Asian trade with the United States Summary

  • Last updated on November 10, 2022

U.S. trade with Asia grew rapidly in volume, significance, and complexity in the last quarter of the twentieth century, affecting what the United States produced and what it imported. U.S. companies have been major players in exploration, production, and trade of Middle Eastern and Southwest Asian oil.

Free trade with foreign nations was one of the key principles of the Declaration of Independence in 1776. Merchants of the newly formed United States looked to Asia for business. China constituted a major opportunity, as many other Asian countries had become European colonies. Of the colonial powers, only the Netherlands agreed to sign a most-favored-nation treaty with the United States in 1782. This treaty also covered Dutch Southeast Asian possessions.Trade;U.S. with AsiaAsia;U.S. trade with

U.S. trade with China;U.S. trade withChina was especially lucrative. In 1789, Congress passed the first Tariff Act of 1789Tariff Act, levying a duty of 10 percent on imported chinaware, as porcelain was called. Average duties were only 8.5 percent, indicating that the young nation sought to maximize public revenue from the Asia trade.

After the War of 1812 ended, U.S. trade policy became more protectionist. High tariffs protected U.S. manufacturers. However, since key imports from Asia such as tea, silk, spices, and coffee were not produced domestically, trade in these items continued regardless of higher duties. Because of the United States’ comparatively small manufacturing base, the value of U.S. goods sold in Asia remained low.

To protect the interests of American traders in Asia, the United States appointed consuls to Manila in the Philippines in 1817 and Batavia (later Jakarta, Indonesia) in 1818. In 1830, U.S. president Andrew Jackson concluded a treaty between the United States and the Ottoman Empire. In 1832, Congress ratified a commercial treaty with Muscat (later Sultanate of Oman) in Arabia.

More trade treaties with Asian nations followed. However, although the 1833 treaty with Siam (later Thailand) and the 1850 treaty with Brunei were fair, the 1844 treaty with China was unfair. Like the treaty imposed on Japan in 1854, the unfair treaties set low duties for U.S. exports to China and Japan and imposed high duties on goods exported from these countries to the United States. The United States made duty exemptions only for desired Asian materials such as silk and agricultural products such as tea.

After the U.S. Civil War

The American Civil War severely limited Asian trade, but it recovered quickly. China remained the United States’ main trading partner. Trade with China reflected the typical pattern of nineteenth century U.S.-Asian trade. Asian countries tended to export more to the United States than they imported from American manufacturers.

Despite India;U.S. trade withIndia’s status as a British colony, limiting American access to its markets, India was an important trading partner for U.S. merchants. India’s tea was an especially desired commodity. In 1868, imports from India to the United States were worth $6.4 million. This was ten times the value of U.S. exports to India. However, in spite of the importance of Asian materials such as silk and cotton for the United States’ manufacturing industry, U.S. trade with Asia remained a niche market. It accounted for less than 3 percent of all U.S. trade in the post-Civil War period.

U.S. business was deeply aware that European colonialism hampered American access to Asian markets. In 1899, the $6.5 million of U.S. exports to India and the $32.7 million of Indian imports to the United States were worth just 8 percent of India’s trade with Great Britain. In that year, to avoid the creation of a colonial stranglehold over China, the United States proclaimed the start of the Open Door Policy in China, demanding equal trade access for all foreign nations. Free trade in China served U.S. business interests well. Unlike the situation in India, in 1899, the $60 million in trade between the United States and China was rather close to the $74 million in trade between Great Britain and China.

Until 1913, the United States protected its developing industries through high tariff barriers on manufactured goods and commodities. Thus, U.S. companies sold locomotives in Siberia and to the Ottoman Empire, while raw materials and noncompetitive goods from Asia enjoyed lower import duties. To gain the favor of the Philippines, which the United States had taken from Spain in 1898, Philippine sugar entered the United States duty-free, beginning in 1909. This did no harm to businesses in continental America as no sugar was produced there.

Between the World Wars

American businesses vigorously expanded trade with Asia in the period between the world wars from 1918 to 1941. Petroleum industry;U.S. trade with Middle EastTrade was aided by lower U.S. tariffs. Discovery of oil in the Middle East and Southwest Asia aroused the interest of American oil companies. They obtained stakes in the consortiums that were given concessions by local governments. In 1925, American oil companies participated in oil discovery in Iraq.

