{"id":618,"date":"2005-09-24T12:51:37","date_gmt":"2005-09-24T16:51:37","guid":{"rendered":"http:\/\/www.eprup.com\/ica\/?p=618"},"modified":"2023-06-14T18:09:15","modified_gmt":"2023-06-14T22:09:15","slug":"open-markets-india-china-america-trade-issues","status":"publish","type":"post","link":"https:\/\/www.icainstitute.org\/roundtable-discussions\/open-markets-india-china-america-trade-issues\/","title":{"rendered":"Open Markets?: India, China and America Trade Issues"},"content":{"rendered":"
Summary of ICA Institute Study Group held on September 24, 2005
\nYear published: 2005<\/p>\n
Discussion leader:
\nDr. Penelope Prime, Director China Research Center, Kennesaw State University Kennesaw, GA USA<\/p>\n
After the Cold War, private capital flow replaced official development assistance as the main form of capital transfer around the world. There is increasing demand for primary products: China and India have made normally inelastic price commodities like farm produce attractive again because of their huge populations and rapidly growing economies. There is also high mobility of labor and capital. There is wage pressure on the U.S. middle class because China and India present cheap labor options that are attractive to U.S. companies, who would rather outsource than pay higher wages at home.<\/p>\n
The panel agreed that trade deficit is not always a bad thing. However, if the U.S. trade balance continues to increase as a percentage of GDP, it may not be sustainable.<\/p>\n
The panel discussed timing as an interesting insight into U.S. trade deficits. Something significant could have happened in the mid-1990s because that is when the deficit started growing exponentially. The panel discussed factors possibly causing this:<\/p>\n
China\u2019s economic expansion is structurally flawed because it is exclusively export- oriented. There is no liberalization to spur domestic economic activity, which could be problematic for China if there is decreased demand for its goods abroad. India understands this and is trying to encourage domestic, demand-driven growth. Foreign companies are usually in India to serve the domestic market.<\/p>\n
Another problem that belies China\u2019s success story is that over half of exports from China are from foreign companies and most of the rest is from state-owned companies. It means that very few private entities are being encouraged to compete in the economy, which is bad for innovation and not a sign of a healthy economy. The conclusion was that China\u2019s democratic reforms (which open up private enterprise) must go hand-in-hand with its economic liberalization.<\/p>\n
Evidence shows that consumption as a fraction of GDP is declining instead of growing. On the other hand, savings are increasing. This is further evidence to support the panel\u2019s conclusion that China has a lot of liquidity but has not invested it much in ways to fuel consumer demand.<\/p>\n
The U.S. can use China\u2019s over-reliance on exports as leverage to influence change in trade policies that could improve the U.S. trade balance. Any changes will be slow and difficult given several factors:<\/p>\n
There is growing backlash in China over the government\u2019s policies. Many average Chinese citizens are not seeing the benefits of FDI in China so foreign companies are feeling some pressure. The government is concerned that uneven growth is contributing to social tensions.<\/p>\n","protected":false},"excerpt":{"rendered":"
Summary of ICA Institute Study Group held on September 24, 2005 Year published: 2005 Discussion leader: Dr. Penelope Prime, Director China Research Center, Kennesaw State University Kennesaw, GA USA The Current Situation After the Cold War, private capital flow replaced official development assistance as the main form of capital transfer around the world. There is…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[14],"tags":[],"region":[31,30,29],"acf":[],"yoast_head":"\n