From Mao and Nixon to Xi and Trump: A history of China-US trade

Chad Bown (0:01)

President Nixon's departure for China.

SPEAKER_2 (0:03)

South Lawn, 17 February 1972

Will Bain (0:06)

President Nixon prepares to leave Washington for China for what he would call This was the week that changed the world. As President Xi prepares to fly in the opposite direction for an expected meeting with President Trump in Washington this week, what's happened in the intervening period in the trade relationship between China and the United States?

Chad Bown (0:24)

They've really taken advantage of our country for a long period of time.

SPEAKER_2 (0:27)

We're faced with opportunities never seen before.

SPEAKER_4 (0:32)

We both understand that the capabilities and requirements of our two countries complement each other.

SPEAKER_5 (0:38)

The American people are a great people. The Chinese people are a great people.

SPEAKER_6 (0:45)

We have great differences today. What brings us together is that we have common interests which transcend those differences.

Will Bain (0:55)

That's today's Business Daily from the BBC World Service. I'm Will Bain and really the modern trading relationship between the US and China starts around that moment in 1969 and that's where most of our focus will be, but it's not the complete story. So let's go back, way back, 1784 back.

The Empress of China became the first ship to carry goods across the Pacific Ocean directly between the US and China. It was just a year before that trade between the two countries had been allowed under the Treaty of Paris. Tea, silk and porcelain would be sent from China. Going the other way were things like silver, sandalwood and furs. The first really big trade dispute? Well, you would have heard of the rouse recently over the importation of the illegal drug fentanyl into the United States. Back then the Chinese were upset about the amount of opium being sent from foreign countries, primarily Britain, but the US had also got in on the act. It led to the first treaty on trade between the countries in 1844

And tariffs? Well, they're not a new issue either.

At the time of the American Civil War, the US government needed to raise money. How to do it? Yep, sorry President Trump, but the word tariffs was also a favourite of those politicians back then, with import taxes of 50% in some cases. After the Second World War came the founding of the People's Republic of China and trade. Well, it almost ceased, until 1969 And President Nixon and that inaugural address.

SPEAKER_6 (2:27)

During this administration, our lines of communication will be open. We seek an open world, open to ideas, open to the exchange of goods and people.

Will Bain (2:39)

Well, joining us is Chad P. Bown. He's co-author of the book How to Win a Trade War and a senior fellow at the Peterson Institute Think Tank in Washington, DC. You also served in two different Democrat White House administrations.

Chad Bown (2:52)

At that stage, China was really so underdeveloped that there was really very little technologically that China could do with the exception of really labor-intensive manufacturing. And during that era, and so we're talking about, you know, footwear and clothing and textiles, sewing, things of that nature.

Will Bain (3:20)

In 1972, President Nixon arrived in China to meet with Chairman Mao and his premier Zhao Enlai.

SPEAKER_5 (3:29)

The peoples of our two countries have always been friendly to each other. But owing to reasons known to all, contacts between the two peoples were suspended for over 20 years.

SPEAKER_6 (3:43)

But what we have said in that communique is not nearly as important as what we will do in the years ahead.

We have been here a week. This was the week that changed the world.

Will Bain (4:00)

Trade quickly increased between the countries, growing from $13 million in 1972 to $992 million by 1978

And at that time, it was the US who held most of the chips with a trade surplus. That soon changed though. Trade rocketed in the 1980s. Ronald Reagan visiting China in 1984 First addressing Chinese community leaders of the Great Hall.

SPEAKER_4 (4:24)

When it does come, China will rapidly become a powerful and rich nation. The population is industrious, frugal, intelligent and quick to learn.

Well, today, China's economy crackles with the dynamics of change.

Will Bain (4:43)

And then, staff at the Shanghai Foxborough Company.

SPEAKER_4 (4:47)

Your pioneer efforts demonstrate that a promising future beckons for expanded cooperation between our people.

Chad Bown (4:56)

China had asked to be entered into the formal trading system at the time, the General Agreement on Tariffs and Trade, I believe in 1986, right? And so, you know, that was the formal process. Anybody that wanted in, you know, have to do a lot of preparations, talk about how you're going to change your economy, what you're going to do, how you're going to get rid of your own tariffs and other kinds of trade barriers for the rest of the existing membership to allow you in. And it was on sort of a path to be brought into the trading system. And then in the late 1980s, you had the Tiananmen Square incident, right? And massacre and the human rights concerns that popped up, which undoubtedly slowed, you know, the progress of China's entry into the Western dominated system, right? At this stage, it was the United States, Europe, Japan, right? It was really, you know, these Western allies holding the keys about whether or not China was going to be allowed to get in.