Comparison of US and China patterns of trade - Essay Example

Comparison of the United s and China’s Patterns of Trade Comparison of the United s and China’s Patterns of Trade Introduction Business organizations and nations tend to have diverse trading patterns about international or global markets to maximize their exports while reducing the volume of imports. Categorically, China, the United States, and EU have different patterns evident in their approaches and decisions on exports and imports. For instance, China seeks to export more textile and clothing products to substantiate its labor-intensive industry, as well as abundance presence of labor in China. Nevertheless, in the current context, labor is becoming expensive in China, thus the need for the nation to consider increasing its investment in technological operation. The U.S and EU, however, focuses on exporting capital-intensive products to highlight the technologically advanced industries. The purpose of this research is to examine and explore trading patterns (exports and imports) of China, the U.S and EU. In 2012, the trade in private services and goods between the U.S. and China totaled to $579 billion. In that year, trade between the two partners (U.S. and China) represented a total of $141 billion of exports and $439 billion of total imports. As at 2014, China was America’s second greatest trading partner. In 2013, China was the third-largest export market for the U.S. In that year, 2013, China remained the greatest goods supplier of imports to the U.S. there was a recorded trade deficit of $318.4 billion for U.S. goods trade with China in 2013. America’s Foreign Direct Investment (FDI) in 2012 amounted to $51.4 billion according to data by the Office of the U.S. Trade Representative (2014). Based on the assessment, China is the leading exporter of manufactured goods to various nations in the global context such as EU and the United States, just ahead of the America and Germany. Many business practitioners believe that Chinese manufacturers experience direct competition against corporations in North America and the European Union. In the course of examining and exploring this skeptical aspect, it is vital to analyze the product components of trades from China before comparing it with the product components of trades from the US and EU. Analysis Business entities and nations have the tendency to adopt and integrate the concept of differentiation in addressing demands and needs of the consumers. In this context, there tends to be diversity in the mode and mechanism towards the achievement of the goals and targets. China focuses on exporting various products such as iron and steel, pharmaceuticals, office and telecom equipment. Besides, China transacts on automobiles, machinery, textiles, and clothing. Similarly, China exports personal and household goods in pursuit of competitive advantage in the market and industry of transaction in the global context. This export composition is valuable in enabling China to improve its position, as well as competitiveness towards handling the preferences and needs of the consumers or stakeholders in the international market. On the other hand, the US focuses on exporting chemicals other than pharmaceuticals to improve its GDP levels. Furthermore, the US exports aircraft and integrated circuits, as well as non-electrical machinery. The US also engages in exporting scientific and controlling instruments in agreement with the needs of the consumers in the global market and industry of operation. These attributes have been essential in placing the US in the global marketing as one of the leading exporters and operators on the internal platform. Thirdly, the European Union focuses on exporting iron and steel products to facilitate satisfaction of the needs and demands of the customers in the internal market. Besides, EU engages in exporting chemicals inclusive of pharmaceuticals. EU also provides the platform for exportation of diverse transport equipment inclusive of the automobiles, as well as aircraft. The European Union also engages on the exportation of all types of machinery, scientific, and controlling instruments to facilitate the improvement of GDP, as well as the competitiveness of the region in the global or international market. According to the assessment of the export composition, there are differences the Chinese, the US, and the EU export composition in volume and elements. The differences provide the platform for understanding the level of competition among the nations at the international level. Significant shifts over the decades have been essential in the course of reshaping the international transactions landscape. From this perspective, trade has been able to improve effectively and enormously in comparison to the international transactions during the early 1950s because of the assimilation of the swiftly developing and evolving marketplace economies (EMEs). The enormous expansion of trade relates to the growth in non-commodity exports, particularly in the hi-tech merchandises such as computers, as well as electronics (Helper & Sake, 2012). Besides, the growth of the trade relates to the growing regional concentration, as well as the continuous shift of the technology content towards the emerging market economies. It is valuable to note that these developments have massive consequences for trade configurations in reacting to the changes in the prices of merchandises in the modern or contemporary society. Researchers and business practitioners continue to concentrate on the evaluation of the factors relating to the changes in the international trade patterns while utilizing data relating to entities such as China, the US, and the EU (Balassa & Bauwens, 2014). Firstly, it is valuable to consider that the expansion of the global, as well as regional trade, relates to the liberation of trade and the eventual vertical specialization and income convergences. In the early 1950s, there were multilateral and bilateral liberation mechanisms. These liberalizations in trade and business have been essential in the eliminating or lowering of the trade barriers in the advanced entities and economies, particularly in the developing nations (Aspinwall & Greenwood, 2013). Besides the lower trade barriers, technology-led declines concerning the transportation and costs have been essential in the fragmentation of production stages across