Trading with China

Last Sunday the Boston Globe ran an essay by Eric Jay Dolin based on his new book, When America First Met China: An Exotic History of Tea, Drugs, and Money in the Age of Sail. It begins:

Two hundred twenty-eight years ago, a Boston-built ship inaugurated one of the longest and most fraught trading relationships in our country’s history. As the sun rose in the brilliant blue sky and gentle winds rippled the surface of water on Feb. 22, 1784, the Empress of China sailed down New York’s East River, embarking on a 15-month round-trip journey to Canton, modern day Guangzhou.

The voyage rewarded its backers with a 25 percent return on their money—not as much as they had hoped, but enough to prove the viability of the trade. Through the mid-1800s, a veritable armada of ships followed in the Empress of China’s wake, venturing from the young nation of the United States to the ancient empire of China, the mysterious so-called Middle Kingdom.

The merchants who funded those voyages, and their countrymen, saw China as a golden economic opportunity. China grew from roughly 300 million to 400 million people during this period; it was then, as now, the world’s most populous country. It was a rich source of tea, silk, and porcelain. Businessmen here dreamed that it would also become a major market for American goods, fueled by the purchasing power of Chinese consumers.

That is not what happened. Instead of becoming a major market for American goods, China racked up what would now be called a huge trade surplus with the United States. Americans purchased far more Chinese goods than the other way around. And by the end of the 19th century, that early dream of China as a leading booster of American commerce had long since been abandoned.

By then American merchants like Thomas Handysyd Perkins had discovered one product that could pay for their China ventures: opium from the Indian subcontinent. No matter that the Chinese government had ruled that drug illegal because of the social costs of addiction.

For most years of its first century, the U.S. of A. ran a trade deficit, importing more than it exported. Not until World War 1 did the country become a creditor nation. For most of the 20th century (i.e., the time we personally remember), the U.S. of A. had a strong trade surplus, in no small part because most other industrialized nations kept attacking each other. Taking that as the norm or ideal makes America’s current trade deficits seem like an anomaly. But perhaps the periods of trade surplus were the odd parts in American history.