Last fall, Democrats tried desperately to turn voters’ anxieties about trade with China into a winning issue on Election Day. Yet while Americans tell pollsters they worry about losing jobs to China, a majority who voted in November failed to take the bait.
Across the country, but especially in the industrial heartland, candidates who refused to make China a bogeyman were accused of shipping American jobs and industry to our Communist rival across the Pacific. In one TV ad in Pennsylvania, Democratic Senate candidate Joe Sestak said his pro-trade Republican opponent, Pat Toomey, “ought to run for Senate in China.”
Instead, Toomey and a flock of other pro-trade Republicans are now safely sworn in as members of the new Congress. Early signs point to a more business-friendly relationship with China. Republican House leaders announced early in the new Congress that legislation targeting China for its currency policies would not be on the trade agenda. They concluded, wisely, that the U.S. government faces many more urgent challenges.
Although the U.S.-China trade relationship is complex, it is fundamentally beneficial for both countries, for the same reasons that expanding trade has served America’s interests throughout the post-WWII period. Trade with China, like trade with the rest of the world, enlarges markets for U.S. companies and blesses American consumers with more competition, innovation, and lower prices, while promoting peace and spreading American influence and values abroad.
Politicians obsess over exports, while forgetting that all their constituents benefit from imports. Of the $365 billion worth of goods Americans imported from China in 2010, more than three quarters were consumer products that make our lives better every day at home and the office. Top imports from China are clothing, shoes, toys, household appliances, computers, and other consumer electronics.
Those goods are especially important to working-class, Walmart-shopping families that spend a higher share of their income on the affordable, non-durable consumer items we import from China. A 2008 University of Chicago study by Christian Broda and John Romalis found that imports from China have slowed the rate of increase in the prices of goods likely to be purchased by the poor. Politicians who call for higher tariffs on imports from China are aiming straight for the pocketbooks of the poor and middle class.
For American companies and their workers, China remains the fastest-growing major market for U.S. exports. From somewhere back in the pack 20 years ago, China is now the number-three buyer of U.S. exports, behind only our NAFTA partners, Canada and Mexico. Exports to China in 2010 jumped 30 percent from the year before, increasing far faster than exports to the rest of the world. Soybeans and copper are among the top U.S. exports, but most of the things we sell to China are high-end manufactured products, led by chemicals, plastics and other industrial supplies, industrial machinery, computers and semiconductors, and civilian aircraft.
Selling in China is not just a Fortune 500 phenomenon. More than a third of our exports to China are supplied by small and medium-sized enterprises (SMEs) employing 500 or fewer workers. Talk to the people near you on a flight to China and you are likely to meet a sales rep or executive for one of the 27,000 American SMEs now selling their wares in China’s rapidly expanding market.
When the Chinese are not buying U.S. goods with the dollars they earn, they buy U.S. Treasury bills. Critics put a sinister spin on the federal government’s growing indebtedness to China, but it’s a simple fact that if the U.S. government did not borrow from Chinese savers, it would need to borrow from some other country. Our own level of domestic savings is too low to fund both the yawning fiscal deficit and the investment opportunities created in the private sector.