The Foreign Service Journal, January 2003

he growth of trade and invest- ment between China and the United States since the nor- malization of our bilateral rela- tionship in 1979 has been quite remarkable. According to U.S. statistics, bilateral trade amounted to $120 bil- lion in 2001, making China our fourth largest trading partner in the world, behind only Canada, Mexico and Japan. China’s exports to the United States have soared from negligible levels in the 1970s to over $100 billion annually today. In the other direction, U.S. exports have risen to nearly $20 billion. Meanwhile, American companies have invested a cumulative total of nearly $40 billion in China, mak- ing up around 10 percent of total foreign direct investment there. Overseeing this rapid growth in our bilateral economic relationship requires close cooperation between the commercial and economic sections. To facil- iate that effort, the economic section is divided into three separate units. The trade and investment unit helps to manage our broad economic relationship with China, with the primary aim of expanding U.S. access to the Chinese markets for goods and services. It is currently focused on ensuring that the Chinese government imple- ments its commitments to the World Trade Organization. The macroeconomic and financial policy unit monitors economic developments in China, especially with respect to their implications for domestic stability. The labor unit reports on issues in connection with China’s labor laws and policies, work and occupational safety standards, and social security and welfare issues. Such cooperation is all the more essential precisely because the debate over the many trade and investment issues facing our two countries has frequently been acri- monious. Following China’s recent accession to the World Trade Organization, for example, critics of U.S. trade policy have voiced doubts about the extent to which Beijing will fully implement its new market access com- mitments. Reflecting this distrust, Congress has created two separate commissions to monitor China’s implemen- tation of its WTO commitments and performance in other areas related to human rights. The United States Trade Representative, the General Accounting Office and other gov- ernment agencies have also been tasked to submit reports on China’s performance in this regard. In this article, I will discuss some of the major issues that have affected our bilateral trade and investment relationship with China. I will focus in particular on those issues that have arisen since China acceded to the WTO and on how China and the United States have addressed them. Finally, I will look at the prospects for further growth in bilateral trade and investment and its broader implications for our overall relationship. The “Deficit Problem” Some in Congress and elsewhere have been particu- larly critical of the perceived “imbalance” in our trade relationship as reflected in the sizeable and growing U.S. trade deficit vis-à-vis China. According to U.S. statistics, the trade deficit now exceeds $80 billion, surpassing that with Japan. Critics of the U.S. government’s policies toward China have long pointed to this trend as evidence 54 F O R E I G N S E R V I C E J O U R N A L / J A N U A R Y 2 0 0 3 F O C U S O N F C S U.S.-C HINA T RADE : A N E CONOMIC S ECTION V IEW T HE S INO -A MERICAN ECONOMIC RELATIONSHIP REQUIRES CLOSE COOPERATION BETWEEN THE COMMERCIAL SECTION AND THE REST OF EMBASSY B EIJING . H ERE IS THE ECONOMIC SECTION ’ S PERSPECTIVE . B Y R OBERT W ANG T