U.S.-Asian trade flourished. American companies gained from growing Asian markets, especially China, Japan, and India. By 1929, U.S. exports to Asia were worth $643 million and accounted for 12.3 percent of U.S. exports. By March, 1930, the United States had granted most-favored-nation status to China, Persia (later Iran), and Turkey.

The Great Depression severely shrank trade, and many countries erected trade barriers. American exports to Asia shrank by 40 percent, to $386 million in 1931. This decline was not as sharp as elsewhere, so Asia’s share of American exports increased to 16 percent. By 1932, the $292 million of U.S. exports to Asia made up 18 percent of U.S. exports. Asian trade helped U.S. manufacturers in the deepest troughs of the Great Depression.

In 1933, the United States shifted its policy to Free trade, as U.S. policyfree trade. That same year, American oil companies founded the California-Arabian Standard Oil Company in Saudi ArabiaSaudi Arabia, which struck oil in 1938. The 1939 trade agreement with Turkey was the first one with a Middle Eastern country concluded under the new American Reciprocal Trade Agreements Program, which sought to revive world trade.

The United States responded to Japan;U.S. trade withJapanese aggression in China and other Asian countries with an oil embargo to Japan after July, 1941. It was only a few months before the Japanese attack on Pearl Harbor effectively ended peacetime U.S. trade with Asia. Trade did not resume until the Japanese surrender, announced on August 15, 1945.

Postwar U.S. Markets

At the end of World War II, the United States decided to promote the integration of the economies of the free world, including those of Asian nations, through free trade. The United States opened its domestic market on an unprecedented scale. Asian nations quickly availed themselves of this opportunity for their exports, primarily of commodities.

A major blow to U.S. business in Asia occurred when Chinese communists won control of the country in 1949. U.S. trade with mainland China ceased to exist from 1951 to 1972. On the other hand, because of U.S. support, Japan gained admission to the free world’s trade zone in 1955.

With its economy booming, the United States could afford generosity toward Asian companies accessing the huge American market. The first pressures appeared when the American textile industry suffered from cheap Asian competition. However, during the Cold War, foreign policy concerns overrode domestic business concerns regarding cheap imports from Singapore, the Republic of China (Taiwan), Japan, and South Korea. During the Kennedy Round of the General Agreement on Tariffs and Trade (GATT) from 1964 to 1967, the United States was decidedly in support of free trade.

American oil companies enjoyed huge earnings from trade with the Middle East. In 1951, when Prime Minister Mohammad Mossadegh, MohammadMossadegh of IranIran nationalized the British oil company that was exploiting Iran’s oil fields, the United States supported the British. The boycott of national Iranian oil was very effective, and Mossadegh was toppled from power with covert U.S. help in 1953. Because of favorable royalty agreements with Southwest Asian and Arabian nations, U.S. oil companies earned massive profits until the Arab oil embargo of October, 1973.

When the Tokyo Round of the GATT opened in 1973, the American economy had lost some of its postwar vigor. Increased competition from East Asia as well as Japanese protectionism severely strained the U.S. steel, textile, and apparel industries. Taiwan, South Korea, and Japan enjoyed rapid economic growth because of free access to the U.S. market. The United States also absorbed goods from developing Asian countries such as Malaysia, Indonesia, Sri Lanka, India, and Pakistan. For political reasons during the Cold War, American business had to bear the burden of an open market while encountering trade barriers in Asia.

By the 1980’s, the U.S. trade balance had become decisively negative. Oil prices jumped in 1973 and 1979, and while American companies trading in Middle Eastern and Southwest Asian oil made profits, higher energy costs led to a global recession. To achieve a favorable balance of payments, East and Southeast Asian nations such as Japan, South Korea, TaiwanTaiwan, MalaysiaMalaysia, and Indonesia flooded the American market with goods. U.S. businesses complained about Dumpingdumping. Under the administrations of U.S. presidents Ronald Reagan and George H. W. Bush from 1981 to 1993, the antidumping clauses of the 1979 Trade Agreement Act were more strictly enforced. American businesses won 58 percent of the seventy-eight cases they brought against Japanese manufacturers, 66 percent of the thirty-eight cases against Chinese companies, and 54 percent and 44 percent, respectively, of the forty-one cases filed against South Korean and Taiwanese producers.

