Business

China and the US: Friends or rivals?

Former paper mills on the Willamette river
Image caption Paper mills used to be a major employer in the Portland region but they are no longer competitive with China and some have closed

The massive US trade deficit with China has led many American politicians to accuse Beijing of undervaluing its currency to keep Chinese exports cheap. Unions say competition from China is costing American jobs. But in Oregon, trade between the US West Coast and China is growing rapidly and a lot of the goods are flowing towards the Chinese.

Sitting with some of her former co-workers in a bar in Oregon City, LeAnn Lucas's voice cracks as she remembers working at the now idle Blue Heron paper mill that once dominated her small community.

"That was our life," she says of the paper recycling plant on the banks of the Willamette River.

"It was its own little city, everyone would either hang out, or go fishing, or go hunting with each other. That life is gone."

Blue Heron closed for good in February.

Some 175 people lost their jobs because the mill could no longer compete with similar plants in China.

Chinese companies were buying up supplies of used newspapers and other waste paper in the US at a price the local mill could not match. Nor could it compete with the cheaper costs of labour in China.

The great hulk of the factory sits right in the middle of the town.

LeAnn, who worked at Blue Heron for 17 years, says it will soon be taken down and she suspects be replaced by a shopping mall.

"They'll put in boutique shops where the products all come from China," she says.

Historical ties

The demise of Blue Heron is a story repeated across the United States where old manufacturing industries have slowly disappeared.

But there is another side to the trade relationship and you can see it clearly in the Portland region of Oregon.

The US buys a lot more goods from China than it sells, hence the yawning trade deficit.

But US exports to China are increasing 50% faster than with any other country, and China is now America's second largest export market.

The state of Oregon is doing its bit for that trade. On America's West Coast and with long historical ties to Asia, it sees its future as part of the booming Pacific Rim.

China is now the state's biggest customer, buying $4bn (£2.5bn) worth of goods last year. Top of the list of exports are hi-tech computer and electronic components.

Also included are specialised agricultural products.

Growing market

Oregon's Willamette Valley is where almost all of America's hazelnuts are grown. Ten years ago, it was rare for growers to sell to China.

Image caption Hazelnut farmer Peter McDonald exports the majority of his nuts to China

Now up to 70% of the annual crop is bought by the Chinese and farmers say they are having difficulty meeting the new demand.

As a result, the price of their hazelnuts last year was the best it has ever been.

"We have really figured out the products and the services that are exportable even to countries like China," says Sam Adams, Mayor of Portland, Oregon's biggest city.

"That's our competitive advantage," he says.

The mayor is talking about businesses like Triquint in Hillsboro, nine miles (15km) outside Portland.

Among other things, they make sophisticated microchips that filter and amplify signals to mobile phones.

The chips are exported to China where the phones themselves are assembled. It is a growing market and last year Triquint took on 250 new workers.

That is not much comfort to LeAnn Lucas and her friends laid off at the paper mill.

"When I got the job at the mill I thought this is it, this'll be the job for my life," she says. And she adds that she does not see much chance of working in hi-tech manufacturing.

"Far as I know, you're going to need some schooling for that. Where you going to get that?" she says.

'Lean and efficient'

Portland Mayor Sam Adams agrees. He says the local export strategy has to go hand in hand with improving education and skills.

Image caption The Port of Portland has seen a 26% trade increase in the year to April, with China the biggest customer

"There are fewer and fewer jobs out there even in manufacturing that you are qualified for simply with a high school diploma," he says.

And what about when China acquires the technical know-how to do the more highly specialised jobs; won't the US workers lose out again?

Mr Adams says not, because as China gets more sophisticated in its manufacturing, its production costs go up.

Meanwhile, costs in the US are going down as production becomes more automated and efficient.

The aim is to have "successful global companies locally that offer good wages but are so lean and so efficient that they can still compete," says Mayor Adams.

"If it works both China and the United States can move forward."

He pauses, and then repeats: "If it works".

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