Negotiating with the Chinese: Or How Not to Kowtow

Courtesy Reuters

If international trade is such an undisputed good, why are there so many disputes in international trade? Nowhere is this paradox more acute than with China. Every encounter between U.S. and Chinese negotiators has been characterized by unpleasantness and friction. A few years of negotiations between the United States and Mexico resolved a gamut of trade issues and led to a free-trade accord. During the same period, the Chinese agreed to only modest liberalizing steps, and only after the United States raised the specter of massive trade retaliation.

The United States and China have had substantial trade relations only for about a decade. But already a sharp pattern has emerged. America’s 1993 trade deficit with China, $23 billion, was its second largest, right after its deficit with Japan. China’s $32 billion worth of exports to the United States constitutes more than one-fourth of China’s total trade. U.S. exports to China, however, totaled only $9 billion and made up less than two percent of all U.S. exports. A bilateral deficit may be the result of many factors, but even so, the U.S. import-export ratio with China is the worst of all its major trading partners. It is thus hard to avoid the impression that the Chinese market remains essentially closed to the United States while the American market is essentially open to China.

This wave of Chinese imports has emboldened affected American industries, such as textile and apparel. American labor unions and other groups have issued protectionist calls to stem the tide. Alongside China’s reduced appeal as a strategic asset with the end of the Cold War and its elevated profile as a target for human rights criticism after the Tiananmen Square massacre, the general trade imbalance also incites annual congressional demands to eliminate China’s most-favored-nation trade status and even to impose sanctions on Beijing.

In such a laden atmosphere, the hurdles to doing business with China loom all the larger. Washington policymakers and American businesses have

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