Research Of The Surplus In Sino-US Trade Based On Comparative Advantage

During the recent years, with the expansion and development of China foreign trade, trade imbalance with the increasing trade surplus has troubled the stability and continuity of China economic development, while America, the main trade surplus country for China, is suffering from the trade deficit as well. Therefore, the U.S. government has been inputting pressure on China by not only launching several times to "anti-dumping" "countervailing" case investigation on grounds of China, but insisting that China’s foreign trade follows a mercantilist, is a "currency manipulator", and accordingly making repeat requests on adjusting the RMB exchange rate. In fact, confronting the growing Sino-US trade imbalance figures, China also has paid a great deal of effort, such as continuous decrease of the exchange rate, promoting the appreciation of Renminbi, and actively importing U.S. soybeans, cotton and civilian aircraft. However, these initiatives can not fundamentally solve the trade imbalance, China and the U.S. trade balance is still expanding. So, what are the reasons behind Sino-US trade imbalance? Has China really not followed endowment advantage in the trade with the U.S. but to implement the mercantilist trade policy? Do China’s exchange rate, export subsidies and other policies actually promote the growth of Chinese exports to the U.S.? Confusion of these issues is the starting point of this paper.The first chapter is to sort out the theory of international trade and the study of foreign scholars on the causes of Sino-US trade surplus. Development of the theory of international trade theory can also be called the development of comparative advantage theory. "Bilateral trade is based on the comparative advantages theory", the cornerstone of the old trade theory, through constant questioning and improvement, has formed a more consistent theoretical point of view:Elements endowments among countries with different comparative advantage is differences in factor endowments; comparative advantages among countries with same factor endowments are economies of scale, differentiated products, technology and other factors. China and the U.S. are typically countries with large differences in factor endowments, comparative advantage by the freedom of trade for China is to export labor-intensive products and import capital-intensive goods from the United States. The present study for Sino-US trade has not quantified and determined whether China has developed and exported products without following factor endowments advantage because of mercantilism do not have the advantages of their products, especially in trade with the U.S..Sino-US trade in the 1990’s has been that China had a deficit-based, but since 1993 the deficit turned to surplus, and the surplus increased very rapidly. The second chapter is to summarize the detailed structure of trade goods of Sino-US trade since 1992. Analyses on Sino-US trade structure since 1992 shows that besides textiles, furniture and other Chinese traditional comparative advantage in labor-intensive products, capital and technology-intensive computers, electronic products, machinery and transport machinery and other products without comparative advantage are also increasingly exported to the U.S. in recent years, and a surplus of these products accounted for almost half of China-US trade surplus. Solely from the perspective of trade goods, it seems that China is actively developing and exporting capital-and technology-intensive goods to the U.S., which do not follow the comparative advantage (mercantilism).The third chapter is to calculate the needed capital and labor elements for production in trade with the U.S. based on input-output method. Model calculations showed that, although the share of machinery and electronics products China’s exported to the U.S is large, but China’s trade with the U.S. is still the export of labor-intensive goods to the United States, imports of capital-intensive goods from the United States. It can be concluded that China does not trade with the U.S. under mercantilism, despite the large number of production and export of machinery and electronics products, but these products are produced in China or in the stage of processing and assembly of these products, or in the life cycle of these products have been mature stage (of labor-intensive stages of production), China’s exports to the U.S. is still labor-intensive goods, the trade surplus with U.S. is a result of comparative advantage in factor endowments.The fourth chapter is to make further study on the factors to promote China’s comparative advantage in labor and result in expansion of Chinese exports to the U.S., and conduct cointegration model quantitative analysis on these factors. The results show that a large number of foreign investments is the main factor to promote China’s exports to the U.S., and foreign investment makes China’s labor comparative advantage get full play. In addition, China’s domestic consumption scarcity also significantly affected the expansion of the export to the U.S.. At the same time, RMB exchange rate, China export subsidies and import tariffs and other factors on China’s exports to the United States had no significant effect.Besides the full play of China’s labor comparative advantage, the reasons of Sino-US trade imbalance also includes that the U.S. has made limitation on its comparative advantage in capital and technology, especially the direct control policy on the U.S. technology exports to China. Therefore, this chapter mainly analyzes the influence and evolution of export control of the U.S. on technology products exports to China. Although U.S. technology exports control policy is difficult to quantify, the relevance between the growth of U.S. technology exports and the change of the control policy can determine their impact on U.S. exports to China significantly restrictive.In Sino-US trade, the rapid growth in China exports to the U.S is mainly due to China’s comparative advantage in labor factors. Growth of Sino-US trade surplus with China has significant relationship with foreign investment influx, inadequate domestic consumption in China and the U.S. export controls of technology to China, while it has no close relationship with RMB exchange rate, China’s export subsidies, import tariffs and other factors. Therefore, appreciation of RMB can not be the fundamental solution to the surplus, the two sides need to work together. Chapter six presented the recommendations of the bilateral trade balance: China needs to actively adjust the income distribution in order to expand consumer demand, plan and adjust the structure of foreign investment, while the U.S. needs to relax export controls on China.