i3 | December 28, 2017

Doing Business in China

Lesley Lopez

By Lesley Lopez, communications director, US China Business Council

A recent report by the US-China Business Council (USCBC) sheds new light on what business community leaders have been saying for years — China is a key market for U.S. exports, benefitting the U.S. economy and jobs, but it should be more.

The growth in services exports ranging from insurance and banking to travel and tourism across congressional districts in the U.S. is a new and significant development, according to USCBC’s annual assessment. Out of 435 congressional districts, 432 had triple-digit growth in service exports to China since 2006. More than a quarter of districts exported more than $100 million in services to China in 2015, the last year data was available. Two districts exported more than $1 billion in services — NY-10 and NY-12, in New York City and its boroughs — and another two districts exported more than $500 million — CA-33, in the Los Angeles area and MA-07, around Boston.

Though global trade is slowing, U.S. services exports to China grew more rapidly than all other major trading partners, averaging nearly 19 percent annually over the last decade. China was the top services export market in 2015 for 93 congressional districts and a top five market for 399 districts. The 6.8 percent growth in services exports to China in 2015 far outpaced growth in exports to the U.S. top three markets: the U.K. (3.4 percent), Canada (-9.2 percent), and Japan (-5.2 percent). 

“Our nation’s commercial relationship with China is complex,” USCBC President John Frisbie said. “Exports to China contribute to America’s economy and support good jobs for American workers. Last year, we reported that the U.S.-China trade relationship supports roughly 2.6 million jobs in the U.S. across a range of industries, including jobs that Chinese companies have created in America. Though China’s economic growth rate is slowing, it remains an important market for U.S. exports and continues to provide growing opportunities for American businesses, large and small. Gains in exports to China are felt widely throughout the country.”

Even with these significant services exports, the U.S. has a small share of China’s market. U.S. goods accounted for about 8.4 percent of China’s total imports in 2015, trailing behind China’s purchases from the European Union, South Korea, Japan and Taiwan. That market share represents a decline from 2000, when the U.S. held a 10 percent share of China’s import market.

The U.S. market share is an even bigger issue when the expected growth of the Chinese middle class over the next decade is taken into account. The number of Chinese middle-class consumers will exceed the population of the U.S. by 2026. U.S. companies may have significant opportunities to tap into a new and lucrative customer base that can further boost U.S. employment and economic growth. Economic data shows that nations trading closely with China outperform nations with less integrated trade ties.

“Eliminating China’s market access barriers is a top priority for the American business community,” Frisbie added. Such changes will be necessary for the trend of employment and economic growth to continue.

Achieving that goal requires various tools. China maintains an array of tariffs and non-taris barriers that prevent more American goods, agricultural products, and services from reaching Chinese customers — these barriers need to be removed. One way to do that is through dispute settlement. The U.S. should continue to bring legally sound, industry supported cases to the World Trade Organization (WTO). That will require funding, so Congress should expand the resources at the O£ ce of the United States Trade Representative to build upon the successful track record of using the WTO to address unfair Chinese trade practices.

WTO cases are insufficient to address China’s barriers fully, however, so more can be done to pursue results-oriented engagement with China designed to address barriers of longstanding concern. A high-standard bilateral investment treaty (BIT) would help address concerns such as unequal treatment of U.S. goods and services in China such as investment restrictions, technology transfer requirements and uneven enforcement of laws and regulations, including the protection of intellectual property. A BIT would go a long way in improving the business environment to ensure that competition in the market is more fair.

CES Asia will be held June 13 - 15, 2018, in Shanghai, China. 

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