Number: RL33744
Title: Chinese Economic Growth: How Will It Affect the U.S. Gains from Trade?
Authors: Craig K. Elwell, Government and Finance Division 
Abstract: With expanding trade with growing emerging economies that have changing resource endowments, the U.S. economy's terms of trade may move as this growth causes changes in the worldwide demand for and supply of the goods and services that the United States exports and imports. Given its current and prospective size, China's impact on these forces could be large. China's main impact on the U.S. terms of trade over the last decade has been through the falling price of U.S. imports from China, transmitting a favorable impulse to the U.S. terms of trade. It also seems likely that the impact of the economic growth of China on the U.S. terms of trade over the near term will continue to be dominated by the favorable effects of a falling price for imports from China. Over the longer term, conclusions are more tentative. Several factors point to a favorable outcome for the United States; however, some deterioration of the U.S. terms of trade may be the unavoidable consequence of successful economic development in large emerging economies such as China (as well as India, Russia, and Brazil). The economic benefit to the world economy from large numbers of people accomplishing the very difficult transformation from poverty to a steadily rising standard of living is great.
Pages: 16
Date: July 26, 2007