Industry Group Calls for Bilateral Free Trade Agreement with Asian Trading Partners

March 30, 2009
U.S. needs to address trade issues with Asian nations says MAPI

In geopolitical terms the rise of China as an economic hegemon in Asia, together with a declining U.S. trade position, increases Chinese political influence in the region, which is a growing concern among Asian nations as well as for U.S. foreign policy interests, explains Ernest Preeg, Senior Fellow in Trade and Productivity at Manufacturers Alliance/MAPI.

Preeg highlights the reversal of export leadership between the U.S. and China from 2000 to 2008 to principal Asian trading partners -- Japan, South Korea, Taiwan, Australia, and India -- and five members of ASEAN -- Indonesia, Malaysia, the Philippines, Thailand, and Vietnam. U.S. exports to the aggregate markets grew from $133.9 billion in 2000 to $159.4 billion in 2008, or by 19%. Chinese exports, however, soared from $71.3 billion in 2000 to $356.1 billion during this time frame, or by 399%. In relative terms, U.S. exports were 88% higher than Chinese exports in 2000, while Chinese exports more than doubled U.S. exports in 2008.

The change is even more pronounced in the technology-intensive machinery, telecommunications, and electronics sector, MAPI points out. In 2000, U.S. exports were almost four times larger than Chinese exports, $74.8 billion compared to $19.1 billion, while in 2008 Chinese exports more than doubled U.S. exports, $150.4 billion compared to $67.2 billion. Therefore, over the eight-year period, Chinese exports increased by 687% while U.S. exports declined by 10%.

Preeg concludes that there is no simple solution to this sustained loss of market share by the U.S., and he advocates a comprehensive strategy integrating domestic and international policy objectives. "The U.S. policy response for the domestic agenda needs to be directed toward reducing cost disadvantages related to corporate tax rates, tort litigation, and regulatory policies, among others," he said. "Internationally, currency misalignment, especially in China, has been a principal cause of the huge trade deficits in price-sensitive manufactures of the U.S. and Europe with Asia.

"In addition, the United States needs to have a bilateral free trade agreement (FTA) strategy for Asian trading partners, beginning with the approval of the U.S.-South Korea agreement, in order to head off the adverse impact on U.S. exports from the proliferation of FTAs among Asian nations, excluding the United States," he concluded.

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