The terrain of the world trading system is shifting as countries in Asia, Europe, and North America negotiate new trade agreements. However, none of these talks include both China and the United States, the two biggest economies in the world. In this pathbreaking study, C. Fred Bergsten, Gary Clyde Hufbauer, and Sean Miner argue that China and the United States would benefit substantially from a bilateral free trade and investment accord. In the process, they contend, each country would also achieve progress in addressing its internal economic challenges, such as the low saving rate in the United States.
Achieving greater trade and investment integration could be accomplished with one comprehensive effort or through step-by-step negotiations over key issues. The authors call on the United States to seek liberalization of China's services sector as vital to securing an agreement, and they explain that such contentious matters as cyberespionage and currency manipulation be handled through parallel negotiations rather than in the agreement itself. This is an important study of the benefits and difficulties of a complex matter that could yield dividends to the two economies and help stabilize the security and well-being of the rest of the world.
Data disclosure: The data underlying this analysis are available here.
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I The Context
2. The Effects of a China—US Free Trade and Investment Agreement
Peter A. Petri, Michael G. Plummer, and Fan Zhai
3. Adjustment Challenges for US Workers
Robert Z. Lawrence II Potential Self-Balancing Stand-Alone Agreements
4. Merchandise Tariffs
5. Government Procurement
6. Agriculture III Potential Components of a Comprehensive Agreement
Appendix 7A Quantitative Estimates of Barriers to Services Trade and Investment
8. Financial Services
9. Intellectual Property Rights
10. Labor Policy
11. Environmental Policy
12. Export Controls
IV The Investment Cluster
13. Foreign Direct Investment
14. State-Owned Enterprises
15. Competition Policy
V Parallel Issues
17. Trade and Currency
VI. Wrapping Up
18. Dispute Settlement
19. Conclusions and Recommendations