Wednesday, 30 July 2008

EPI "China trade costs jobs in every state"

More China bashing or more to it? The Economic Policy Institute report that Chinese trade is causing job losses in every state of the US. The counter arguments are too numerous to go into but a basic trade text book should suffice.

China trade costs jobs in every state [EPI]

Unbalanced U.S. trade with China since 2001 has had a devastating effect on U.S. workers. Between 2001 and 2007, 2.3 million jobs were lost or displaced, including 366,000 in 2007 alone (Scott 2008). These jobs were displaced by the growth of the U.S. trade deficit with China, which increased from $84 billion in 2001 to $262 billion in 2007.

Growing China trade deficits between 2001 and 2007 eliminated jobs in all 50 states and the District of Columbia. Jobs displacement exceeded 2.0% of total employment in Idaho, New Hampshire, South Carolina, Oregon, California, Minnesota, Vermont, Texas, and Wisconsin (see Map). The effects of growing trade deficits with China have been felt widely across the United States and no area has been exempt from their impact. While traditional manufacturing states such as Wisconsin, Tennessee, and the Carolinas were certainly hard hit, so too were states in the tech sector such as California, Texas, Oregon, and Minnesota. Rapidly growing imports of computers and electronic parts accounted for almost half of the $178 billion increase and eliminated 561,000 U.S. jobs. Idaho, which lost an estimated 9,000 jobs in computer and electronic products alone, was the hardest-hit state in the country in terms of share of total state employment.


This press release is based on a longer paper that is worth having a look at.

The China trade toll [EPI]

In addition to its finding of 2.3 million U.S. jobs lost and workers displaced between 2001 and 2007, this study finds:

* Because U.S. exports to China are much more commodity intensive (i.e., comprising products such as grains, steel scrap, and paper scrap) than Chinese imports (99% of which are manufactured products), average wages earned in jobs producing U.S. exports to China paid 4.4% less than the jobs displaced by imports from China. More than one-fourth of U.S. exports to China on a value basis were commodities.
* The 2.3 million jobs lost/workers displaced nationwide since 2001 are distributed among all 50 states and the District of Columbia, with the biggest losers, in numeric terms: California (325,800 jobs lost), Texas (202,900), New York (127,000), Illinois (102,800), Ohio (102,700), Florida (100,900), Pennsylvania (85,100), North Carolina (79,800), Michigan (79,500), and Georgia (73,600).
* In the past year alone, each of these states has also lost more than 10,000 jobs due to growing China trade deficits, including California (55,400 jobs), Texas (34,100), New York (21,300), Illinois (17,300), Ohio (17,000), Florida (17,000), Pennsylvania (12,400), North Carolina (12,400), Michigan (12,300), and Georgia (11,500). Many of these are among the hardest-hit states in the current labor market downturn.
* The hardest-hit states, as a share of total state employment, are Idaho (14,700, 2.59%), New Hampshire (15,700, 2.5o%), South Carolina (42,600, 2.34%), Oregon (36,800, 2.29%), California (325,800, 2.23%), Minnesota (58,700, 2.18%), Vermont (6,500, 2.15%), Texas (202,900, 2.13%), and Wisconsin (59,100, 2.10%).
* Rapidly growing imports of computers and electronic parts accounted for almost half of the $178 billion increase in the U.S. trade deficit with China between 2001 and 2007. The $68 billion deficit in advanced technology products with China in 2007 was responsible for more than 25% of the total U.S.-China trade deficit. The growth of this deficit eliminated 561,000 U.S. jobs in computer and electronic products in this period. Other hard-hit industrial sectors include apparel and accessories (153,000 jobs), miscellaneous manufactured goods (134,000), and fabricated metal products (102,000); several service sectors were also hard hit by indirect job losses, including administrative support services (139,000) and professional, scientific, and technical services (128,000).
* More than two-thirds of the jobs displaced by China trade deficits were in manufacturing, which tends to employ a higher-than-average share of workers with a high school degree or less (43.7% of workers displaced) and to provide those workers with good wages and benefits. More than half (55.6%) of the jobs displaced came from the top half of the U.S. wage distribution, and among this group a disproportionate share came from the top 10th of all U.S. wage earners. African Americans (230,000 jobs lost), Hispanics (339,000), and other ethnic groups (219,000) all suffered from the loss of jobs such as these that pay substantially more and offer better benefits than jobs in other industries.



So who are EPI: "The Economic Policy Institute is a nonprofit, nonpartisan think tank that seeks to broaden the public debate about strategies to achieve a prosperous and fair economy."

Politics is the US is as always never clear. It appears to me that both the left and the right (or right and slightly less right) all want to bash China whenever possible. Where are the reports on how much better off US consumers are from access to cheap Chinese imports thus leaving them with more money to spend on other goods such as food?

These reports are at best misleading and at worst simply wrong. From the articles above it is not possible to pin the blame on China. What about Mexico, India and other developing countries?
.

