U.S.-China Trade Issues: The Congressional Research Service Keeps Trade Talks in Focus

Updates on the U.S.-China trade negotiations have been progressing, but reporting on that progress has been far from transparent. On April 8th, 2019, the Congressional Research Service published a short report on "U.S.-China Trade Issues." The report continues to nail down the reasons why the economic squabble continues between the two largest nations in the world. 



President Trump has cited his desire to shrink the trade deficit between the United States and China. In 2018, that deficit reached the highest it's ever been at $419 billion. The report suggests that economists could explain a rising deficit not as an unfair trading relationship, but as a result of "low U.S. domestic savings relative to total investment." Of course, this could be a result of rising rates, but that trend might be temporary.

In addition to a general "unfair" trade relationship, the current administration sees a problem with Chinese cybertheft and the stealing of intellectual property rights (IPR). According to the report, "the U.S. Customs and Border Protection reported that China and Hong Kong together accounted for 78% of counterfeit goods it seized in FY2017." Looking back at 2018 specifically, one can see direct calls to action by Crowdstrike (a U.S. cybersecurity technology company) and U.S. Assistant Attorney General John C. Demers.

Foreign direct investment (FDI) flows still flow more heavily into China than into the United States. A private advisory firm, Rhodium Group, estimated the total to be about $140 billion from China to the U.S. and $256 billion from the U.S. to China. In an effort to manage FDI that could be related to intellectual property crime, the current administration enacted the Foreign Investment Risk Review Modernization Act of 2018 in August 2018 which modernizes the Committee on Foreign Investment in the United States in an effort to stop potential sources of cybertheft.

Overall, the report doesn't provide any updates on trade talk progression but instead continues to provide reasons for being steadfast in the U.S.'s approach to China. The deadlock could continue for weeks as reporting on the effects of the tariffs on both countries' growth.

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