Us China Trade Dispute
US China Trade Dispute
CJ Keist
CSU-Global Campus
ENC 500 – Global Economics
Dr. William Cheng
Dec. 25th, 2011
CASE STUDY: Analysis of the US-China trade relationship.
Introduction
The United States and China have had a long and complicated trading relationship. Both countries are greatly dependent on each other, and yet are so contradictory in many political and social problems affecting the entire world. These constant differences between the two nations have put extreme pressures on a very tentative trading relationship. With such extreme differences in political views it makes you wonder if trading with China really is beneficial to the United States? In this paper I will look into the various factors why the United States and China have developed their existing trade relationship. Then I will look into the events that occurred in 2009 when President Obama imposed a high tariff on Chinese imported tires. Currently the US has an extreme trading deficit with China, can this be a threat to the US economy? Finally, with the current conflicting issues between the two countries, can beneficial trade between the US and China continue in the long term?
Analysis of US-China trade relationship The principle of comparative advantage can show why two nations even without absolute advantage may find it beneficial to create a trading relationship (Carbaugh, R. 2009). The principle of comparative advantage was developed by a wealthy London businessman named David Ricardo (1772-1823) (Carbaugh, R. 2009). So what are the comparative advantages between the US and China? When looking at the comparative advantage of China, the one main asset that stands out is China’s immense cheap labor force in manufacturing goods. Clearly China’s cheap labor-intensive industry is its main comparative advantage with the US. In 2006, the compensation cost of China’s workers compared to US was just 2.7% (What Are the US and China’s Current Comparative
CJ Keist
CSU-Global Campus
ENC 500 – Global Economics
Dr. William Cheng
Dec. 25th, 2011
CASE STUDY: Analysis of the US-China trade relationship.
Introduction
The United States and China have had a long and complicated trading relationship. Both countries are greatly dependent on each other, and yet are so contradictory in many political and social problems affecting the entire world. These constant differences between the two nations have put extreme pressures on a very tentative trading relationship. With such extreme differences in political views it makes you wonder if trading with China really is beneficial to the United States? In this paper I will look into the various factors why the United States and China have developed their existing trade relationship. Then I will look into the events that occurred in 2009 when President Obama imposed a high tariff on Chinese imported tires. Currently the US has an extreme trading deficit with China, can this be a threat to the US economy? Finally, with the current conflicting issues between the two countries, can beneficial trade between the US and China continue in the long term?
Analysis of US-China trade relationship The principle of comparative advantage can show why two nations even without absolute advantage may find it beneficial to create a trading relationship (Carbaugh, R. 2009). The principle of comparative advantage was developed by a wealthy London businessman named David Ricardo (1772-1823) (Carbaugh, R. 2009). So what are the comparative advantages between the US and China? When looking at the comparative advantage of China, the one main asset that stands out is China’s immense cheap labor force in manufacturing goods. Clearly China’s cheap labor-intensive industry is its main comparative advantage with the US. In 2006, the compensation cost of China’s workers compared to US was just 2.7% (What Are the US and China’s Current Comparative
References: Bradsher, Keith (2009). China-US Trade Dispute Has Broad Implications. The New York Times: Retrieved from: http://www.nytimes.com/2009/09/15/business/global/15trade.html?pagewanted=all Carbaugh, Robert (2009) Miller, Debra A. (2009). Importing From China.: Greenhaven Press, a part of Gale, Cengage Learning. Schuman, Michael (2009). Why the China-U.S. Trade Dispute Is Heating Up. Time Business. Retrieved from: http://www.time.com/time/business/article/0,8599,1922155,00.html Trumbull, Mark (2009)