January 25, 2006
- Contacts:
- Maura Keaney
202-409-7584
mkeaney@apcoworldwide.com
John Frisbie
202-429-0340
jfrisbie@uschina.org
China Trade Pushes US GDP Up, Prices Down
WASHINGTON, DC (January 25, 2006) — The increase in US trade with China since 2001 will push US gross domestic product (GDP) up and drive prices down significantly by 2010, according to a report released today by the China Business Forum, the educational and research arm of the US-China Business Council (USCBC).
The China Effect: Assessing the Impact on the US Economy of Trade and Investment with China, a report authored by Oxford Economics and The Signal Group, assesses the impact on the United States of China's commitment to a program of economic reform and opening, cemented by its World Trade Organization (WTO) entry, and the increased trade and investment flows that ensued.
"This report provides a balanced look at trade with China," said John Frisbie, USCBC president. "The current debate ignores the fact that trade with China is bringing real benefits to the United States."
The study finds that the increase in US trade with China associated with China's economic reform program will boost US GDP by up to 0.7 percent and will reduce prices by up to 0.8 percent by 2010. Together, this translates into an increase of up to $1,000 in real disposable income per US household per year by 2010.
"Critics of US trade with China assert it harms the US economy. But this report finds that trade with China results in Americans saving money and the US economy receiving a positive boost to productivity and real wages," said Erik Britton, author of the report.
The report also finds that the recent expansion of trade with China is contributing to a decades-long shift in the structure of US employment away from manufacturing and toward services. US manufacturing employment will fall, but employment in services--in industries including distribution and financial services--will increase, with no net impact on total employment in the long run.
The report challenges the widespread belief that China is solely responsible for the recent deterioration of the overall US trade position. In fact, The China Effect shows that China's share of the overall US deficit has remained fairly constant for more than a decade, as our deficit with the rest of the world has grown substantially. Moreover, US sales to China have constituted the fastest-growing segment of US exports in recent years, and the increase in China's share of US imports from 2000 through 2004 was offset by declining shares of other East Asian exporters.
If China had not cemented its commitment to economic reforms by joining the WTO, the report suggests that bilateral trade flows would have been substantially lower, with Chinese exports to the United States roughly $80 billion lower than they were in 2004, and imports from the United States some $10 billion lower. Though this implies a reduction of the US trade deficit with China of $70 billion, the report suggests that the difference, in large part, would have been offset by imports from other East Asian trade partners.
"US policymakers find themselves in a position to fully address the inevitable changes occurring in US trade relations, and create policies that best position American firms to take advantage of market openings in China and expand upon the positive substantial benefits already accruing to the US economy," said Frisbie.
About the China Business Forum
The China Business Forum, Inc. (www.chinabusinessforum.org) was established by the US-China Business Council (USCBC, www.uschina.org) to promote broad-based policy discussion and greater understanding in both China and the United States of the economic systems and business methods of each country and of the role of commerce in the overall relationship between the United States and China.
The USCBC is the leading organization of US companies engaged in business with the People's Republic of China. Founded in 1973, the USCBC provides extensive China-focused information, advisory, and advocacy services, along with comprehensive events, to nearly 250 US corporations operating within the United States and throughout Asia.
About Oxford Economics and The Signal Group
Oxford Economics (www.oef.com) is one of the world's leading providers of economic forecasting, analysis, modeling, and advisory services. Oxford Economics supplies a range of "off-the-shelf" products and services in addition to customized economic consultancy services, with staff in London, Oxford, and Philadelphia.
The Signal Group, LLC (www.chinasignals.com) is a specialized consultancy providing competitive intelligence and strategic economic assessments for clients operating in China and other emerging markets; it has offices in Princeton and Shanghai.