the national borders. Similarly, there has been a convergence in the income levels, as well as the factor endowments across the international trade platform. These did play critical roles in the growth and rapid development of the output (Hix & Hoyland, 2011). Besides, advanced nations and EMEs have the tendency to play different roles in the supply chain, globally. For instance, advanced economies focus on utilization of upstream mechanism concerning the supply chain. This is evident in the moderately lesser international components in their trade and comparatively large influences towards downstream nations’ exports. Alternatively, EMEs tend to incorporate the downstream concerning supply chain with enormous stocks of the imported context in their international trade activities (Dent, 2013). From this perspective, the degree of foreign content in international trade of advanced nations, as well as EMEs have significant and conflicting consequences concerning the thoughtfulness of trade configurations to the relative changes in the costs in the international market. Most nations in Asia have the tendency to use a more dispersed supply chain in comparison to the US and EU. Categorically, the logistics chain in Asia demonstrates that goods-in-process cross-regional or national boundaries numerous times before reaching the relevant destination (El-Agraa, 2011). Conversely, virtually all-international input undergoes importation from the hub directly (the US and EU). From this perspective, the superior distribution of manufacturing in the case of the Asian distribution channel renders the economy of the region to more susceptible to interruptions of trade flows regardless of the induced policies such as regional or partisan trade arrangements and natural disasters. Another essential feature in this discussion is the emergence of the global distribution channels, which have been essential in enabling EMEs to augment the machinery as a vital component of exports. This incorporates inputs in the high-technology exports of the advanced nations and economies. Categorically, it is valuable to note that volume of high-technology exports continues to increase in the case of China. This is because of the influence of processing trade, as well as significant imported contributions from other Asian nations. Similarly, China has been able to focus on moving upstream while focusing on the value-added chain. Notably, imports from China (exports) contribute significantly to the high-technology exports of the advanced economies or nations. Moreover, in the cases of China and other EMEs, there is an increasing presence in the sectors, which did belong to the advanced economies in the previous decades (Conrad, Rittler, & Rotfuß, 2012). This adoption and integration of a similar export structure have been essential in the generation of competitiveness or competition pressure among nations in the international market in the recent years. The similarity in the export structure has increased in the recent years, thus the need to enhance integration of appropriate mechanisms to address the needs and preferences of the consumers in the modern context. Similarly, besides the rebalancing effects, transformations and changes in the pricing systems have been essential in the changes in the trade patterns in the global context or international market. In most cases, economic practitioners have focused on utilizing a partial equilibrium in the course of examining the relative changes in the pricing systems concerning the trade patterns and structures of major players in the global trade. Three of the major players in the international market include China, EU, and the US. On one hand, China focused on utilization of the downstream approach in marketing the products and services in the market and industry of transactions. Conversely, the US and EU seek to incorporate an upstream supply chain towards addressing demands and expectations of the consumers in the global or international context. In this context, it is essential to note that the position of China, as a downstream nation, has been essential in generating implications on the relative changes in the prices of imports and exports. This is evident in the advanced international content in the downstream nation’s exports, which focus on mitigating the consequences of the exchange rate variations. Secondly, sectors, which respond the greatest to the exchange rate variations, have the ability and potentiality to experience diverse appreciation, thus a massive upsurge in the portion of the hi-tech international trade in China. Alternatively, depreciation generates an enormous intensification in the portion or volume of the hi-tech exports in the US, thus massive influence in the changes within the automotive sector (Gereffi & Wyman, 2014). Alternatively, research practitioners and business entities have focused on attributing the changes and diversities in the trade patterns to the growing relationship between the role of the global supply chains and increased trade interconnectedness. From this perspective, there have been various trends in the past decade (Fung, Leung & Xu, 2003). One of the most notable trends is the rapid emergence of the China, with the US, as an essential trading hub in the contemporary society. The emergence connotes a notable increase in the number of trading partners. Similarly, there tends to be a perfect overlap between nations hosting important trade and financial institutions in the global or international trading platforms. China Trading Patterns In the recent years, China has become one of the major trading nations (Yue &Hua, 2002). Besides, the nation has massive trading potential, which is attracting substantive attention by the advanced, as well as newly industrializing nations. This is evident in the interest of the world in China’s membership in the WTO. Trade continues to perform important functions within the economy, thus the platform for the generation of the needed capital goods, as well as modern technology to abet development and primary commodities (Lee, Lin, & Liu, 1999). It is essential to note that China’s trading pattern has focused on adhering to three major aspects since the 1930s. Before the Second World War, the US, the United Kingdom, and Japan did make three-fourths of the total trade volume (Abeysinghe & Ding, 2003). In 1949, the trade the shift for the former