Trade deficit with China causes loss of 3.4m US jobs: EPI

26 Oct '18
3 min read

The growing goods trade deficit with China has cost 3.4 million US jobs between 2001 and 2007, according to a report by Economic Policy Institute (EPI). Losses occurred in all 50 states of the country and in every congressional district, with job losses in the hardest-hit states ranging from 2.57 per cent to 3.55 per cent of total state employment.

The hardest-hit states include New Hampshire, Oregon, California, Minnesota, North Carolina, Rhode Island, Massachusetts, Vermont, Wisconsin, and Texas, as per the analysis by EPI senior economist Robert E Scott and research assistant Zane Mokhiber.

“The US–China trade relationship needs to undergo a fundamental change,” said Scott. “Addressing unfair trade, weak labour, and environmental standards in China, and, especially, ending currency manipulation and misalignment should be our top trade and economic priorities with regard to China.”

Supporters of China’s entry into the World Trade Organization in 2001 claimed that the move would create jobs and increase US exports to China. However, China has continued to engage in unfair trade practices, which have limited the growth of US exports. Meanwhile, growth in outsourcing by multinational companies has created a flood of Chinese imports into the US, leading to rapidly growing trade deficits and corresponding job loss. The US trade deficit with China has increased annually by $18.3 billion, or 9.9 per cent, on average since 2001. Overall, the US goods trade deficit with China has grown by $292.2 billion, to $375.2 billion in 2017, says EPI.

Scott and Mokhiber calculated the impacts of the trade deficit with China using a standard input-output model including 205 US industries, which estimates the direct and indirect labour requirements of producing output in a given domestic industry.

Job losses have occurred throughout the country and in every industry, but were concentrated in manufacturing, including sectors in which the US has traditionally held a competitive advantage. 2.5 million jobs, nearly three-fourths of the total jobs lost, were in manufacturing.

“Trade with China has redistributed vastly more income from working Americans to those at the top, than it has created through any increases in economic efficiency,” said Scott. “The first priority for American trade and financial policy should be to eliminate the soaring trade deficits we have with China and other countries with persistent, global trade surpluses, by lowering the value of the dollar through currency realignment.”

The impact of the trade deficit with China is not limited to direct job losses. Competition with low-wage countries drives down wages and reduces bargaining power for millions of workers throughout the US economy. Scott and Mokhiber find that trade with low-wage countries like China is largely responsible for reducing wages by nearly $2,000 per worker per year, for all of the 100 million non-college-educated workers in the US. Most of that income was redistributed to corporations and to workers with college degrees at the top of the income distribution, adds the report. (KD)

Fibre2Fashion News Desk – India

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