Warren 1 Jacob Warren ENGL 1101 Dr. Molly Daniels 27 October 2019 China VS The USA: The Economic Battle for Power When China rose as a leader in the world economy in the late 1970’s and early 1980’s, it changed the world’s economic structure forever. Today China is the main contender for economic power, next to the United States, and tensions run high. The economic relationship between the United States and China is one of the most complex relationships in the world, and there is no simple answer when questioning whether it is good or bad. In short, it is complicated. While things do not seem to be improving, they are also not getting any worse. However, such a delicate matter is liable to cause world economic collapse at any given time. Scary, right? Both sides could be argued; the United States and China may not agree politically, but it is in neither countries best interest to inflict economic harm on the world’s economy, but rather use it as a tool for shaping policy and trade deals. China is a threat to economic growth in the United States, therefore leading to possible conflict as each country struggles for economic power. Historically, the world was viewed as having one reigning economic power, the United States. Today that could not be farther from the truth. It could be argued that this was the standard up until the signing of the One China Policy in 1979 by then President Jimmy Carter. China, along with this policy and major economic reforms lead by China’s Vice Premier Deng Xiaoping, was well on its way to becoming a global economic power by the end of the 1980’s. Fast forward to the year 2000 when President Bill Clinton signed the US-China Relations Act of 2000; this granted China permanent normal trade relations with the United States and eventually Warren 2 resulted in China joining the World Trade Organization in 2001. However, this relationship was put to the ultimate test during the 2007-2008 global financial crisis. The global market tanked around September 15th 2008 with the collapse of global bank Lehman Brothers. The Chinese took multiple measures in response to the crisis; however, this help came with strings attached. China, in order to boost the United States economy and stabilize their largest trading partner, bought large quantities of US securities. Some policy makers in the United States have expressed concern over China’s larger holding of United States securities citing that it may be used as leverage against United States policy that it might oppose. In the past, China has made no secret of its intended use of this strategy and how it can benefit it in trade and other arears such as currency appreciation. This could spell trouble for United States policy makers in the future (Morrison 45). This strategy could lead the United States being forced to play into China’s hand when it comes to economic policy, and it could ultimately stunt the United States’ economic growth in the future. I have yet concluded wither the global financial crisis helped or hindered economic relations between the countries. Nevertheless, I do know it highlighted the growing interdependence between the United States and China and how China is not afraid to use its power to get what it wants. Warren 3 In present-day context, the relationship between the two countries is simply constant; it is not worsening or improving. One question that sparks debate in the economic world is whether or not China reaps the benefits from this relationship, and there is no easy answer. The United States benefits more than what is commonly understood from China, but it also suffers losses. “For example, recent data shows that U.S. exports to China support around 1.8 million jobs in sectors such as services, agriculture, and capital goods.  However, trade with China has also led to job destruction in some U.S. industries—particularly low wage manufacturing” (Meltzer and Shenai). China has both a positive and negative impact on the United States’ economy and job market. Thus, leading to a possible trade war. A trade war is a war of tariffs and the battle over trade between the 2 countries. A trade war seemed almost enviable as: “On 22 March 2018 the US Trade Representative (USTR) presented the findings of a report on China's IPR policies. The USTR had been working on this report since Aug. 2017 as a part of an investigation initiated by the Trump Administration. The report found China is involved in unfair trade practices and stealing American intellectual property rights, and costing the American economy. The USTR revealed that the USA is losing about $50 billion via IPR theft in China…. the report recommended flat 25% tariff on certain Chinese import (Sengupt and Rastogi 197). On this same day, President Trump signed a bill that imposed a 25% tariff on certain categories of Chinese imports along with purposing new restrictions on Chinese investors. (Sengupt and Rastogi 197). In the months following, the United States imposed 2 phases of tariffs equaling $50 billion USD and in retaliation China imposed the same level tariff equaling approximately $34 billion USD. This issue is far from over and trade talks between the United States and China are set to happen for the 13th time this year later this month. Trade will continue despite trade war Warren 4 fears because between 1980 and 2004 US-China trade increased from 5 billion to 231 billion, a 4520% increase. With this major increase, China became the 2nd largest trading partner of the United States surpassing Mexico and the EU, falling short of Canada. Today China is the leading trade partner of the United States as well as being the leader of imported goods for 34 other counties including Australia, Japan and The European Union. "Over the past three decades, China has emerged as the world's major exporter with a sustained trade surplus earned against most nations" (Sengupta 190). With trade also comes a trade deficit. A trade deficit is the dollar value of how much more a country imports rather than exports. The latest numbers show the United States trade deficit with China has reached 419.2 billion dollars. In the graph below it shows the growing trade deficit between the United States and China between the years 19982016. While this may seem like a growing problem, a trade deficit is not always negative; it can be misleading. “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…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 Warren 5 that shows the U.S. selling more to China than vice versa” (Meltzer and Shenai). China has restrictions on imported goods from the United States while the United States has much looser import restrictions thus widening the gap. The trade deficit also neglects to show numbers from affiliate companies which will show that United States is actually selling more compared to Chinese companies. The trade deficit will likely only grow in the future but should not be a major factor when evaluating the economic relationship between the 2 countries. A more current issue of concern is the stealing of intellectual