Bridging the Pacific: Toward Free Trade and Investment Between China and the United States
The terrain of the world trading system is shifting as countries in Asia, Europe, and North America negotiate new trade agreements. However, none of these talks include both China and the United States, the two biggest economies in the world. In this pathbreaking study, C. Fred Bergsten, Gary Clyde Hufbauer, and Sean Miner argue that China and the United States would benefit substantially from a bilateral free trade and investment accord. In the process, they contend, each country would also achieve progress in addressing its internal economic challenges, such as the low saving rate in the United States. Achieving greater trade and investment integration could be accomplished with one comprehensive effort or through step-by-step negotiations over key issues. The authors call on the United States to seek liberalization of China's services sector as vital to securing an agreement, and they explain that such contentious matters as cyberespionage and currency manipulation be handled through parallel negotiations rather than in the agreement itself. This is an important study of the benefits and difficulties of a complex matter that could yield dividends to the two economies and help stabilize the security and well-being of the rest of the world.
Toward a US-China Investment Treaty
The United States and China are among the world's largest trading nations. They serve as the destination and source of the world's largest flows of foreign direct investment, and they participate in regional economic arrangements on trade and investment in the Asia-Pacific region and other parts of the world. Yet when it comes to direct investment in each other's economies, China and the United States are among the world's underperformers. The successful conclusion of the negotiation of a US-China bilateral investment treaty (BIT) could change this situation. In this PIIE Briefing, experts examine prospects for a US-China BIT now that negotiations have revived after a hiatus following the 2008 election of President Barack Obama, whose economic team had other economic priorities upon taking office. After spending its first years holding internal debates about trade deals, the administration completed an internal US government review of investment issues in 2012 and resumed talks with China in 2013. The essays in this study focus on recent developments that could inform and possibly set precedents for the investment pact. They also examine issues that pose challenges to a successful negotiation. Jeffrey J. Schott and Cathleen Cimino analyze the recent China-Japan-Korea investment pact and compare it with investment provisions that the United States has developed in its model BIT. Sean Miner and Gary Clyde Hufbauer discuss how a US-China BIT should address US concerns in China regarding subsidies, unfair advantages for state-owned enterprises, and uneven application of competition policy. J. Bradford Jensen analyzes the potential for increased trade in business services. Hufbauer, Miner, and Theodore H. Moran analyze review procedures of the Committee on Foreign Investment in the United States (CFIUS). In a concluding overview, C. Fred Bergsten assesses the broader context of US-China economic relations.
A study of the effects of the Korea-China free-trade agreement ∗
This paper uses a 53-country 15-industry computable general equilibrium model of trade to forecast the effects of the Korea-China free trade agreement on the manufacturing sector. The model uses the Eaton-Kortum methodology to explain intra-industry trade instead of the usual Armington assumption. The model predicts that the Korea-China FTA will increase KoreaChina manufacturing trade by 56%, manufacturing employment in Korea by 5.7% and China by 0.55%. The model also predicts significant reallocation of employment across industries with the Food industry in Korea loosing jobs and other industries there gaining jobs, with the Medical equipment industry gaining the most. There will be some trade diversion from the ASEAN countries, as well as Japan and the United States. JEL codes: F1