Press Center

 Benefits of Trade with China


5/24/2007

HP-423

  • China is America's 4th largest export market and 2nd largest import supplier for goods trade.  U.S. exports to China last year totaled $55.2 billion and U.S. imports from China totaled $287 billion. 
  • Since China joined the WTO in 2001, U.S. merchandise exports to China increased 187 percent.  During the same period, U.S. exports to the rest of the world grew 38 percent. 
  • The United States has a services trade surplus with China. It was $2.6 billion in 2005.
  • Consumer goods, sporting equipment, apparel and footwear – relatively low value added consumer products – are among the U.S.'s top imports from China. High value-added manufacturing products are among top U.S. exports to China, such as electrical machinery and power generation equipment, medical instruments, plastics, aircraft, iron and steel, and agricultural products. 
  • China is often the last stop in the assembly process and thus the recorded import supplier to the United States.  However, materials and components are often first imported into China from other Asian countries then assembled for export. Over 50 percent of China's goods exports are part of this global processing supply chain.
  • U.S. industrial production (78 percent of which is manufactured goods) rose by 46 percent between 1994 and 2006.
  • As the U.S. economy becomes increasingly globally integrated, the U.S. manufacturing base remains strong. While the U.S.'s manufacturing share of GDP is declining, America is still the world's number one manufacturer, accounting for more than 20 percent of worldwide manufacturing value-added – that's twice as much as Germany and more than 2.6 times as much as China. The U.S. manufactures more today than ever in its history – seven times as much real output as in 1950, with roughly the same number of workers as in 1950. 
Global
  • Increased international trade has raised real incomes, restrained prices, introduced greater product variety, spurred technological advances and innovation, and raised real living standards in the United States. 
  • The annual payoff from trade liberalization to date is over $10,000 for an average American family of four.  This includes the Tokyo Round, Kennedy Round and Uruguay Round, NAFTA and other U.S. free trade agreements.
  • The removal of remaining global barriers to trade in goods and services could generate an additional $600 billion in annual income for the United States.  Most of these gains arise from liberalization of trade in services.
  • Approximately 57 million American workers are currently employed by firms that engage in international trade.  These firms tend to be more productive, have higher employment growth and pay their workers higher wages than domestically-oriented firms.
Imports
  • International trade in goods and services exposes firms to foreign competition and reduces their ability to charge high markups above production costs.  The average annual growth in U.S. import prices for the period 1990-2006 was just 1.4 percent compared to 3.1 percent for overall consumer prices. 
Exports
  • Firms engaged in the international marketplace tend to exhibit higher rates of productivity growth and pay higher wages and benefits to their workers than domestically-oriented firms.  Wages paid by manufacturing plants that export are 9 percent higher on average than wages paid by non-exporting plants of the same size.  And the wage premium for service-oriented firms that export is even higher--13 percent. 
  • U.S. exports to the ten most recent U.S. FTA partner countries -- FTA's implemented between 2001 and 2006 -- grew twice as fast as U.S. exports to the rest of the world (26 percent versus 13 percent).
  • Exports accounted for approximately 30 percent of U.S. economic growth in 2006. 
  • All 50 states benefit from exports:  exports account for over 20 percent of manufacturing jobs in South Carolina and over 35 percent in Washington. Agricultural exports support nearly 400,000 jobs in the U.S. farm sector.
The Role of Multinational Firms
  • International trade is an important channel of international commerce but it is not the largest channel.  Many U.S. firms access foreign markets through foreign direct investment, and producing and selling abroad. 
  • U.S. firms deliver five times the value of services (and two and a half times the value of goods) through their foreign affiliates as they do through cross-border trade. 
  • Globally engaged U.S. multinationals on average pay their employees about 20 percent above the national average.
  • U.S. multinationals have been one of the main drivers of overall U.S. productivity growth over the last three decades, and accounted for over half of U.S. productivity growth between 1977 and 2000, and for half of the increase in U.S. productivity growth between 1995 and 2000.
  • Studies show that economic activity abroad by U.S. multinational companies complements domestic economic activity.  One dollar of additional foreign capital spending is associated with $3.50 of additional domestic capital spending.  And when multinationals hire abroad they also expand employment here at home. 
  • While U.S. multinationals account for 25 percent of total U.S. output and 20 percent of employment, they account for a disproportionately high share of U.S. goods exports (49 percent), goods imports (31 percent), physical capital expenditures (29 percent), and research and development spending (68 percent). 
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