing these kinds of consumer goods, our trade deficit with China will continue to account for a substantial share of our overall trade deficit. Nevertheless, the elimination of Chinese barriers to imports will present new opportunities for U.S. exporters. China Made Broad Unilateral Concessions In Our Bilateral WTO Accession Agreement. China made significant, one-way market-opening concessions across virtually every economic sector, including increasing access to its markets for agriculture, services, technology, telecommunications, and manufactured goods. China also agreed to eliminate "unseen" barriers, such as exclusive rights to import and distribute goods. Agriculture tariffs will be cut by more than half on priority products. On U.S. priority agricultural products, tariffs will drop from an average of 31% to 14% by January 2004, with even sharper drops for beef, poultry, pork, cheese, and other commodities. Industrial tariffs will be slashed. Industrial tariffs on U.S. products will fall from an average of 24.6% in 1997 to an average of 9.4% by 2005. Right to import and distribute. China will phase in these trading rights and distribution services over three years, and also open up sectors related to distribution services, such as repair and maintenance, warehousing, trucking, and air courier services. This will allow our businesses to export to China from here at home, and to have their own distribution network in China, rather than being forced to set up factories there to sell products through Chinese partners. New markets for information technology. China will participate in the Information Technology Agreement and will eliminate tariffs on products such as computers, semiconductors, and related products by 2005. Our IT firms lead the world and stand to earn handsomely in this huge, expanding, and information-hungry market. The United States Will Gain New Leverage To Ensure Fair Trade And To Protect The U.S. Agricultural And Manufacturing Base From Import Surges, Unfair Pricing, And Abusive Investment Practices. No agreement on WTO accession has ever contained stronger measures to bolster guarantees of fair trade. This agreement addresses these concerns through: Strong anti-dumping protections. The Agreement guarantees our right to use the special antidumping methodology we apply to non-market economies for 15 years after China's accession to the WTO. A China-specific safeguard. For the first 12 years -- in addition to the existing global safeguard provisions -- China has also agreed to a country-specific safeguard that is stronger and more targeted relief than that provided under our current Section 201 law. This ensures that the U.S. can take effective action in case of increased imports of a particular product from China that cause or threaten to cause market disruption in the United States. Prohibitions on practices that can cost American jobs and technology. China will no longer require U.S. companies to transfer their technology in order for U.S. companies to export or invest in China. In addition, China will no longer require U.S. manufacturers to export as a condition for importing inputs, to use Chinese-made parts for products sold in China, or to balance the value of their exports and imports, so as to prevent a net loss in foreign exchange. If existing contracts contain such provisions, China has committed not to enforce those contract requirements. This Agreement will make it significantly easier for American companies to export to China from the United States, rather than having to set up in China in order to sell products there. The U.S. Must Grant Permanent NTR Or Lose The Full Market Access Benefits Of The Agreement. The market access provided in our bilateral agreement on China's accession to the World Trade Organization will help ensure that we benefit fully from our trade with China. If Congress were to refuse to grant permanent NTR, our Asian, Latin American, Canadian, and European competitors would reap these benefits but American farmers and companies would be left behind.
	Source: White House China Trade Relations Working Group