Sino‐US Trade Issues After the WTO Deal: A Chinese perspective

Abstract

The China‐US accord from the WTO is supposed to increase US exports to China and thus improve the bilateral trade balance in favor of the US, but there is no guarantee that this will happen unless both countries resolve the following long-standing disputes: merchandise trade imbalance; US sanctions against China and technology export control; the alleged currency manipulation; and the human right issues. Among these the most important is trade imbalance. Due to different calculating methods, there is a big discrepancy between the two official figures. This paper argues that the US Customs, which exclude any China‐US trade flow through Hong Kong, distort the bilateral trade balance and grossly overstate the US trade deficit with China. Moreover, large portions of the goods exported from China to the US are processing products, and the profit margin that China earns is very low. Taking all this into account, the US trade imbalance with China is significantly smaller than is claimed or compared to that with Japan. There is no reason for politicizing this issue and poisoning the Sino‐US political relationship.