U.S.-China trade and investment linkages have benefited both countries and both governments should broaden and deepen their bilateral relations, said Karan K. Bhatia, deputy U.S. trade representative here on Tuesday.

Karan Bhatia, deputy U.S. Trade Representative speaks during a speech at the Shanghai Institute of Foreign Trade March 21, 2006. [Reuters]

Bhatia said in his address on "U.S.-China Trade Relations" at the Shanghai Institute of Foreign Trade (SIFT) that there is not a more important bilateral trade relationship today than the one between the United States and China.

He said the dramatic growth of U.S.-China economic ties is the result of a historic transformation in China. Beginning in the late 1970s, China's introduction of market-oriented economic reforms and its encouragement of export-led growth have greatly influenced China's economy, he said.

Bhatia listed a group of statistics to illustrate the changes. In 1981, China was the United States' 16th largest export market, but only its 27th largest supplier of imports, ranking behind countries like Malaysia, Indonesia, Australia and South Africa. There was actually no U.S. direct investment in China at that time, nor was there any Chinese investment in the United States.

In 2005 bilateral trade volume was more than 50 times that of 1981. "China has grown from our 16th to our 4th largest goods export market," said Bhatia, adding U.S. direct investment in China in 2004 reached an impressive 15.4 billion U.S. dollars.

Both countries have benefited from this growth in trade and investment, Bhatia noted, saying U.S. consumers today have access to an enormous range of Chinese-made goods at competitive prices.

He said U.S. companies have enhanced their global competitiveness through their access to China's manufacturing base and China has also fueled its economic development through access to the U.S. market.

The growing trade relationship between the United States and China marks the convergence of two great economic forces, and the United States should see China as a "responsible stakeholder", Bhatia said, adding the United States and China, together with other Asian countries, are the growth engines of the world today.

With regards to trade frictions, Bhatia, who is in charge of U.S. trade policy toward China, said frictions arise even between the closest partners

He said although there are trade frictions, no trade war will break out so long as the two sides settle their disputes using mechanisms established by the WTO.

He pointed out that in a mature international relationship, these frictions are dealt with individually, while the broader relationship continues to flourish.

The deputy representative remains excited by the potential of U.S.-China trade relations, adding that the United States would strengthen its investment and trade in the Asian region.

Bhatia visited the Philippines, Malaysia, Singapore, Japan and other Asian countries before arriving at Shanghai. He arrived in Beijing on Wednesday.