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1、The US-China Economic Relationship 1 ABOUT OXFORD ECONOMICS Oxford Economics was founded in 1981 as a commercial venture with Oxford Universitys business college. Since then, we have become one of the worlds foremost independent global advisory firms providing reports, forecasts, and analytical tool
2、s on more than 200 countries, 250 industrial sectors, and 7,000 cities and regions. Our best-in-class global economic and industry models and analytical tools give us an unparalleled ability to forecast external market trends and assess their economic, social, and business impact. Headquartered in O
3、xford, England, with regional centers in New York, London, Frankfurt, and Singapore, Oxford Economics has offices across the globe. We employ 400 full-time staff, including more than 250 professional economists, industry experts and business editors. Our global team is highly skilled in a full range
4、 of research techniques and thought leadership capabilities, from econometric modelling, scenario framing, and economic impact analysis to market surveys, case studies, expert panels, and web analytics. Oxford Economics is a key adviser to corporate, financial, and government decision-makers and tho
5、ught leaders around the globe. ABOUT THE US-CHINA BUSINESS COUNCIL The US-China Business Council (USCBC) is a private, nonpartisan, nonprofit organization of over 230 American companies that do business with China. Founded in 1973, USCBC has provided unmatched information, advisory, advocacy, and pr
6、ogram services to its members for nearly five decades. Through its offices in Washington, DC, Beijing, and Shanghai, USCBC is uniquely positioned to serve its members interests in the United States and China. USCBCs mission is to expand the US-China commercial relationship to the benefit of its memb
7、ership and, more broadly, the US economy. It favors constructive, results-oriented engagement with China to eliminate trade and investment barriers and develop a rules-based commercial environment that is predictable and transparent to all parties. January 2021 All data shown in tables and charts ar
8、e Oxford Economics own data, except where otherwise stated and cited in footnotes, and are copyright Oxford Economics Ltd. The modeling and results presented here are based on information provided by third parties, upon which Oxford Economics has relied in producing its report and forecasts in good
9、faith. Any subsequent revision or update of those data will affect the assessments and projections shown. To discuss the report further please contact: Alex Mackle, Lead Economist, Oxford Economics: The US-China Economic Relationship 2 TABLE OF CONTENTS Foreword . 3 Executive summary . 4 1. Introduc
10、tion. 4 2. Trade and investment with China supports US growth and employment . 7 2.1 Exports to China. 7 2.2 Imports from China . 8 2.3 US firms invest directly in China . 9 2.4 Chinese firms invest directly into the US . 9 2.5 Trade with China increases US productivity . 10 3. Rising tensions . 11
11、3.1 Concerns over trade with China . 11 3.2 Increasing tariffs and economic tensions . 11 3.3 The trade wars impact on jobs and economic growth . 12 3.4 Sectors that were highly exposed to the trade war . 13 3.5 Raising tariffs failed to achieve stated policy goals . 15 Sidebar: COVID-19 and US-Chin
12、a relations17 4. Alternative paths for US-China relations . 18 4.1 Trade war de-escalation scenario . 18 4.2 Trade war escalation scenario . 20 Sidebar: The rising threat of non-tariff barriers23 5. Conclusion. 24 Appendix: The Global Economic Model and the GTAP model . 25 The US-China Economic Rela
13、tionship 3 FOREWORD The trade relationship between the United States and China has changed significantly since the US-China Business Council (USCBC) last commissioned research on the topic from Oxford Economics in 2017. As tension has increased across all dimensions of the bilateral relationship, tr
14、ade and investment relations have also deteriorated markedly. Tariffs and counter- tariffs have been imposed. Today, despite the phase one agreement, tariffs remain at an unprecedented level. Lines between the commercial and national security domains have become increasingly blurred. With President-
15、elect Joe Biden taking office mere days after this reports release, it is imperative to acknowledge the benefits that trade with China has broughtand continues to bringto the US economy, American global competitiveness, and job creation. Efforts to build on the phase one agreement and negotiate arra
16、ngements that remove Chinas market access barriers and roll back tariffs will bring ample benefits to American farmers, workers, and ranchers. USCBC is pleased to offer the following research to the US government and business stakeholders. This report highlights the benefits of reducing trade barrie
17、rs so that American firms can compete fully, freely, and fairly in the rapidly growing Chinese market. Crafting a more nuanced and effective trade policy toward China will be an essential pillar for managing the worlds most important relationship in the coming years. A more principled and pragmatic
18、trade policy will also contribute to American prosperity for many years to come. Sincerely, Craig B. Allen President US-China Business Council The US-China Economic Relationship 4 EXECUTIVE SUMMARY The US has benefited from trade and investment flows with China. The combination of bilateral trade, i
19、nvestment, and supply chain integration has supported economic growth, consumer choice, and job creation. In 2019, exports to China supported 1.2 million jobs in the US and as of 2018, 197,000 people in the US were directly employed by Chinese multinational firms. US companies invested $105 billion
20、in China in 2019, and the profits from these investments and the contribution they make to the competitiveness of US businesses help support the US economy through R in fact, as we show in Section 3 of this report, protectionism has actually hurt the US manufacturing sector. 2 Based on the output-to
21、-employment multipliers estimated by IMPLAN, linked to export product by category. 3 See Jaravel and Sager, What are the Price Effects of Trade? Evidence from the U.S. and Implications for Quantitative Trade Models (2019, Washington: Board of Governors of the Federal Reserve System). 4 See Autor et.
