China Trade Toll

China Trade Toll

Th e growth of U.S. trade with China since China entered the World Trade Organization in 2001 has had a devastating eff ect on U.S. workers and the domestic economy. Between 2001 and 2007 2.3 million jobs were lost or displaced, including 366,000 in 2007 alone. New demographic research shows that, even when re-employed in non-traded industries, the 2.3 million workers displaced by the increase in China trade defi cits in this period have lost an average $8,146 per worker/year. In 2007, these losses totalled $19.4 billion.1

... Trade

with less-developed countries has reduced the bargaining power of all workers in the U.S. economy who resemble the import-displaced in terms of education, credentials, and skills. Annual earnings for all workers without a fouryear college degree are roughly $1,400 lower today because of this competition, and this group constitutes a large majority of the entire U.S. workforce (roughly 100 million workers or about 70% of all workers, Bivens

(2008a)). China, with nearly 40% of our non-oil imports from less-developed countries, is a chief contributor to this wage pressure.

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

More than two-thirds of the jobs displaced by China trade defi cits 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 benefi ts. 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 suff ered from the loss of jobs such as these that pay substantially more and off er better benefi ts than jobs in other industries.

A major cause of the rapidly growing U.S. trade defi - cit with China is currency manipulation. China has tightly pegged its currency to the dollar at a rate that encourages a large bilateral surplus with the United States. Maintaining this peg required the purchase of about $460 billion in U.S. treasury bills and other securities in 2007 alone.2 Th is intervention makes the yuan artifi cially cheap and provides an eff ective subsidy on Chinese exports. Th e best estimates place this eff ective subsidy at roughly 30%, even after recent appreciation in the yuan(Cline and Williamson 2008).3

China also engages in extensive suppression of labor rights. An AFL-CIO study estimated that repression of labor rights by the Chinese government has lowered manufacturing wages by 47% to 86% (AFL-CIO 2006, 138). China has also been accused of massive direct subsidization of export production in many key industries (see, e.g., Haley 2007). Finally, it maintains strict, non-tariff barriers to imports. As a result, China’s exports to the United States of $323 billion in 2007 were more than fi ve times greater than U.S. exports to China, which totaled only $61 billion (Table 1). China’s trade surplus was responsible for 52.3% of the U.S. total non-oil trade defi cit in 2007, making the China trade relationship this country’s most imbalanced by far. Unless China raises the real value of the yuan by an additional 30% and eliminates these other trade distortions, the U.S. trade defi cit and job losses will continue to grow rapidly in the future. ...