Report finds 2.8 million U.S. jobs lost to China since 2001

Tuesday, September 20, 2011 at 4:48 pm

A new report from the Economic Policy Institute calculates 2.8 million U.S. jobs have been lost to China since 2001, the year the country joined the World Trade Organization.

The briefing paper, “Growing U.S. trade deficit with China cost 2.8 million jobs between 2001 and 2010,” by Robert Scott, reports all 50 states, the District of Columbia and Puerto Rico have been affected by job loss and labor displacement due to trade with China. Since 2001, the U.S. trade deficit with the Communist nation has ballooned from $84 billion to $278 billion.

Some of the hardest hit states include Texas and California, losing some 232,000 and 451,000 jobs, respectively, mostly in manufacturing.

The report also identified job losses per congressional district, with the five most depleted in California. District 15 that includes portions of the Silicon Valley is said to have lost 12 percent of its labor force to the country’s trade deficit with China. California’s unemployment rate is above 12 percent, according to August figures.

From the report:

• Within manufacturing, rapidly growing imports of computer and electronic parts (including computers, parts, semiconductors, and audio-video equipment) accounted for more than 44% of the $194 billion increase in the U.S. trade deficit with China between 2001 and 2010. The growth of this deficit contributed to the elimination of 909,400 U.S. jobs in computer and electronic products in this period. Indeed, in 2010, the total U.S. trade deficit with China was $278.3 billion—$124.3 billion of which was in computer and electronic parts.

• Global trade in advanced technology products—often discussed as a source of comparative advantage for the United States—is instead dominated by China. This broad category of high-end technology products includes the more advanced elements of the computer and electronic parts industry as well as other sectors such as biotechnology, life sciences, aerospace, and nuclear technology. In 2010, the United States had a $94.2 billion deficit in advanced technology products with China, which was responsible for 34% of the total U.S.-China trade deficit. In contrast, the United States had a $13.3 billion surplus in ATP with the rest of the world in 2010.

• Other industrial sectors hit hard by growing trade deficits with China between 2001 and 2010 include apparel and accessories (178,700 jobs), textile fabrics and products (92,300), fabricated metal products (123,900), plastic and rubber products (62,000), motor vehicles and parts (49,300), and miscellaneous manufactured goods (119,700). Several service sectors were also hit hard by indirect job losses including administrative, support, and waste management services (204,300) and professional, scientific, and technical services (173,100).

The author points the finger at currency manipulation as the culprit for U.S. labor lacking a competitive edge. While most foreign currencies fluctuate freely against the dollar based on market dynamics and treasury yields, the Chinese have pegged their currency, the yuan, to the dollar, explains the report.

This is evident due to the stagnant value of the Chinese currency, despite the country’s impressive spike in production since the start of the new millennium. The currency manipulation is explained further:

But the yuan has instead remained artificially low as China has aggressively acquired dollars and other foreign exchange reserves to further depress the value of its own currency. (To depress the value of its own currency, a government sells its own currency, which increases its foreign reserves.) China had to purchase $450 billion in U.S. treasury bills and other securities between December 2009 and December 2010, alone, to maintain the peg to the U.S. dollar (International Monetary Fund 2011).

The country’s foreign exchange reserve purchases increased dramatically to $728.8 billion, for a total reserve chest of $3.2 trillion, 70 percent of which is made up of the dollar.

“This intervention makes the yuan artificially cheap relative to the dollar, effectively subsidizing Chinese exports. The best estimates place this effective subsidy at roughly 28.5% of the U.S. dollar, even after recent appreciation in the yuan,” the author writes.

The alliance for American Manufacturing released a statement following the report’s release, stating in part:

“This report offers conclusive evidence that immediate action by the Administration is needed to curb China’s currency manipulation, which, along with China’s blatant trade violations, are having the same devastating impact on high-tech production that they’ve already had on the nation’s longstanding industrial base,” said Scott Paul, executive director of the Alliance for American Manufacturing (AAM), a partnership of America’s leading manufacturers and the United Steelworkers union.

“And if President Obama won’t name China a currency manipulator,” Paul said, “then Congress will have no choice but to pass legislation that will hold them accountable.


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