1 however trade with china has also led to job

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1 However, trade with China has also led to job destruction in some U.S. industries—particularly low wage manufactur- ing. Despite these costs, the frequent focus by the administration on the bilateral deficit is not a meaningful yardstick for assessing U.S.-China trade or its impact on employment. The U.S. trade deficit is less a product of restrictions on U.S. imports than it is a reflection of a low U.S. domestic savings rate, which requires overseas capital to fund U.S. domestic investment needs and the growth in U.S. government debt. In addition, the trade deficit does not account for the activities of affiliates of U.S. and Chinese companies in each respective market, a calculus that shows the U.S. selling more to China than vice versa. Nevertheless, the economic costs of the bilateral economic relationship are very real. China’s economic practices now risk harming the U.S. service and knowledge economy. As identified in the United States Trade Representative (USTR) Section 301 report, intellectual property (IP) theft and forced technology transfer and other Chinese unfair trade practices threaten high- wage jobs and high-value-added manufacturing in the U.S. The role of the state in effectuating these policies with larger aims of supplanting U.S. leadership in high-tech industries makes these Chinese policies all the more concerning. Why China’s economic model matters Despite the rapid growth in its economy and acceptance of a role for competition and markets, the Chinese Communist Party (CCP) remains firmly in control of China’s economy. China is not the first country with an economic model premised on state control and coordination between the government and business on economic and trade priorities. Elements of all these systems were, and continue to be, present in places like Japan, with the keiretsu, or South Korea, with its chaebols. Yet China’s economic model is different from both Japan and Korea. In addition, due to its sheer size, how China grows will affect the rest of the world in ways that even Japan’s economy at its economic height did not. China’s economic model has a range of growing implications for the U.S. and globally. First, the move towards self-sufficiency in emerging technologies is inconsistent with a trading system based on comparative advantage. Second, use of SOEs, their access to subsidies, and limited rule of law in China support state companies within China and globally. Third, China’s use of industrial policy to pick winners is expected to lead to excess production and dumping overseas. This has already occurred, for instance, in steel and solar photovoltaic (PV) with negative 1 Oxford Economics for the U.S.-China Business Council. Understand the U.S.-China Trade Relationship. 2017. - us-china-trade-relationship.
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The US-China economic relationship: A comprehensive approach 3 impacts for U.S. and global industries, 2,3 and is expected to occur in more advanced industries
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