Congressional Research Service, "China-U.S. Trade Issues," July 11, 2007

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Summary
U.S.-China economic ties have expanded substantially over the past several years. Total U.S.-China trade, which totaled only $5 billion in 1980, rose to $343 billion in 2006. China is also now the 2nd largest U.S. trading partner, its 2nd largest source of U.S. imports, and its 4th largest export market. With a huge population and a rapidly expanding economy, China is a potentially huge market for U.S. exporters. However, economic relations have become strained over a number of issues, including China’s large and growing trade surpluses with the United States; its failure to fully implement its World Trade Organization (WTO) commitments, especially in regards to intellectual property rights (IPR); its refusal to adopt a floating currency system; and its maintenance of industrial policies and other practices deemed unfair and/or harmful to various U.S. economic sectors.

The Bush Administration has come under increasing pressure from Congress to take a more aggressive stance against various Chinese economic and trade practices. It has recently filed a number of trade dispute resolution cases against China in the WTO, including over China’s failure to protect IPR and afford market access for IPR-related products, discriminatory regulations on imported auto parts, and import and export subsidies to various industries in China. In addition, the Administration recently reversed a long-standing policy that countervailing cases (dealing with government subsidies) could not be brought against non-market economies (such as China) when it brought against certain imported Chinese glossy paper products. Finally, in December 2006, the Administration began a “Strategic Economic Dialogue” (SED) with China to discuss major long-term economic issues between the two countries. The latest SED talks were held in May 2007. Several bills have been introduced in Congress that would impact U.S.-China economic relations. H.R. 321, H.R. 782, H.R. 1002, H.R. 2942, S. 364, S. 796, and S. 1607 seek to address China’s currency policy. H.R. 388 would prohibit U.S. imports of Chinese autos as long as Chinese tariffs on autos are higher than U.S. tariffs. H.R. 708, H.R. 1229, and S. 974 would clarify that countervailing laws can apply non-market economies. H.R. 571 would raise tariffs on countries classified as non-market economies (including China). H.R. 1958 and S. 571 would terminate China’s permanent normal trade relations (PNTR) status. H.R. 275 attempts to promote free expression and a free flow of information on the Internet by preventing U.S. companies from aiding regimes that restrict access to the Internet.

China’s rise as a major economic power has raised a number of concerns over  its impact on the U.S. economy. For example, China is attempting to become a major producer and exporter of autos and high technology products, which could increasingly pose competitive challenges to many U.S. firms (especially if China continues to subsidize its firms). In addition, massive piracy rates in China have not only cost U.S. firms billions of dollars in lost sales in China, but also in third markets and in the United States. Finally, imports of certain contaminated food and defective consumer products from China have raised a number of health and safety concerns. This report examines major U.S.-China trade issues and will be updated as events warrant.

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