How should a principled nation which believes in the benefits of mutually beneficial trade respond to the predations of mercantilist trading partners and imbalanced trade? Many argue that the response should be to do little or nothing. Balanced Trade argues that achieving the full benefits of international trade requires an effective response. Although trade deficits provide short-term gains in consumption, these are combined with long-term losses in consumption, innovation, investment, employment and power. Furthermore, market mechanisms do not correct trade imbalances that result from mercantilism, nor do they compensate for the long term shift in production and consumption towards the mercantilist. Balancing trade can make important short run and long run contributions to economic stability and prosperity. In America today, despite the growing evidence that imbalanced free trade is not working, many American economists remain adamant in their promotion of free trade. They are also quick to label actions taken to balance trade as protectionism. The political system has also failed to effectively address the problem of imbalanced trade, and the Federal Reserve has often exacerbated rather than addressed the challenge. The authors argue that the classical economic arguments against mercantilism do not justify doing nothing.--Publisher's description

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China is important to the global economy and a major U.S. trading partner. By joining the World Trade Organization (WTO) in 2001, China pledged to further liberalize its trade regime and follow global trade rules. While U.S.-Chinese commercial relations have expanded, controversies have emerged, including the size and growth of the U.S. trade deficit with China, China's lack of intellectual property protection, and China's implementation of its WTO obligations. Despite these challenges, China's vast consumer and labor markets present huge opportunities for U.S. exporters and investors. GAO (1) analyzed U.S. goods and services exports to China, (2) assessed how U.S. exports to China have fared against those of other major trading partners, and (3) analyzed U.S. investment and affiliate sales in China.

As studies show, Ohio is running a substantial trade deficit with China, with imports from China outpacing exports by nine to one, while nationally, that ratio is six to one. The industry and community impacts have been analyzed and the following recommendations for US Government have been developed: to immediately pursue a WTO action against China regarding the undervaluing of its currency; mitigate tariffs heavily disadvantaging US auto exporters; consulate with trade partners on the violation of China's WTO commitments regarding export constraints (in particular, restrictions on coke); to use all available enforcement tools more fully and effectively, to conduct a public awareness program to inform laid-off workers about existing and newly established programs such as Trade Adjustment Assistance.

The U.S. trade deficit has risen more or less steadily since 1992. ...The large and growing size of U.S. foreign indebtedness caused by successive trade deficits suggests that the investment income surplus is likely to soon be pushed toward deficit. The size of the U.S. trade deficit is ultimately rooted in macroeconomic conditions at home and abroad. U.S. saving falls short of what is sought to finance U.S. investment. ...The cost of the trade deficit is a deterioration of the U.S. investment-income balance, as the payment on what the United States has borrowed from foreigners grows with its rising indebtedness. Borrowing from abroad allows the United States to live better today, but the payback must mean some decrement to the rate of advance of U.S. living standards in the future. U.S. trade deficits do not now substantially raise the risk of economic instability, but they do impose burdens on trade sensitive sectors of the economy. Policy action to reduce the overall trade deficit is problematic.

U.S.-China economic ties have expanded substantially over the past three decades. Total U.S.-China trade rose from $5 billion in 1981 to an estimated $503 billion in 2011, and is projected to reach $539 billion in 2012. China is currently the United States' second-largest trading partner, its third-largest export market, and its biggest source of imports. Because U.S. imports from China have risen much more rapidly than U.S. exports to China, the U.S. merchandise trade deficit has grown from $10 billion in 1990 to $296 billion in 2011, and is projected to reach $311 billion in 2012. The rapid pace of economic integration between China and the U.S., while benefiting both sides overall, has made the trade relationship increasingly complex. This book provides an overview of U.S.-China trade relations, surveys major trade disputes, and lists bills introduced in Congress that could affect bilateral commercial ties.