Did talks make even a dent in U.S.-China trade deficit?

Did talks make even a dent in U.S.-China trade deficit?

The official word out of Washington this week was that the United States and China reached agreements that will be good for both countries and good for the world economy.

Of course it is important for the United States, the world’s largest economy, and China, which is expected to soon pass Japan to become the second largest, to cooperate on global economic matters. They can hardly ignore each other, given that the United States is China’s biggest customer for everything from kitchen gadgets to pipe to electronics to lawn and garden machinery. And given that China funnels much of its profits into buying up U.S. treasury notes. China now holds $1 out of every $10 in U.S. public debt, making it the United States’ largest foreign creditor.

But forgive us if we’re skeptical about whether the United States got any meaningful concessions aimed at reducing the massive trade imbalance between the two countries.

Even before China joined the World Trade Organization in December 2001, trade deals under President Bill Clinton granted China greater access to the U.S. market and U.S. firms greater ability to produce in China for export back to the United States.

But for 25 years, the one trend that has remained constant is that no matter how much we sell to China, China sells more — in the last decade, much more — to the United States.

It grew like topsy

Back in 1985, the difference was almost miniscule. The total trade between the two countries was about $7.7 billion, and the difference was about $600 million in China’s favor. In 2008, China enjoyed a trade surplus with the United States of about $730 million every day of the year. For that year, China bought $69.7 billion worth of goods from the United States, while the United States bought $337.7 billion from China, for a trade deficit of $268 billion. Put another way, for every dollar the Chinese spent on U.S. products, Americans spent nearly $5 on products from China.

One of the factors that has been driving the trade disparity in recent years is the artificially depressed value of China’s currency, and no one in Washington uttered a public word about the need for China to allow the value of its currency to rise. The disparity allows China to sell its goods in the United States at artificially low prices, and increases the relative cost of U.S. goods in China.

And so it is not surprising that since China joined the WTO, the balance of trade deficit between the United States and China has totaled about $1.5 trillion dollars.

Certainly China is not the only country that sells more to the United States than it buys, but none of our major trading “partnerships” are nearly so lopsided.

And while American consumers could make a small dent in the trade deficit if they would be more careful in their buying habits, China’s ability to dominate American commerce was facilitated by trade policy that came out of Washington, and any meaningful reversal of the trend is going to have to start in Washington.

We suspect that didn’t happen during this week’s talks.