Diplomacy vs. Economics: Examining the Roots of Decline in Sino-U.S. Trade in 1975

Abstract

In 1975, the explosive growth of Sino-U.S. trade that only had resumed after 1971 ended with a severe decline from $920 million a year to just $461 million. The cause of the collapse was the unilateral decision of the People’s Republic of China (prc) to cancel several orders from late 1974 to early 1975. Scholars have advanced three reasons for the prc’s action, blaming to trade disputes, Beijing’s desire to punish the Americans for slow progress on the Taiwan issue, and Chinese trade officials preventing radicals from labeled them “compradors.” Each explanation, however, overstates the importance of high-level politics and ignores mid-level exchanges, as trade delegations shuttled back and forth across the Pacific in 1975. The article demonstrates that the real obstacle to trade in 1975 was China’s limited ability to purchase American grain in the same quantities as in the last four years, along with indications of a good future harvest in China emerging at the end of 1974. Economic factors therefore better explain the decline in prc-U.S. trade, providing an example of how in the last years of the Cultural Revolution, Beijing’s economic policy was more pragmatic than one would expect.