China-US relations

Five trade issues the US and China need to tackle before Trump goes to Beijing

A number of concerns – ranging from exchange rates to accusations of intellectual property theft – are likely to feature prominently when Donald Trump visits Beijing later this year

PUBLISHED : Tuesday, 26 September, 2017, 3:20pm
UPDATED : Thursday, 12 October, 2017, 6:08pm

During his meeting with Chinese Premier Li Keqiang on Monday, US Commerce Secretary Wilbur Ross urged China to increase market access for American firms.

Trade has long been a contentious issue between the world’s two largest economies – especially in the wake of US President Donald Trump’s efforts to boost opportunities for American workers and firms.

To resolve their difficulties, the two governments negotiated a “100-day plan” in April, which included measures such as the resumption of American beef sales to China.

However, there are major trade conflicts that still remain to be resolved and these are likely to feature prominently on the agenda when Trump visits Beijing in November.

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Trade deficit

The US trade deficit with China was US$347 billion last year – almost 1.87 per cent of total US GDP, according to the World Bank.

The trade deficit exists because US exports to China were only US$116 billion compared with imports of US$463.

The US has blamed the gap on China exporting cheaper goods in large quantities, benefiting from lower wages and exchange rate manipulation that helps keep down the cost of its products (see below).

Market access

The US has complained that China has restricted foreign companies’ access in sectors such as energy, telecommunications and cars.

Chinese rules require foreign firms that want to enter these sectors to form joint ventures with local partners – and this often carries an additional benefit for the Chinese firms in the form of technology being transferred to them.

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Intellectual property

Beijing often insists on taking a close look at technology that foreign companies want to sell in China.

This not only makes market entry more expensive for US companies but has fuelled accusations of industrial espionage.

“Chinese government authorities jeopardise the value of trade secrets by demanding the unnecessary disclosure of confidential information for product approvals,” according to a report released by the American Chamber of Commerce in China in April.

In August Trump authorised an inquiry into accusations China was stealing US intellectual property, the first direct measure taken by his administration.

According to a New York Times report that month, intellectual-property theft costs America up to US$600 billion a year, the greatest transfer of wealth in history and China accounts for most of that loss.

Currency exchange rates

China’s currency policies have long been a major irritant to the Americans, who have complained that Beijing is deliberately using exchange rates to make Chinese goods cheaper.

China was last formally designated as a currency manipulator between 1992 and 1994, under the administrations of George HW Bush and Bill Clinton.

Before his election Trump promised to do so again, and also threatened retaliatory measures such as tariffs, though he did not follow through on this after coming to office.

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Government subsidies

This problem is often raised during US government anti-dumping investigations into Chinese products, which are allegedly subsidised by the government, making them unfairly cheap on the US markets.

The Trump administration said earlier this month that it would initiate a new anti-dumping and countervailing duty probe to determine whether stainless steel flanges from China are being dumped in the US.