Trade With China Has Cost 3.2 Million American Jobs

By Niraj Chokshi, The Washington Post

15 December 14

The trade imbalance with China has cost jobs in every state, according to the Economic Policy Institute. Check out Figure B in EPI’s report for an interactive version of the map above. (EPI)

fter 15 years of negotiating, China was finally granted membership to the World Trade Organization in 2001, a pivotal step in the opening of the country’s economy.

The impact of its entry was much debated, but one thing quickly became clear: It was a good move for China. A new study from the left-leaning Economic Policy Institute shows that while China gained, the American labor market suffered: At least 3.2 million American jobs were displaced during the first dozen years that China was in the WTO, thanks to an unbalanced trade relationship between the two countries.

“The growing trade deficit with China has cost jobs in all 50 states and the District of Columbia,” EPI’s Robert E. Scott and Will Kimball write. “Using a new model and new congressional district data to estimate the job impacts of trade for the 113th Congress, this study also finds that job losses occurred in every congressional district but one.” (California’s 21st congressional district, located in the state’s Central Valley, was the only one that saw no job losses due to Chinese trade, according to the report.)

Imports from China grew dramatically from $102 billion the year it joined the WTO to $438 billion in 2013. Trade in reverse grew as well, from $18 billion to $114 billion. But in 2013 the U.S. was importing four times more from China than it was exporting to the country, making it one of the—if not the—most imbalanced trade relationship for the U.S. That growing trade deficit contributed to an ever-increasing displacement of American jobs, as depicted in the graphic below.

(Note: It shows the cumulative impact of the U.S.-China trade deficit.)

The cumulative impact of trade with China, since it joined the WTO. (EPI)

The congressional districts hardest hit by open trade with China were those with industry highly exposed to that trade imbalance. Districts home to the computer and electronic parts and other durable goods industries were particularly affected.

The three hardest-hit districts were all in Silicon Valley. California’s 17th Congressional District saw the most displaced jobs as a as a share of overall employment: A loss of 61,500 jobs over the first dozen years of China’s membership in the WTO meant the district lost about 17.8 percent of district employment. California’s 18th lost just over 50,000 jobs, or 14.7 percent of district employment. And the state’s 19th district was next, with job losses accounting for about 12.3 percent of district employment.

Among the top 20 hardest-hit congressional districts, 8 were in California, 6 were in Texas and one each was in Georgia, Illinois, Massachusetts, Minnesota, New York and Oregon.

Get the underlying data at epi.org.

But displaced jobs haven’t necessarily directly benefited China, the authors note.

Is America’s loss China’s gain? The answer is not clearly affirmative. China has become dependent on the U.S. consumer market for employment generation, suppressed the purchasing power of its own middle class with a weak currency, and, most importantly, now holds nearly $4 trillion in foreign exchange reserves instead of investing them in public goods that could benefit Chinese households.

Other research has found similar effects. In their 2012 paper, economists David Autor, David Dorn, and Gordon Hanson found that import competition from China had cost the U.S. 1.5 million manufacturing jobs from 1990 to 2007. The EPI estimates are larger than those in the 2012 paper, but both show significant job losses due to Chinese trade. Another paper published this year by those authors and two others — Daron Acemoglu and Brendan Price — reached a similar conclusion: job losses of 2 to 2.4 million from 1999 to 2011. Again, not the same magnitude as EPI’s estimates, but substantial nonetheless.

EPI’s Scott and Kimball end their paper with a call to action.

“The U.S.-China trade relationship needs to undergo a fundamental change,” they write. “Addressing the exchange rate policies and labor standards issues in the Chinese economy are elements of an important first step. It is time for the administration to respond to the growing chorus of calls from economists, workers, businesses, and Congress and take action to stop illegal currency manipulation by China and other countries.”