China-U.S. Trade IssuesPosition Paper

Latonya CollinsMCS-429 Global Sourcing

May 14, 2015

Introduction:

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The China and U.S. trade issues are very important to merchandising in the

fashion industry. China and the U.S. economic ties have expanded over the past few

decades, but despite those economic ties their relationship has become aggressively

complicated and often with heavy tension. China is currently the United States, second

largest trading partner, the third largest export market, and its biggest source of imports.

The United States viewpoint is that many trade tensions stem from China’s incomplete

transition to a free market economy. One of the continuing issues in the apparel industry

is the rising cost of labor in China and fabric availability; in certain apparel producing

regions are major drivers still deciding where to produce products. Major areas of

concern expressed by U.S. policymakers and stakeholders include China’s relatively

poor record of intellectual property rights (IPR) obligation and declared widespread

cyber economic intelligence against U.S. firms by Chinese government body. One of the

major issues is how to address the commercial issues with China more effectively.

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Review of Literature:

A possible solution to this issue between China and the U.S, which could make a

large impact on the apparel sourcing landscape, is the Trans-Pacific Partnership (TPP)

Free Trade Agreement, which is still under negotiation. The TPP is a secretive

multinational trade agreement that threatens to extend restrictive intellectual property

(IP) laws across the world, and rewrite international rules on its enforcement. The U.S.

IP chapter includes many detailed requirements that are more restrictive than

international standards. They include: placing greater liability on internet intermediaries,

escalating protection for digital locks, creating new threats for journalist and

whistleblowers, expanding copyright terms, enacting a three-step test language that

puts restrictions on fair use, and adopt original sanctions for copyrights. The TPP has

stretched for about 30 chapters, and has been ongoing for almost 5 years.

With China increasing their efforts to deepen diplomatic trade relationships with

international partners, their dynamic presents both challenges and opportunities for the

United States. Beijing sees the U.S. strategy of rebalancing its Asia policy in a negative

way. China and the U.S. seem to be moving further and further apart when it comes

down to negotiating certain agreements. In a recent study, The Peterson Institute of

International Economics “Bridging the Pacific,” concludes that a free trade agreement

would greatly benefit both countries. U.S. income would increase by $400 billion a year,

and U.S. national income would raise more than $100 billion annually, with 1.7 million

export related jobs to add to the U.S. economy over a 10 year period. This agreement

would leave Americans to benefit from lower prices and wider choices. China’s national

income would increase by $300 billion a year, with a dramatic boost in foreign direct

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investment between the two countries. With a bi-lateral free trade agreement in order,

U.S. FDI could rise to $160 billion, and China’s FDI could rise to $122 billion, all while

helping to reposition the U.S. to the world leading investments creating further growth.

Several of countries across the Asia Pacific region have implemented negotiations on

the free trade agreement with China, which one of the reason for the U.S. to join.

Another reason is that the U.S. share of China’s import market has already declined in

recent years, and the U.S. risk further market share losses to this region and more. The

economic relationship with China needs to change for it to produce more jobs in the

U.S., and better balance of the trade by China actually redeveloping its economy by

reducing its reliance on exported growth. Taking steps to increase domestic

consumption can help the U.S. economy. For an example, the article from Economy

Policy Institute states that, these could include measures to raise domestic wages by raising

minimum wages and by recognizing the rights of workers to independently organize and bargain

collectively (e.g., form independent trade unions). China can also boost domestic demand by

increasing investment in its social safety net and through expanded investments in domestic

infrastructure.(Scott, par. 4, pg. 9)

Recently in politics, President Obama made a strong pitch for the Trans Pacific

Partnership agreement on Friday, choosing Nike Inc. headquarters as a backdrop and

offering an incentive: Nike chief executive officer Mark Parker said if TPP is ratified, the

company will create an “advanced footwear manufacturing center” in the U.S. that will

create 10,000 jobs over the next decade (Friedman, par. 1). While introducing

President Obama, Parker mentioned that another 40,000 jobs would be created across

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the supply chain in the U.S. to support its efforts. The chief executive Mark Parker

quote,

“We support President Obama’s leadership in trade and the Trans Pacific

Partnership,” Parker said. “We are proof that trade works. Free trade opens doors,

removes barriers and creates jobs. It has helped Nike employ

26,000 people across this country…Economic growth don’t happen in a vacuum. Free

trade drives our future growth and the capacity to invest and innovate.”

Obama says that he believes the Trans-Pacific Partnership will level the playing field,

and enable the United States to increase exports and create jobs. President Obama

claims to disagree that the free trade and the TPP will produce job losses here in

America, while stating that the pacts from the past like the American Free Trade

Agreement as led to the outsourcing of manufacturing jobs. President Obama also

states at Nike headquarters, that this is the new style agreement that looks to fix the

problems of old pacts. Obama refers to TPP as outsourcing reversed to in-sourcing

because major U.S. corporations are starting to move back.

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Discussion:

The United States workers and the domestic economy have had a negative

effect especially those in manufacturing since China entered the World Trade

Organization in 2001. We hear all the time whether it’s in school, newspaper, or social

media newsletters about how much debt the United States owe to China. I think that is

due to the lack communication between these two countries. The trade deficit between

China and the U.S. has increase so much in the last decade it has resulted in major job

losses in America.

In my review of literature there is a solution I think could help these trade issues

between US-China. Even though it is still under negotiation I think that the TPP Free

Trade Agreement would actually help our economy by producing more money back into

our economy. It is kind of scary to think of the United States falling behind economics

wise because our workers are losing jobs due to the fact we will not join in on something

that can fix the problems of the old agreements, which have to this trade deficit we face

today. I believe that there has to be a way to create trade balance that can support job

creation.

Conclusion:

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References:

Greenberg, M., & Bergsten, F. (2014, December 18). The US needs

free trade with China. Retrieved May 14, 2015, from

http://www.wsj.com/articles/mauricegreenbergandfredbergstenth

eusneedsafreetradedealwithchina1418946345

Friedman, A. (2015, May 8). Obama, Nike CEO Push TPP. Retrieved May 13,

2015, from http://wwd.com/

Friedman, A. (2015, May 8). Obama, Nike CEO Push TPP. Retrieved May 13,

2015, from http://wwd.com/

Salacuse, J. (2015, April 1). THE TOP TEN WAYS THAT CULTURE CAN

AFFECT INTERNATIONAL NEGOTIATIONS. Retrieved May 13, 2015.

Mozur, P., & Perlez, J. (2015, April 16). China Halts New Policy on Tech for

Banks. Retrieved May 13, 2015, from

http://www.nytimes.com/2015/04/17/business/international/china-suspends-

rules-on-tech-companies-serving-banks.html

sss

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