The U.S.-China Bilateral Trade Balance: It’s Size and Determinants

Introduction

       It is quite incredible that while the negotiations of China’s accession to the World Trade Organisation (WTO) are greatly influenced by the deficit that the United States runs in its trade with China, the actual size of the US-China bilateral trade deficit[1][1] is not actually known!  The US puts the 1995 bilateral trade deficit to be $34 billion, while China puts it at $9 billion.  If the US figure is correct, then China has the second highest bilateral deficit, after Japan whose bilateral trade deficit with the US is $59 billion.  But if China’s figure is correct, then the China bilateral trade deficit is lower than that the US bilateral trade deficits with Canada, Mexico, Germany and Taiwan.

       Some analysts have interpreted the large US-China bilateral trade deficit as prima facie evidence of unacceptably high levels of protectionism in China, and have advocated stringent entry conditions for China’s admission into WTO, even though China is in the poorest third of the world’s economies.[2][2]  In response, supporters for easier entry conditions for China have emphasised other factors (e.g. the movement of low-skill, labor-intensive manufacturing industries to China from neighboring economies) for the recent widening of the bilateral trade deficit.

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