Hoover Essay in Public Policy: U.S.-China Trade Issues after the WTO and the PNTR Deal: A Chinese Perspective By Jialin Zhang

Wednesday, September 20, 2000

China and the United States have a $46 billion difference of opinion over the trade deficit between the two countries. The U.S. claims the deficit is extremely high—around $68 billion dollars. But China's calculations put the deficit at about one-third of that estimate—$22 billion. If no resolution can be found for this dispute the newly begun process of normalizing trade relations between the two nations might be seriously jeopardized.

In his Hoover Essay in Public Policy U.S.-China Trade Issues after the WTO and the PNTR Deal: A Chinese Perspective, Jialin Zhang warns that there are still many fundamental issues that need to be addressed.

For example, Zhang says U.S. economic sanctions and control of high-tech exports to China have hurt both nations. China is being denied goods it needs to modernize, while American companies are losing lucrative Chinese markets to competitors from other countries.

Zhang also points to U.S. Treasury department claims that China has manipulated its exchange rate to gain competitive advantage in its trade with the United States.

In addition, recent trade legislation by the U.S. has set a dangerous precedent in U.S.-China trade relations by linking human rights issues with China's most favored nation status. It is a precedent which, Zhang argues, "conflicts with the fundamental principles of General Agreement on Tariffs and Trade and the World Trade Organization," and has no legal support.

Because these trade disputes are confined only to certain industries and enterprises, they have become increasingly detrimental to the national interests of both countries. For Zhang, the key to resolving the friction lies in negotiation on an equal basis, a solution he says has been proven by past experience.

A visiting scholar at the Hoover Institution, Jialin Zhang specializes in international economics, China's economic reforms, and Sino-American trade relations. He is a senior fellow of the Shanghai Institute for International Studies, as well as director of the board, Council of Policy and Strategy in Shanghai. He is the author of two Hoover Institution essays titled China's Response to the Downfall of Communism in Eastern Europe and the Soviet Union (1994) and An Assessment of Chinese Thinking on Trade Liberalization (1997).

The Hoover Institution, founded at Stanford University in 1919 by Herbert Hoover, who went on to become the 31st president of the United States, is an interdisciplinary research center for advanced study on domestic and international affairs.