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Trading with Asia’s Giants


  • Barry Bosworth

    (Indian Council for Research on International Economic Relations)

  • Susan M. Collins
  • Aaron Flaaen


The United States large and sustained trade deficit with Asia raises concerns in the United States about its competitiveness in the region. The purpose of this paper is to examine the patterns of U.S. trade relationships with China and India, and the factors that are influencing their evolution. In contrast to the current public policy debate, the discussion largely addresses how these two economies compare as markets for U.S. exporters. This paper begins by noting that U.S. exports to both countries do appear low relative to the performance of Japan and the EU-15. We examine potential explanations for the weak exports from three different perspectives. First, we analyze the composition of U.S. exports to these economies, and consider how this mix of products compares to those which it appears to be competitive in exporting to the rest of the world. Second, we examine the role of multinational corporations in facilitating the trade flows between the U.S and these two economies. Finally, we employ the use of gravity equations to examine the bilateral trade patterns while controlling for a variety of country specific characteristics, such as distance. In this context, we are also able to analyze the pattern of trade in services as well as the more traditional focus on goods trade.

Suggested Citation

  • Barry Bosworth & Susan M. Collins & Aaron Flaaen, 2008. "Trading with Asia’s Giants," Trade Working Papers 22145, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:tradew:22145

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    References listed on IDEAS

    1. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 691-751, September.
    2. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 441-487.
    3. K.C. Fung & LawrenceJ. Lau & Yanyan Xiong, 2006. "Adjusted Estimates Of United States-China Bilateral Trade Balances: An Update," Pacific Economic Review, Wiley Blackwell, vol. 11(3), pages 299-314, October.
    4. Feenstra, Robert C, 2002. "Border Effects and the Gravity Equation: Consistent Methods for Estimation," Scottish Journal of Political Economy, Scottish Economic Society, vol. 49(5), pages 491-506, December.
    5. Fung, K. C. & Lau, Lawrence J., 2003. "Adjusted estimates of United States-China bilateral trade balances: 1995-2002," Journal of Asian Economics, Elsevier, vol. 14(3), pages 489-496, June.
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    More about this item


    China; India; United States; trade; and exports;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business


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