property from the United States. “On 22 March 2018 the US Trade Representative (USTR) presented the findings of a report on China's IPR policies….The report found China is involved in…stealing American intellectual property rights, and costing the American economy” (Sengupt and Rastogi 197). Intellectual property can be defined as: “creations of the mind, such as inventions, literary and artistic works, and designs, symbols, names and images used in commerce” (Bloomberg). These things are protected by laws such as patents. Not only does this break United States patent law, but it is also costing American companies. This cost is shown best in lost profits due to the sale of Chinese counterfeit goods accompanied with the lowering of prices to be competitive in markets that may be supported by a domestic company/industry. This is no small issue: “A 2015 paper by the Federal Reserve Bank of Minneapolis concluded that more than half of all technology owned by Chinese firms was obtained from foreign companies” (Bloomberg). This showing that ½ of all technology owned by Chinese firms has been stolen. Thus, costing American companies billions in sales and ultimately rising prices for domestic consumers. China, now the second largest economy in the world, is the United States’ number one competitor when it comes to global economic power and will remain a threat for the foreseeable future. I Mrs. Katie Simmons, the Associate Dean at The University of North Georgia, and asked Warren 6 her for her opinion on the debatable issue of the on the issue of if she believed the Chinese economy posing a threat to the United States. She stated: “The US does face a threat from China particularly in the form of a trade war. US manufacturers have invested in Chinese production of intermediate goods. … China is the world’s largest trading nation and is the largest manufacturer of exported goods. It is the second largest consumer market in the world. Tariffs and trade restrictions could send the US into a recession because of slow production and consumers’ reacting to higher prices after cutting spending.” Her response clearly explains how the Chinese economy poses a threat to the United States as seen in previous trade wars. She also explains how China could send the United States into a recession due to the slowing of United States manufacturers. She described the current status of relations by saying: “The United States and China have been on a collision course economically for many years.” When this collision is going to happen and what effects it will have is still unknown. What does this mean for the everyday consumer? Unfortunately, the negative externalities of a bad economic relationship with China will fall on them. This will more than Warren 7 likely come in the form of higher priced goods and the loss of jobs as domestic companies try and compete with the Chinese market. Ultimately, China is a threat to the United Sates’ economic growth. However, a relationship between the world’s two largest economic powers is necessary. China is the United States number one trading partner, and while it may be challenging to regulate it, it is also necessary. The main threat from the negative effects caused by China stealing intellectual property. In the coming years, China will most likely overtake the United States as the largest economy in the world. However, this does not mean that the United States economy will not continue to grow; it will only slow the shifting of economic power from the United States to China. The United States is losing its regional economic hegemony, and with that comes a new era of economic structure and power struggle. Warren 8 Works Cited Emilio Casetti. “Power Shifts and Economic Development: When Will China Overtake the USA?” Journal of Peace Research, vol. 40, no. 6, 2003, p. 661. EBSCOhost, search.ebscohost.com/login.aspx?direct=true&db=edsjsr&AN=edsjsr.3648382&site=edslive&scope=site. Ming Wan. “The Political Economy of U.S.-China Relations and the Trump Administration.” Washington Journal of Modern China, vol. 13, Sept. 2017, pp. 53–75. EBSCOhost, libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h& AN=131014541&site=ehost-live. Morrison, Wayne M. “China and the Global Financial Crisis: Implications for the United States.” Washington Journal of Modern China, vol. 9, no. 2, Dec. 2010, pp. 39–46. EBSCOhost, libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h& AN=55738552&site=ehost-live. Sengupta, Anirban, and Siddhartha Kumar Rastogi. “US--China Trade War Data: Truth and Post-Truth.” World Economics, vol. 19, no. 4, Oct. 2018, pp. 189–211. EBSCOhost, libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=bth& AN=134295304&site=eds-live&scope=site. “Timeline: U.S. Relations With China 1949–2019.” Council on Foreign Relations, Council on Foreign Relations, www.cfr.org/timeline/us-relations-china. Glaser, Bonnie S. “Us-China Relations.” Southeast Asian Affairs, Jan. 2014, pp. 76–82. EBSCOhost, libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h& AN=96548015&site=eds-live&scope=site. Agar, Michael. “Infographic: 2008 Financial Crisis Led to Closure of 800,000 Businesses.” Metro, Metro.co.uk, 13 Apr. 2017, metro.co.uk/2012/08/16/infographic-2008financial-crisis-led-to-closure-of-800000-businesses-538207/. Bloomberg.com, Bloomberg, www.bloomberg.com/news/articles/2018-12-05/what-sintellectual-property-and-does-china-steal-it-quicktake. Elwell, Craig Kent, et al. Is China a Threat to the U.S. Economy? [Electronic Resource]. Nova Science Publishers, 2008. EBSCOhost, libproxy.ung.edu/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=cat06 568a&AN=ung.9913739752002931&site=eds-live&scope=site. Warren 9 Meltzer, Joshua P., and Neena Shenai. “The US-China Economic Relationship: A Comprehensive Approach.” Brookings, Brookings, 6 Mar. 2019, www.brookings.edu/research/the-us-china-economic-relationship-a-comprehensiveapproach/. Mgmresearch. “China vs United States - A GDP Comparison.” MGM Research, 14 May 2019, mgmresearch.com/china-vs-united-states-a-gdp-comparison/. Warren 10 Rhetorical Rational When throwing around ideas for this project I found that my passion for politics was one of the main drivers of my decision making. Many political issues today are extremely polarized and can spark debate and conflict between people. However, I feel that the topic of United Sates and China economic relations has more middle ground than some may think. The countries may be at odds politically but would rather see economic growth than destruction. The images I used I used to help explain the content, especially the one about the 2008 financial crisis. The other two images I used to help show the size and scope of certain numbers as it relates to the economy. Most of the sources I used because they were easy to understand but also gave knowledgeable insight to the issue. One of the sources I began with was a entire book, I ended up not using it but the parts I read were very good. I also used MLA because I am more familiar with it and didn’t feel it appropriate to use APA.