During the 1990’s, American businesses’ fears of being overtaken by Japanese companies faded with the burst of the Japanese bubble economy. The Asian financial crisis of 1997 underscored the vulnerability of the East and Southeast Asian economies. A long, acrimonious human rights and business dispute between the United States and the People’s Republic of China was solved with the signing of the Agreement on Market Access of November 15, 1999. This enabled the People’s Republic of China to join the World Trade Organization in 2001.

Early Twenty-first Century

In 2006, the People’s Republic of China surpassed Mexico as the United States’ number two trading partner. By mid-2008, China accounted for 11.2 percent of all U.S. trade, behind Canada’s 17.9 percent share but ahead of Mexico’s 10.7 percent share. U.S. trade with Japan decreased to 6.2 percent in mid-2008, assuaging American fears of Japanese economic domination. Three more Asian nations were among the top fifteen U.S. trading partners. South Korea, SouthKorea held a share of 2.5 percent and was ranked seventh, followed by Saudi Arabia with 2 percent and a rank of ninth, and Taiwan with 1.9 percent and a rank of eleventh.

From its modest beginnings during the nineteenth century as a niche market, Asia grew enormously in importance as a trading partner for the United States. Indicative of the shift from Asian countries as providers of raw materials and commodities to exporters of the latest in consumer electronics was Malaysia. Although Malaysia had formerly been known for its exports of rubber and palm oil, the greater part of its $32 billion exports to the United States in 2007 consisted of consumer electronics and electrical appliances. This was also true for other Asian nations. Japan and South Korea were major car exporters to the United States.

The United States had a negative trade balance with most countries in the world by 2008, and Asia was no exception. Indeed, beginning in the eighteenth century, the United States tended to import more goods from Asia than it exported to Asia. However, as Asian countries began to employ protectionism for their developing industries, much as the United States had done in the nineteenth century, critics worried that the United States might not be able to pay for its Asian imports without drastically devaluing its currency. At the same time, America’s oil trade with the Middle East became characterized by extreme volatility and political risks.

Further Reading
  • Bailey, Jonathan. Great Power Strategy in Asia: Empire, Culture, and Trade, 1905-2005. New York: Routledge, 2007. In the context of American-Japanese rivalry, this work covers U.S. trade with East Asia, especially Japan and China. It also analyzes trade’s importance for the postwar U.S.-Japanese relationship and the outlook for U.S. trade with China.
  • Dudden, Arthur Power, ed. American Empire in the Pacific: From Trade to Strategic Balance, 1700-1922. Burlington, Vt.: Ashgate Variorum, 2004. Individual essays focus on early U.S.-China trade, the reasons for U.S. trade interests in Asia, and the connection between trade and U.S. foreign policy in Asia. U.S. colonial trade in the Philippines and U.S. trade with Japan are covered in detail.
  • Eckes, Alfred E., Jr. Opening America’s Market: U.S. Foreign Trade Policy Since 1776. Chapel Hill: University of North Carolina Press, 1995. Excellent overview of U.S. trade policy that makes reference to U.S.-Asian trade and puts it into perspective. The author was a member of the U.S. International Trade Commission from 1981 to 1990. The work shows how postwar Japan successfully copied nineteenth century U.S. protectionism.
  • Kalicki, Jan H., and Eugene K. Lawson, eds. Russian-Eurasian Renaissance? U.S. Trade and Investment in Russia and Eurasia. Washington, D.C.: Woodrow Wilson Center Press, 2003. This useful overview of U.S. trade with the Central Asian republics that were part of the Soviet Union until 1991 focuses on the investment climate, the economic drivers, specific industries and their potential in the new republics, and the problems affecting U.S. trade there.
  • Oren, Michael. Power, Faith, and Fantasy: America in the Middle East, 1776 to the Present. New York: W. W. Norton, 2007. Comprehensive look at American interests in Southwest Asia, with good coverage of trade issues, particularly regarding oil. Chronology includes milestones in U.S.-Middle East trade history.
  • Strobridge, William, and Anita Hibler. Elephants for Mr. Lincoln. Lanham, Md.: Scarecrow Press, 2006. A close look at U.S. trade with Southeast Asia from its beginning to the post-Civil War era. The title refers to the Thai king’s proposal to aid the Union war effort with a gift of war elephants. The work focuses on the actual experiences of early American traders in Southeast Asia and the damage wrought by Confederate raiders in local waters targeting Union shipping. Readable and informative.

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Categories: History