China in the World Economy Mark S. LeClair

Transcript:China in the World Economy Mark S. LeClair:
China in the World Economy Mark S. LeClair Professor of Economics Fairfield University To Obtain Slides….. Go to www.faculty.Fairfield.edu/mleclair Look for LLL link at top of page. Click and document will open 5 Days of Presentations China’s economy and its entry into the world trading system How important is China in the world economy Why the conflict between the U.S. and China? Geopolitical and Trade issues Forming a new relationship A Brief History China largely closed to the world until period of the Republic -1912 onwards (end of Qing Dynasty) Adopted Western form of government and opened to the outside world Lasted until 1949, with the ascension of Communism Country quickly closed to rest of world, including Russia in 1958 (Great Leap Forward) Isolation Continued until Nixon’s Trip in 1972 →Social disruptions continued with the Cultural Revolution →Country remained closed, with little external trade →Deng Xiaoping (1980s) began the process of putting aside ideology for practical policies of growth and trade →By 1990s, seeking entrance into GATT/WTO →1994, China is admitted Basics of WTO/GATT System and Why it Matters….. General Agreement on Tariffs and Trade (GATT) dates to 1947 First attempt at multilateralism – all tariff reductions became universal As long as nation had Most Favored Nation (MFN) status Initially a “club” for the industrialized nations Results of the GATT Process Tariffs came down dramatically from their post-war levels International trade boomed Currently, the average U.S. tariff rate is around 2% - Both Europe and Japan have similar rates Always some exceptions on specific products, but overall rates are low Problem Built into System Everyone got same tariff rates, but nothing was said about the level of those rates Developing nations accepted tariff cuts from developed nations without cutting their own By 1990s, huge disparity between rates impacting imports into developed nations versus those into developing nations This is one reason why trade relations with China are strained To China……. China admitted to WTO in 1994 Created 7 export processing zones Enormous movement of people to these cities began Millions left subsistence farming to engage with international trade Exports and growth boomed China’s internal consumer market is still small in relation to its economic size Gross Domestic Product Exports Dramatic Growth not seen Anywhere Before 10% range until about 4 years ago, 6% range now Economy will double in size every 12 years Reflection of a vibrant people who had