Special Section: Trade & Development - To the Benefit of Both: Why trade with the PRC?

China looms as the next big thing in trade-policy discontent. An unlikely coalition comprising the National Association of Manufacturers, union leaders, anti-trade Naderites, and conservative lawmakers critical of China's human-rights record is complaining with growing volume about rising imports from the Middle Kingdom.

Like the fears about Japan in the late 1980s, anxieties about trade with China lack a firm foundation. Despite the discomfort it causes for certain U.S. producers, trade with China is mutually beneficial. Chinese workers gain from the opportunity to sell the products of their labor to a global market; Americans -- consumers and producers alike -- benefit from the low prices, variety, and competition of imports from China. Raising barriers to commercial engagement with China would damage our economy and undermine security and human rights.

Most American families benefit unambiguously from trade with China. The clothing, furniture, toys, and electronics that make up a big chunk of Chinese imports keep prices down in American stores and raise the real wages of American families, especially those with middling or low incomes. Lower-cost parts and other intermediate goods from China -- such as computer hard drives and plastic moldings -- allow American manufacturers to retain their competitive edge in global markets.

Although imports from China have grown rapidly, they are nothing like a flood. In 2002, Americans bought $125 billion worth of goods made in China -- which represents only 10 percent of our total imports ($1.2 trillion) and a tiny fraction of our $10.4 trillion economy. There is nothing wrong with Americans' spending 1 percent of their income on products made by the one-fifth of mankind that lives in mainland China.

And, despite the warning that U.S. factories are moving in droves to China, American investment in the mainland remains modest. Annual outflows of manufacturing investment to China average about $1 billion, less than 1 percent of the $200 billion or so that is invested each year in our own domestic manufacturing capacity. At the end of 2001, American companies directly owned and controlled $7 billion worth of manufacturing investment in China -- which amounts to less than 2 percent of the total stock of U.S. direct manufacturing investment abroad, and far less than the $35 billion American companies own in the (tiny) Netherlands.

Critics ignore China's own growing appetite for goods. While China is the world's sixth-leading exporter, it is also the world's sixth- leading importer. Because of soaring domestic demand, it has now displaced the United States as the world's chief importer of steel, and has become one of the world's top markets for automobile sales. While America's total exports were falling in 2002, our exports to China rose 14.4 percent. How will the people of China -- or India, or other developing countries -- become middle-class consumers if we do not allow them to participate in the global economy?

So much for the economic worries. National-security concerns about China are not so easily dismissed -- especially those regarding technology-related exports. The U.S. government wields extensive power to block exports of sensitive military and "dual use" technology, and the government should use that power when necessary. We should not be selling cutting-edge military technology to China that could then be sold to our enemies or otherwise turned against us. But that is not what really bothers critics of trade with China. What they object to are imports from China, believing that enriching China through trade will threaten American security.