Global Economics Monthly: Toward a Mutually Beneficial U.S.-China Economic Relationship

This December will mark the 15th anniversary of China’s accession to the World Trade Organization (WTO). To listen to some of this year’s election rhetoric, the U.S. decision to allow China into the club of normal trading nations was a mistake of historic proportions. This is hyperbole, which ignores the benefits, real and potential, that a more prosperous China brings. However, it is true that expectations in 2001 for mutual benefit between the United States and China as a result of WTO entry have not been fully met; in fact, the economic relationship has grown increasingly out of balance in recent years. But politicians and policymakers in Washington would do well to focus less on rhetoric and more on outcomes. Washington has a range of tools it can use to seek a mutually beneficial U.S.-China relationship; it is time it started figuring out how to use them responsibly.

Economic ties between the United States and China are massive and complex. More than $700 billion in trade flows between the two countries every year, involving thousands of companies, millions of workers, and inputs from dozens of other countries. Bilateral investment ties are deepening. The flow of direct investment from China to the United States exceeded $18 billion in the first half of this year— three times the amount recorded in the same period last year—with more than $30 billion in additional deals in the pipeline. In the past decade alone, the number of nonstop flight routes between the United States and China has more than tripled. And all of this is dwarfed by the growth in information flows across the Pacific.