22、al, The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade (2016, Annual Review of Economics). 5 Caliendo et.al, Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock (2019, Econometrica). 6 https:/ The US-China Economic Relationship 9 2.3 U
23、S FIRMS INVEST DIRECTLY IN CHINA US investment in China generates income for US businesses and grants firms access to the worlds fastest-growing consumer market. While it is important to address areas where China continues to restrict US market access, it must also be noted that China has opened its
24、 economy significantly to US investment since its accession to the WTO. US direct investment in China increased to $105 billion in 2019 from $11 billion in 2000, and US multinational firms based in China earned $40 billion in net income in 2018 according to the US Bureau of Economic Analysis (BEA).7
25、 Profits made by US companies through investing in China can also benefit the American economy as a whole, through dividends, domestic investment, and R Altshuler, Rosanne: The spillover effect of outward foreign direct investment on home countries: Evidence from the United States (2015, Rutgers Uni
26、versity, Department of Economics, Working Paper, No. 2015-01) The US-China Economic Relationship 10 Fig. 3: Employment in the US by Chinese multinational firms 2.5 TRADE WITH CHINA INCREASES US PRODUCTIVITY Trade and foreign direct investment between the US and China have direct tangible benefits fo
27、r the US, such as export revenues, profits, and employment, as well as lower prices. But fundamentally, the key long-term benefit to economic ties with China comes from gains in total factor productivity (TFP), the efficiency with which inputs such as capital and labor are used to produce goods and
28、services. These gains from trade (and FDI) result from increased competition, comparative advantage in the production of certain goods and services, and supply chain efficiency, which reduces production costs. There is widespread consensus among economists that productivity is the most important dri
29、ver of long-term growth, and as our previous study in 2017 found, US productivity has improved as a result of trade and investment flows with China.10, 11 10 Frankel and Romer, Does Trade cause growth? (1999, American Economic Review) found that an increase in trade exposure of 1 percent increases i
30、ncome by 0.5 percent. 11 https:/www.uschina.org/sites/default/files/OE%20US%20Jobs%20and%20China%20Trade%20Report.pdf 0 50 100 150 200 250 2001620172018 Source : Oxford Economics/BEA Employment, thousands The US-China Economic Relationship 11 3. RISING TENSIONS 3.1 CONCERNS OVER TRADE WIT
31、H CHINA The impacts of trade with China have generated increased debate in recent years, especially given the impact of Chinese imports on manufacturing employment. In particular, debate has centered on concerns that China does not adhere to commonly accepted rules in international markets given its
32、 unique economic model which combines market forces with strong state interventionism. In August 2017, the Office of the United States Trade Representative (USTR) initiated an investigation into Chinas acts, policies, and practices related to technology transfer, intellectual property, and innovatio
33、n under Section 301 of the Trade Act of 1974, the findings of which sowed the seeds of the trade war with China. 3.2 INCREASING TARIFFS AND ECONOMIC TENSIONS Tensions escalated rapidly in early 2018, with the US imposing 30% anti-dumping duties on all solar panels and washing machines, including Chi
34、nese products. That was followed by 25% tariffs on global steel and aluminum imports, which were justified on national security grounds and significantly impacted imports from China. Thereafter, USTR began imposing wide-ranging tariffs on Chinese imports based on its Section 301 investigation. The s
35、ummer of 2018 saw 25% tariffs imposed on $50 billion of machinery imports, followed by 10% tariffs imposed on $250 billion of industrial supplies in October 2018. Duties on those goods were then raised to 25% in May 2019, before 15% tariffs were imposed on another $110 billion of consumer-focused im
36、ports in September 2019. China responded in kind with equivalent tariffs on US goods, focused on vehicles, agricultural produce, oil and natural gas, and capital equipment. According to the Peterson Institute for International Economics, by end-2019, the effective (trade-weighted) tariff on US impor
