EPI: U.S. Trade Deficit With China Cost 3.4m Jobs Since 2001

The skyrocketing U.S. trade deficit with China, starting in 2001, cost U.S. workers 3.4 million jobs, including jobs that disappeared and those that weren’t created because firms faced low-cost Chinese competition, a new Economic Policy Institute analysis says. In addition, U.S. workers lost at least $37 billion in wages due to Chinese competition, EPI adds.

Every single U.S. congressional district lost jobs, but losses were higher in heavy manufacturing states and high-tech areas, such as Silicon Valley and Portland, Ore. Three-fourths of the losses were in factories, EPI analyst Robert Scott calculated, using U.S. data.

“What is needed is a clear, comprehensive approach to deal with China’s protective and predatory trade practices,” said Steelworkers President Leo Gerard after reading the report. His union leads the way among unions and businesses in bringing trade cases against China.

“China has used virtually every tool, legal and illegal, to steal our jobs and undermine our manufacturing base and economy. Subsidies, dumping, overcapacity, currency manipu-lation and cyberespionage are all used by China to help amass a $3.9 trillion trade surplus since 2001. Mounting trade deficits are sapping our economic strength and undermining our national security. It’s time to demand that China play by the rules,” Gerard added.

But he also faulted so-called “free traders” in the U.S. “Our government needs to recognize how its flawed trade policies damaged workers and their communities, while corporations and Wall Street have reaped profits. We need a new approach to trade that puts working families first,” Gerard declared.

California led in sheer job losses, with 589,100 jobs in the Golden State – 3.6 percent of all jobs – lost to China from 2001-15, Scott calculated. The largest losses were in Silicon Valley’s congressional districts.

But in statewide percentages, California finished second-worst, behind Oregon. That state lost 65,000 jobs to China in the same era, or 3.82 percent of all its workers. Half the Oregon losses were in Portland.

Minnesota, at 3.27 percent of all state jobs lost, was fourth-worst (-89,100 jobs), with the largest share in Rochester and the south. Illinois, at 2.52 percent (-149,400 jobs) was 14th overall. Of those, 17,200 were in the 6th congressional district in Chicago’s Northwest suburbs. Missouri lost 50,700 jobs and Ohio lost 121,500.

The U.S.-China trade deficit is so large that it now accounts for 48.2 percent of the overall U.S. trade deficit, Scott reports. In several sectors – notably advanced technology – the U.S. had a trade surplus with the rest of the world through 2015, and a huge deficit with China.

“Growth of the trade deficit means the United States is both losing jobs in manufacturing electronics and high tech, apparel, textiles, and a range of heavier durable goods industries -- and missing opportunities to add jobs in manufacturing, in exporting industries such as transport equipment, agricultural products, computer and electronic parts, chemicals, machinery, and food and beverages, because imports from China have soared, and exports have increased much less,” he explained.

Scott’s report notes U.S. exports to China increased from $19.2 billion in 2001 to $116 billion in 2015,  the latest federal figures available. But imports from China rose from $102.3 billion in 2001 to $483.2 billion in 2015.

The biggest losses – 1.238 million jobs -- have been in computers and electronics. That includes factories that produce computers and their components.

“Some regions are devastated by layoffs and factory closings while others are surviving but not growing the way they could be if new factories were opening and existing plants were hiring more workers. This slowdown in manufacturing job generation is also contributing to stagnating wages and incomes of typical workers and widening inequality,” Scott said.

That’s because while China benefited from the trade deficit, so did U.S.-based multinational corporations, he calculated. Scott advanced several solutions for closing the China trade gap. They included:

• Enhanced enforcement of fair trade laws, including more anti-dumping and countervailing duty verdicts and more cases against China with the World Trade Organization.

• Making elimination of Chinese overcapacity a goal of U.S.-China trade talks. Much of that over-capacity is in government-owned firms, Scott said. Those firms also receive heavy Chinese government subsidies. “This excess capacity fuels the dumping of exports into the U.S.,” Scott wrote.

• Barring China from bidding on federal procurement contracts, and banning the Chinese government-owned firms from investing in U.S. manufacturing and high-tech firms. The Machinists have campaigned against such investment for years, citing national security.

• Keeping China a “non-market economy” under WTO rules. Making it a market economy takes away many U.S. trade enforcement tools, Scott notes.

• Negotiating a new pact with China, similar to the Plaza Accord many years ago, to curb its currency manipulation, which also gives its exporters an unfair advantage.

“In short, the U.S.–China trade relationship needs to undergo a fundamental change. In addition to putting an end to the unfair trade practices outlined here, the new terms of this relationship must include action on China’s part to reduce its massive and growing savings glut by raising wages, increasing spending on health care and pensions, and recognizing free and independent trade unions. Through these steps, China can raise consumption and end its persistent trade surpluses,” Scott says.