Title: The US-China economic relationship: A comprehensive approach
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The US-China economic relationship: A comprehensive approach
Executive Summary
Joshua P. Meltzer
Senior Fellow - Global Economy and Development
Neena Shenai
Visiting scholar - American Enterprise Institute
The state of the bilateral economic relationship
Why China’s economic model matters
The impact on the WTO
Making progress in US-China economic relations
Bilateral negotiations
The role for the WTO
Work with US allies
Unilateral US action

Content: Despite these costs, the frequent focus by the administration on the bilateral deficit is not a meaningful yardstick for assessing U.S.-China trade or its impact on employment. The U.S. trade deficit is less a product of restrictions on U.S. imports than it is a reflection of a low U.S. domestic savings rate, which requires overseas capital to fund U.S. domestic investment needs and the growth in U.S. government debt. In addition, the trade deficit does not account for the activities of affiliates of U.S. and Chinese companies in each respective market, a calculus that shows the U.S. selling more to China than vice versa. Nevertheless, the economic costs of the bilateral economic relationship are very real. China’s economic practices now risk harming the U.S. service and knowledge economy. As identified in the United States Trade Representative (USTR) Section 301 report, intellectual property (IP) theft and forced technology transfer and other Chinese unfair trade practices threaten high-wage jobs and high-value-added manufacturing in the U.S. The role of the state in effectuating these policies with larger aims of supplanting U.S. leadership in high-tech industries makes these Chinese policies all the more concerning. Why China’s economic model matters
Despite the rapid growth in its economy and acceptance of a role for competition and markets, the Chinese Communist Party (CCP) remains firmly in control of China’s economy. China is not the first country with an economic model premised on state control and coordination between the government and business on economic and trade priorities. Elements of all these systems were, and continue to be, present in places like Japan, with the keiretsu, or South Korea, with its chaebols. Yet China’s economic model is different from both Japan and Korea.