USSR, as well as Eastern Europe. Furthermore, in the early 1950s, China sought to engage 50 percent of its transactions with the former USSR before reduction of the volume of this trade to about 40 percent in the later stages during the decade (Chen et al., 2001). The trade between these two entities did decline following the deterioration of the Sino-USSR relations in the 1960s, thus the eventual realization of the one percent trade interaction with the USSR in 1970. In the 1980s, most of the leading trading partners of China were industrialized non-Communist nations, thus integration of the concept of a high degree of multilateralism (Ng & Wu, 2007). Nevertheless, in the recent years, China has been able to improve its influence and importance in the international market, thus enhancing the implications of Hong Kong as an entrepot. Hong Kong did become a significant major source of revenue in the recent years of the transaction. In the early 1990s, Hong Kong did provide the platform towards generating approximately 35 percent of the transactions or trading activities of China (Thorbecke, 2008). The most critical change in the mid-1980s relates to the emergence of the US as the third-largest trading partner of China. By 2000, the US had become the second-largest trading partner of China before becoming the largest importer of the Chinese products in the international market. It is valuable to note that China has been able to focus on the exploitation of the dispersed supply chain (Zhu & Warner, 2004). The approach has been ideal for the exploitation of the marketing opportunities in the international marketing platform. The US Trading Patterns Following the accession of China to the WTO in 2001, there were various expectations on the increase on the US exports to the nation, because of the reduction in tariffs, as well as an increase in the market access (Dalin et al., 2012). In the first instance, it is essential to note that the US trading practices with China have more than quintupled in value. Nevertheless, the increase in the value of the exports continues to be dwarfed by the surge of the imports of China in the US market (Aggarwal & Urata, 2013). This has been essential in the consistent bilateral trade deficit. The increase in the echelons of non-manufactured products in the agricultural sector, raw materials, and quarried natural resource products from the US to China has been essential in facilitating the achievement of surplus trade with China with non-manufactured goods (Pingyao, 2002). Alternatively, the histrionic increase in the imports of the Chinese manufactured goods into the US has been essential in decreasing the exports of the US of the mass-produced goods to China as a critical share of the export composition (David, Dorn, & Hanson, 2012). The trading patterns of the US have been essential in the generation of a steady upward move of the value chain concerning the Chinese imports into the US. This is most noticeably in the computers and consumer electronics (Athukorala, 2011). Nonetheless, in the latter category, China has focused on serving as an assembly and export platform for various international companies of mechanisms manufactured elsewhere in the international market (Cunat & Melitz, 2012). Researchers and economists have not been able to reflect this notion effectively and efficiently in the trade statistics in the modern or contemporary society and international market. EU Trading Patterns EU comes out as the world’s leading exporter of goods and services, thus the world’s largest source of foreign direct investment. From this perspective, EU occupies a commanding place in the global or international market (Keukeleire & Delreux, 2014). Nevertheless, significant shifts in the distribution of the world trade are occurring, thus the platform for the changes or transformations like the contribution of EU in the modern context (Holland & Doidge, 2012). This is also evident in the certainty of its dominance. Following the economic and financial crisis of 2008, the European Union has been able to move away from the production or generation of labor-intensive, as well as low-value products towards specializing in the generation of higher-value branded products (Morel et al., 2012). In the course of focusing on the achievement of the goals and targets in the modern context, European Union has been able to incorporate various tariffs and regulations, which generate persistent trade barriers. The persistent trade barriers have negative implications on the efforts of the exporters from the region. In an attempt to eliminate or overcome these challenges, the European Union has focused on negotiating many free trade agreements, thus the platform to enhance the image, position, and reputation of the European Union. The size and openness of the internal market of the European Union have been essential in enabling the trading bloc to play a critical role in the course of shaping and transforming the global trading system. From this perspective, the EU has been able to contribute to the creation of the WTO while utilizing the platform to enhance the living conditions and standards in the European Union. The region tends to focus on the utilization of the economic openness to achieve competitive advantage, thus enabling the union to be the largest, as well as integrated free trade area in the global context. Conclusion Conclusively, business entities and nations have the tendency to adopt and integrate the concept of differentiation in addressing demands and needs of the consumers. In the modern context, China is the world’s largest exporter of industrial goods, just ahead of the US and Germany. Notable shifts few decades, which have been essential in the course of reshaping the international trends in trade. That is because of the expansion of the global, as well as regional trade relates to the liberation of trade and the eventual vertical specialization and income convergences. Moreover, advanced nations and EMEs have the tendency to play different roles in the global supply chains. Similarly, various nations in the Asia have the tendency to use a more dispersed supply chain in comparison to the US and Europe. Another fundamental aspect of the discussion is the emergence of the global supply chains, which have been essential in enabling the export of technology by EMEs. 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