17 comments:

Alex said...

Basic bashing by a 'think tank'. Are you aware of who they're funded by?

Juliana & June said...

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China Research said...

US-China trade is not entirely just trade between the US and China. The reason simply is that a lot of countries export components and raw materials to China, which are then used to manufacture final goods, which in turn are sold to the US, the EU, and elsewhere. For instance, Japan now exports more to China than to the US. However, a great deal of output from Japan still ends up in the US because of Japan's trade with China.

Thus, saying US-China trade is to blame for America's woes misunderstands the situation, and will only eventually make things far more worse. ie, Those who think protectionism is the solution know not what they ask for. A country that moves and stays outside the global trading system will inevitably become poorer in the long run.

dongcha said...

Sorry if this is the wrong place for this sort of thing, but I've been checking in on this blog for a while and was wondering what people here think about the potential influence of sovereign wealth funds in China.

You can find my concerns on a recent post on my blog:

http://dongcha.org/2008/08/chinas-sovereign-wealth-fund-an-enterprise-owned-state/

Curious to know people's thoughts in the comments...

dongcha.org

Anonymous said...

The EPI report is a bit one-sided, but in my view it is equally one-sided to highlight the gains to consumers from Chinese goods without also recognizing that growing imports of industrial goods from China could have contributed to downward pressure on wages; both sides of the ledger count. Larry Summers -- no protectionist -- has made a similar point in the FT. Certainly a world where the US trades financial assets for Chinese (and Asian) goods will produce a different set of winners and losers in the US from a world where the US trades goods and services for Chinese goods and services. The composition of US output will be different, with some sectors doing better and some doing worse. And we are in a world where the US trades financial assets for chinese goods rather than goods and services for goods and services because of government policy choices, not market forces. The EPI is surely right to note that some sectors of the US economy (notably workers in the manufacturing sector) have been hurt by China's massive exchange rate intervention.

Dongcha -- I thought your ananalysis of the CIC was right to highlight the corporatists risks created by large sovereign investments domestically. But the CIC's abiltiy to invest domestically is limited, as it primarily is a vehicle for helping to sterilize China's rapid reserve grwoth and thus it has to use the proceeds of its rmb bonds to invest abroad (its purchase of Huijin/ recapitalization of the CDB is a bit misleading ... there are limits to what it can do here if it wants to help move funds out of China and thus slow reserve growth). Moreover, it isn't -- unlike Alaska's fund -- financed out of a fiscal surplus but rather is financed by borrowing, and borrowing in rmb to buy $ produces losses, not gains in most scenarios. as a result, it isn't a vehicle for creating wealth. And as it was created to manage the fx that China's government is accumulating as a result of a policy of resisting market pressure for currency adjustment, in my view it represents a move away from capitalism, not a move toward it -- China's state is accumulating large funds and investing them (in ways that may or may not reflect state goals other than limiting china's financial losses), reinforcing state power in the global economy as a byproduct of a government policy to limit the adjustment in a key market price.

bsetser

Car Crozon said...

If you look at the Chinese Auto industry it might just get a little bit worse for the states. Take a look at this article I found: http://www.monsterauto.ca/chinese-cars.php

francis said...

Growing China trade deficits between 2001 and 2007 eliminated jobs in all 50 states and the District of Columbia. Jobs displacement exceeded 2.0% of total employment in Idaho, New Hampshire, South Carolina, Oregon, California, Minnesota, Vermont, Texas, and Wisconsin. The effects of growing trade deficits with China have been felt widely across the United States and no area has been exempt from their impact. While traditional manufacturing states such as Wisconsin,Tennessee, and the Carolinas were certainly hard hit, so too were states in the tech sector such as California, Texas, Oregon, and Minnesota. Rapidly growing imports of computers and electronic parts accounted for almost half of the $178 billion increase and eliminated 561,000 U.S. jobs. Idaho, which lost an estimated 9,000 jobs in computer and electronic products alone, was the hardest-hit state in the country in terms of share of total state employment. Economic Policy Institute Unbalanced U.S. trade with China since 2001 has had a devastating effect on U.S. workers. Between 2001 and 2007, 2.3 million jobs were lost or displaced, including 366,000 in 2007 alone (Scott 2008). These jobs were displaced by the growth of the U.S. trade deficit with China, which increased from $84 billion in 2001 to $262 billion in 2007. Growing China trade deficits between 2001 and 2007 eliminated jobs in all 50 states and the District of Columbia. Jobs displacement exceeded 2.0% of total employment in Idaho, New Hampshire, South Carolina, Oregon, California, Minnesota, Vermont, Texas, and Wisconsin (see Map). The effects of growing trade deficits with China have been felt widely across the United States and no area has been exempt from their impact.
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francis
Link Building

Anita said...

great article! for your readers, here is a good resource about china jobs. take a look at it:
" tradekey jobs "

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