Prime Asset Captial View of United States and China Trade

TOKYO, Japan - June 20, 2016 - PRLog -- There is no doubt that a significant number ofAmerican workers have lost their jobs as a result ofimports from other countries, including China. But wealso have to recognize that a significant number ofAmerican jobs have been created by the rapid growthin exports to other countries, especially China.Moreover, the U.S. manufacturing sector has been evolving for more than 50 years, a process that hasbeen driven by technological change and which beganlong before China was an economic power. Building atariff wall to block Chinese imports would not stop thisprocess, nor would it revitalize Americanmanufacturing jobs. Rather, we should aggressivelypush China to further open its market to U.S. goodsand services, a step that would actually create moreU.S. jobs.

One of the greatest strengths of the U.S. economy is that American industry has embraced change. Change, whether from new technologies, such as computers and automation, or from newcompetition, has initially been disruptive, often resulting in job losses, but over the long run that changehas also created new jobs and raised productivity and income. As American manufacturing hasbecome more efficient and productive, it has required fewer workers. In fact, 1953 marked the peakpoint in the manufacturing share of total U.S. employment, long before China was even a factor inglobal trade.

In Prime Asset Capital view, the problem has not been in engaging in trade with China, it has been our failure toAdequately assist workers whose jobs have been affected by that trade. The solution should not beattempting to keep out imports from China, as those goods would likely be replaced by imports fromother developing countries, not from goods made in America. Rather, we have to ensure that ourworkforce has access to the resources that will enable them to compete, including better education andjob training, relocation assistance and access to health care while they look for a new job.Trying to forestall change with trade tariffs isn't likely to help American workers. For example, a studyby the Peterson Institute for International Economics found that a 2009 decision to increase tariffs onnew Chinese car and light truck tire imports "cost the U.S. economy around 2,531 jobs, when losses inthe retail sector are offset against gains in tire manufacturing. Adding further to the loss column, Chinaretaliated by imposing antidumping duties on U.S. exports of chicken parts, costing that industryaround US$1 billion in sales." The study concluded that U.S. tire consumers ended up "paying higherprices regardless of whether they purchase a Chinese or non-Chinese tire," and that "the big winnersfrom the 2009 safeguard tariffs were alternative foreign exporters, primarily located in Asia and Mexico,selling low-end tires to the United States."It is also apparent that Chinese imports do not play as big a role in the U.S. consumer market as someimagine. A 2011 study by economists at the Federal Reserve Bank of San Francisco found that goodsand services from China accounted for "only 2.7% of U.S. personal consumption expenditures in 2010, of which less than half reflected the actual costs of Chinese imports. The rest went to U.S. businesses

and workers transporting, selling, and marketing goods carrying the 'Made in China' label."

And U.S. exports to China have created U.S. jobs. Since China joined the World Trade Organization (WTO) in 2001, U.S. imports from China rose 354%, but U.S. exports to China rose 618%, far fasterthan the 79% growth rate of U.S. exports to the rest of the world.

The most constructive approach for U.S. workers would be to aggressively push China to further openits markets to U.S. goods and services, rather than to attempt to block Chinese goods from enteringthe U.S. market, Peter Lobach from Prime Asset Capital said.

The views and information discussed in this article are as of the date of publication, are subject tochange and may not reflect the writers' current views. The views expressed represent an assessmentof market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does notconstitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of any securities or any sectors mentioned herein.

The subject matter contained herein has been derived from several sources believed to be reliable andaccurate at the time of compilation, but no representation or warranty (express or implied) is made asto the accuracy or completeness of any of this information. Prime Asset Capital does not accept any liability for losses either direct or consequential caused by the

use of this information.

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