Marriage that was made in China

The ugly goings-on within this marriage are plain for all to see. The U.S. trade deficit with China was roughly US$60 billion in 1998, the year before we reached the accord granting China permanent normalized trade relations. Over the following decade, it ballooned to US$268 billion, and tens of thousands of U.S. factories closed down. The trade deficit is the major reason China is awash in dollars — about 800 billion of them — and has become our largest creditor. And it is the major reason why boosting consumption in the United States, in an attempt to reverse the recession, has the peculiar effect of boosting production and employment in China just as much if not more than happens at home.

Most reports that mention this defining economic imbalance treat it as a given — a fact as immutable as the cycles of the moon. In fact, after U.S. Trade Representative Charlene Barshevsky reached an agreement with her Chinese counterpart 10 years ago this week on normalizing trade relations, an intense debate took place in Congress and in the nation. U.S. business leaders, members of the Clinton administration, a majority of congressional Republicans and a minority of congressional Democrats all argued that the deal was a win for the American people.

Cautioning Congress not to reject the pact, Carly Fiorina, then chief executive of Hewlett-Packard, warned, “A vote against trade with China is a vote against U.S. business, employees, citizens and the people of China.” Advocates' central contention was that the deal would eventually lead to a political liberalization of China — which it hasn't — and would enable the United States to so increase exports to China that our Chinese trade imbalance would end — precisely the opposite of the effect that normalizing trade relations has actually had.

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