US companies doing well out of free trade with China, despite unfounded concerns
By Hu Weijia Source:Global Times Published: 2016-3-31 1:07:21
Chinese President Xi Jinping's current visit to the US to attend a nuclear security summit comes at a time when some people in the US are venting their frustrations about trade with China.
Presidential candidate Donald Trump - who has described China as a currency manipulator and suggested that the US economy has been hurt by an unfair trading relationship with China - has played a key role in stirring up public anger on the issue.
Voters' anger could have a big impact on America's future if it shakes the once-solid consensus that free trade is essentially a good thing, said a report on March 16 by the New York Times.
Some critics of free trade have cited a recent study by US academics, which said that rising imports from China have resulted in economic losses for American blue-collar workers, due to sagging wages in local labor markets that have been exposed to Chinese competition.
It is not the first time the accusation has been made that rising Chinese imports affect employment for American workers, but this tells only part of the story. There has been a lot of discussion about the huge success achieved by China in the past few decades as a world factory, but less attention has been paid to the fact that Western countries, especially the US, put pressure on China in the 1980s to open up its manufacturing sector to foreign investors.
The US has showed great enthusiasm for investing in manufacturing in China in recent decades, and the country now serves as a key production and processing base for many US enterprises. This has allowed many US firms, such as Apple Inc, to benefit from China's ample supply of cheap labor.
Processing and business operations by US firms in China and their exports back to their home market are contributing to China's trade surplus with the US.
In fact, until recent years, exports of products from foreign-funded companies in China had long accounted for over half of the total volume of China's exports.
Also, China-US trade appears to be fattening profits for US firms even more than for Chinese ones. For every one dollar registered in China's exports, Chinese firms get less then 50 cents back, Wang Zhi, an economist with the International Trade Centre (ITC), said in 2013.
In the case of the iPhone, which is assembled in China, Chinese processors only get 1.8 percent of the total profits created by the device.
It seems US firms doing business in China are the biggest winners from China-US trade, instead of Chinese domestic firms.
It is natural and normal for capital to be profit-seeking, and there is no reason to blame US enterprises for this. What the two countries need to do is look forward. To deal with sagging wages in local industries exposed to Chinese competition, the US should move its workers into more advanced industries that can successfully compete in global markets. At the same time, China needs to continue its efforts to move up the value chain.
In this regard, opposition to free trade in the US is a cause for concern. According to the Wall Street Journal, Trump says he's not afraid of US exports being hit in a trade war because China would have more to lose. Such views are perhaps too simplistic.
The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn