Trade Deficit with China Costs 2.7 Million Jobs, Study Finds

Aug. 23, 2012
Bulk of job losses over last decade occurred in manufacturing.

A growing trade deficit with China is responsible for the loss of 2.1 million manufacturing jobs since 2001, a new study concludes, and more than 2.7 million U.S. jobs overall.

These job losses occurred since China was admitted into the World Trade Organization (WTO) a decade ago, according to the report by the Economic Policy Institute (EPI).

“The United States is piling up foreign debt and losing export capacity, and the growing trade deficit with China has been a prime contributor to the crisis in U.S. manufacturing employment,” said the report’s author, Robert E. Scott, EPI’s director of Trade and Manufacturing Policy Research.

Through June, the U.S. trade deficit with China in 2012 was more than $145 billion and outpacing the same period in 2011.

Between 2001 and 2011, the trade deficit with China eliminated or displaced more than half of all U.S. manufacturing jobs lost over that period. The growing trade deficit with China, EPI found, has cost jobs in every state as well as in the District of Columbia and Puerto Rico.

The total losses include 662,100 jobs from 2008 to 2011, even though imports from China and the rest of the world plunged in 2009 before recovering and surpassing the previous peak reached in 2008.
The trade deficit in the computer and electronic parts industry grew the most, displacing more than 1 million jobs in high-tech industries. In fact, rapidly growing imports of computer and electronic parts, including computers, semiconductors and audio-video equipment, accounted for nearly 55% of the $217.5 billion increase in the U.S. trade deficit with China between 2001 and 2011.

“The EPI report offers convincing evidence that, unless China’s trade violations and currency manipulation are challenged forcefully, our growing trade deficit will continue to cripple the fledgling U.S. jobs recovery,” said Scott Paul, executive director of the Alliance for American Manufacturing (AAM), an organization representing manufacturers and the United Steelworkers (USW).

While U.S. exports to China have grown from 2000-2011, Paul said imports from China have far outpaced exports in the same timeframe, and America’s annual trade deficit with China has more than tripled since 2000.

“Exports to China may have increased since 2000, but imports have soared dramatically in that time,” said Paul.
The study found the hardest-hit congressional districts were in California, Texas, Oregon, and Massachusetts, and Minnesota. Some districts in North Carolina, Georgia, Colorado, and Alabama also were hit especially hard by job displacement in a variety of manufacturing industries, including computers and electronic parts, textiles and apparel, and furniture.

Trade Deficit Puts Pressure on Wages

According to the EPI report, competition with China also has driven down wages for workers in U.S. manufacturing and reduced the wages and bargaining power of similar, non-college-educated workers throughout the economy who comprise roughly 70% of the workforce, or about 100 million workers.

China is the most important source of downward wage pressure from trade because its products make up such a large portion of U.S. imports. Indeed, China was responsible for 55.3% of U.S. non-oil imports from less-developed countries in 2011.

Other industrial sectors hit hard by growing trade deficits with China between 2001 and 2011 include apparel and accessories (211,200 jobs), textile mills and textile product mills (106,200), fabricated metal products (120,600), furniture and fixtures (80,700), plastic and rubber products (57,600), motor vehicles and parts (19,800), and miscellaneous manufactured goods (111,800).

Several service sectors also were hit hard by indirect job losses, including administrative, support, and waste management services (160,600), and professional, scientific, and technical services (145,000).

The states suffering the biggest net losses were California (474,700 jobs), Texas (239,600), New York (158,800), Illinois (113,700), North Carolina (110,300), Florida (106,100), Pennsylvania (101,200), Ohio (95,900), Massachusetts (92,700), and Georgia (87,300).

EPI's Scott said the job displacement estimates in the study are conservative. They include only the direct and indirect jobs displaced by trade, and exclude jobs in domestic wholesale and retail trade or advertising, and re-spending employment. He noted that during the 2007–2009 recession, and continuing through 2011, jobs displaced by China trade reduced wages and spending, which led to further job losses in the economy.

Paul added, “Both Congress and the administration have missed opportunities to reduce our trade deficit with China, and consequently stem the offshoring we still see. Stopping China’s currency manipulation and cheating on its trade obligations is key to making America more competitive, but we must also take concrete steps here to boost jobs: investing in training, infrastructure and innovation and forming a manufacturing strategy are critical.”

Sponsored Recommendations

Voice your opinion!

To join the conversation, and become an exclusive member of IndustryWeek, create an account today!