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Autor: anton • March 10, 2011 • 2,662 Words (11 Pages) • 758 Views
The United StatesÐŽ¦ Trade Relationship with china and Japan
Since 1950s, Japan and the United States have had trade interactions which mutually benefited their economies, but took many steps and hardships to get to the dominating level where they are now. On the other side, China and the US have taken careful steps to open their markets to each other and normalize trade relations with the ending of economic isolationism after the Cultural Revolution. Globalization brings both advantages and disadvantages to the world. It is interesting that US supposed to get most benefits from globalization due to the US has strongest economic power in the word. However, the US has formed large deficits during the past decades while developing trade relations with China and Japan. The paper will focus on US trade relationship with China and Japan and how the US payoff these deficits.
Expanding US trade with China: Issues, Obstacles, Consequences and Imbalances
A trade relationship was also built between the US and another Asian country, China. Throughout the past twenty years, many issues and obstacles have also been overcome in expanding trade with China.
Since the ÐŽ§open doorÐŽÐ policy in the late 1970s, successful trade and investment with China has been a common goal among American businesses. Along the way, there have been many issues and obstacles to overcome as a business relationship with China has been formed. In light of consideration for ChinaÐŽ¦s membership in the WTO, there are still issues to be dealt with and examined. Through the development of an economic relationship with China, we will attempt to examine the causes and impact of trade imbalances with China, as well as implications of the imbalances and plans for dealing with them in the future.
In the 1970s, US trade was not very extensive with China, yet many entrepreneurs were anticipating ÐŽ§exclusive dealsÐŽÐ in the region. They would travel to Beijing with big hopes, only to find they had to deal with China completely on ChinaÐŽ¦s terms. Importers had more success, as ÐŽ§The China Trade was simple at that time, being primarily the import and export of goods that were packaged in boxes and balesÐŽÐ (Lubman, 2). By the end of the 1970s, most American exporters were critical and weary of trade with China, while the importers had had better success. In 1979 with the adoption of the "open door" policy, foreign investors were welcomed into the region, as they anticipated access to billions of untouched customers. The Open Door policy, in general terms, meant trade liberalization. Yet China did not let an unfettered flow of goods and services enter its market. Rather, it insists that anything that can be made within the boarders will be made at home.
With great expectations and aspirations of penetrating a new market, American businessmen and investors plunged into the market. Most American businessmen did not view China as simply a new market to exploit, rather ÐŽ§in the softer vocabulary that the Chinese themselves offered, of friendship and assistance to the countryÐŽ¦s modernization,ÐŽÐ (Lubman, 3). Americans were more lenient with deals and transaction terms because they hoped their consideration would yield enormous profits. Another reason special rules applied in dealing with the Chinese was to make sure the relationship was not built with AmericaÐŽ¦s competitors instead. They wanted to make sure that a relationship and loyalty was forged with them instead of their European or Japanese counterparts.
Yet frustration surmounted in part because Americans were used to doing business based on legal agreements, signed contracts and careful attention to financial analysis. However, Chinese businessmen were less apt to sign documents or use lawyers. Another mistake on the AmericanÐŽ¦s side was the lack of research or preparation on companies, culture and the country itself. They believed that the information they were collecting was unique and groundbreaking. Americans did not bother to look beyond what they were doing and learn from others mistakes and research from the past. The fact was, since the 1970s information was available about how to train people, do marketing research and work out the kinks of doing business in China. The problem was no one knew about previous research or bothered to ask the proper questions about it. Such information could have been used to their advantage, but was overlooked or ignored as businesses virtually learned the hard way how Chinese negotiate and do business.
The feeling in the late 1980s was that working with the Chinese was next to impossible. In light of the political turmoil in June 1989, many American investors gave up because they had ÐŽ§overestimated business and technologyÐŽ¦s effect on China and underestimated difficulties working in the Communist system,ÐŽÐ (Lubman, 4). With the Tiananmen Square incident, a ÐŽ§pallÐŽÐ was cast over foreign direct investment FDI even as China tried to bounce back and raise FDI. China did this with efforts directed towards promoting investment through policy pursuit, and developing legal institutions while the economy grew.
Yet questions about the strength of central government have been raised as local departures from central policy increase. Since the opening policy began, investment has been regulated as laws have been made and then later changed. Inconsistencies between national and local legislation have also been found so much so that Beijing has had to forbid certain tax incentives. Because of the problems with FDI, the strength and role of the Chinese government and pending membership into the WTO, there are many issues to be sorted out in the trade relationship between the US and China.
The Japan and United States Trade Imbalances
Since World War II, Japan has experienced a miracle of economic success. The trading of raw and manufactured goods with the United States was a key in lifting Japan back on their feet after the war. The integration of Japanese businesses into the United States gave Japan opportunities to expand their markets and economy globally. The Japanese economic miracle can be explained by examining the different segments of the Japanese economy and the imbalances of trading with the United States. One question I have about JapanÐŽ¦s economic recovery is, was it the Japanese who rebuilt themselves, or did the United States open market and rebuilding efforts trigger JapanÐŽ¦s economic burst. By researching the history of the bilateral trade relations between Japan and the United States, I will explain the possibilities the future holds for these countries.
Japan and the United States have had strong trade flows in both their imports and exports.