37、ts from China stood at 21%, compared to 3.1% at the beginning of 2018. The effective tariff on Chinese imported goods from the US stood at 20.9% compared with 8% at the beginning of 2018.12 12 https:/ The US-China Economic Relationship 12 Fig. 4: Timeline of US tariff actions on imports from China 3
38、.3 THE TRADE WARS IMPACT ON JOBS AND ECONOMIC GROWTH While it is still too early to complete a final accounting of the full impact of the trade war, initial evidence already demonstrates it has damaged the US economy. A wide range of academic and industry studies have found the trade war to have low
39、ered US GDP growth, welfare, and employment. Estimated costs to the US economy range from $6.97.2 billion by the end of 2018, and one study found that the trade war cost US firms $1.7 trillion in market capitalization and will reduce investment growth by 1.9 percentage points in 2020.13, 14, 15 The
40、immediate and highly visible effects of tariffs on the economy have been weaker trade flows to and from China, with each round of tariff increases leading to declines in bilateral imports and exports. US exports to China fell 18% from 2017 to 2019; while imports fell by 11% over the same period. The
41、 combination of higher tariffs, reduced trade flows, and heighted tensions damaged the US economy, firms, and households via a number of channels: Consumer prices: Increased tariffs have raised consumer prices on both imported products and domestic products, given the increase in prices of intermedi
42、ate goods. Contrary to claims from the Trump administration that 13 Fajgelbaum et,al, The Return to Protectionism (2020, The Quarterly Journal of Economics) 14 Amiti et.al, The Impact of the 2018 Trade War on U.S. Prices and Welfare (2019, NBER working paper 25672) 15 Amiti et.al, The Effect of the
43、U.S.-China Trade War on U.S. Investment (2020, NBER working paper 27114) Solar and washing machines ($10bn at 30%) Steel and alum. excl. Can, Mex & EU ($18bn at 25%) $34bn at 25% $16bn at 25% $200bn at 10% $200bn at 25% $110bn at 15% -7.5% on $110bn 0 5 10 15 20 25 30 35 40 Dec-17Apr-18Aug-18Dec-18A
44、pr-19Aug-19Dec-19 % of 2018 China import value Source : Oxford Economics/Peterson Institute for International Economics The US-China Economic Relationship 13 the cost of tariffs would fall on Chinese exporting firms, most evidence suggests that US consumers have paid the price of tariff increases.16
45、 This has squeezed real incomes and consumer demand. Delayed and canceled investments: Increased tariffs have escalated uncertainty around trade policy, which has caused businesses to delay or cancel investment plans.17 In August 2019, the Federal Reserves Global Economic Policy Uncertainty Index re
46、ached its highest level since the Global Financial Crisis. Household wealth: Financial markets saw a significantly negative impact upon tariff announcements, which affected household wealth and therefore consumer demand, as well as investor confidence. Company competitiveness: Finally, supply chain
47、disruption from the trade war led to higher input costs for firms, as many intermediate goods are imported from China, hurting competitiveness and profit margins.19 Considering each of these channels, Oxford Economics estimates the cost of the trade war to be around 0.5% of US GDP over 20182019, equ
48、ivalent to $108 billion (in 2020 prices). Weaker GDP growth also has implications for jobs and household income. At its peak, the trade war cost the US economy an estimated 245,000 jobs and on a cumulative basis, real household income was $88 billion lower over 20182019 (in 2020 prices), or around $
49、675 per household. 3.4 SECTORS THAT WERE HIGHLY EXPOSED TO THE TRADE WAR 3.4.1 Agriculture The US agricultural sector saw the earliest and sharpest effects in terms of reduced export flows to China as a result of retaliatory measures. In 2017, prior to the increase in tariffs, the US exported $19.5 billion worth of agricultural produce to China. Following retaliatory tariffs and reduced administrative purchases, agricultural exports to China fell to just $9.1 billion in 2018a decline of 53%. This raw decline underestimates the true impact on the agricultural sector, as it fails to account for