In addition, China joined the  WTO in December 2001, making it subject to the multilateral organization’s  trade liberalizing requirements. In 2004, $33  billion, or 4 percent of total U.S. goods exports, went to China, compared  with $164 billion and $93 billion to Canada and Mexico, respectively. China Is a Growing Destination for U.S. Services Exports, Which Grew Faster Than Overall U.S. Services Exports

Although still small, China is a growing market for U.S. services exports,  which grew faster than U.S. services exports to the rest of the world from  1995 to 2004. 3). Office of the United States Trade Representative (USTR)  officials noted that implementation problems have inhibited market access  for services. 7). These trends are due to multiple factors. U.S. Investment in China Has Increased, and Affiliate Sales Surpassed U.S. Exports

Through increased foreign direct investment in China, U.S. affiliate sales  have exceeded U.S. exports to China, since U.S. companies have  increasingly sold their goods and services directly to the Chinese market  through their local affiliates. For example, the cumulative  stock of U.S. investment in China grew from $2 billion in 1995 to $15 billion  in 2004. Figure 10 shows affiliate sales  from 1995 to 2003 and exports from 1995 to 2004. Observations

This analysis reflects a range of issues affecting U.S.-China trade and  investment, including broad factors, such as China’s economic  development and exchange rate regime, and more narrowly focused sector- specific aspects such as China’s growing importance as a market for U.S.  goods and services, the rise in integrated production among China’s  regional trading partners, China’s increasing demand for oil, and China’s  growing role as an attractive venue for foreign direct investment. Agency Comments

We provided USTR, the Departments of Agriculture and Commerce, and  the International Trade Commission with a draft of this report for their  review and comment. All four agencies chose to provide technical  comments from their staff. A GAO contact and staff acknowledgments are listed in  appendix V.

Objectives, Scope, and Methodologies

As part of a long-term body of work that the Chairman and the Ranking  Minority Member of the Senate Committee on Finance as well as the  Chairman and the Ranking Minority Member of the House Committee on  Ways and Means requested, we (1) analyzed U.S. goods exports to China  and how they have changed over time, (2) analyzed U.S. services exports to  China and how they have changed over time, (3) assessed how U.S. exports  to China have fared against other major trading partners’ exports to China,  and (4) analyzed U.S. investment and affiliate sales in China. Table 8 lists subcategories whose exports to  China accounted for more than 10 percent of total U.S. exports in that  category in 2004; table 9 lists subcategories whose exports to China  accounted for less than 1 percent of total U.S. exports in 2004; table 10 list  subcategories with the largest increases in export value over the decade;  table 11 lists subcategories with the largest declines in export value; table  12 lists subcategories with the largest declines the U.S. share of world  exports to China; and table 13 lists subcategories with the largest increases  in the U.S. share of world exports to China. China is a major market for some U.S. goods exports. U.S. share of world goods exports to China declined overall from 1995 to  2004.
Why GAO Did This Study

China is important to the global economy and a major U.S. trading partner. By joining the World Trade Organization (WTO) in 2001, China pledged to further liberalize its trade regime and follow global trade rules. While U.S.-Chinese commercial relations have expanded, controversies have emerged, including the size and growth of the U.S. trade deficit with China, China's lack of intellectual property protection, and China's implementation of its WTO obligations. Despite these challenges, China's vast consumer and labor markets present huge opportunities for U.S. exporters and investors. GAO (1) analyzed U.S. goods and services exports to China, (2) assessed how U.S. exports to China have fared against those of other major trading partners, and (3) analyzed U.S. investment and affiliate sales in China. We provided the Office of the U.S. Trade Representative, the Departments of Agriculture and Commerce, and the International Trade Commission with a draft of this report for their review and comment. These agencies chose to provide technical comments from their staff. We incorporated their suggestions as appropriate.

What GAO Found

China is a rapidly growing market for U.S. goods and services. Although still small, accounting for only 4 percent of U.S. goods exports in 2004, U.S. goods exports to China tripled, from $11 billion to $33 billion, and increased across virtually all major categories from 1995 to 2004. Over the same period, China went from the ninth-largest to the fifth-largest U.S. market for goods behind Canada, the European Union, Mexico, and Japan. Although smaller, U.S. services exports grew from $3 billion to $7 billion, from 1995 to 2004. Economic growth in China and liberalization of its market, including joining the WTO, are among the factors driving the impressive export growth. Despite rapid growth, U.S. goods exports to China have not kept pace with those of other countries, particularly exports from Asia. The U.S. share of world goods exports to China declined from 12 percent to 9 percent, from 1995 to 2004, while South Korea and Taiwan's shares increased and at times surpassed that of the United States. The decline is partly due to increased integrated production among China's neighbors; growing resource-based exports, such as oil, from smaller countries; and macroeconomic factors, including exchange rates. Sales to China by U.S. affiliates located in China grew faster and exceeded U.S. exports to China in 2003, $38 billion versus $35 billion, while U.S. foreign direct investment grew from $2 billion to $15 billion from 1995 to 2004. Growth in U.S. investment and affiliate sales, particularly for goods, is due at least in part to China's attraction as a growing economy, including its burgeoning domestic market, high productivity and low labor costs, and developing infrastructure.