Robert E. Scott is a Professor at the Economic Policy Institute (EPI). He is a Senior Economist and Director of Trade and Manufacturing Policy Research. Professor Scott has written extensively on international trade, especially international trade relations with China.
Growing China trade deficit cost 3.7 million American jobs between 2001 and 2018: Jobs lost in every U.S. state and congressional district
Two weeks after President Trump signed a “phase one” trade deal with China, a new EPI analysis shows that growing trade deficits with China cost 3.7 million U.S. jobs between 2001 and 2018, including 700,000 jobs lost in the first two years of the Trump administration.
Despite the tariffs and other restrictions imposed on China trade by the Trump administration, the bilateral trade deficit continued to grow between 2016 and 2018 because of the failure to address the fundamental flaws with the U.S.–China trade relationship.
Job losses occurred in all 50 states and in every congressional district, with the highest rates of job loss occurring in New Hampshire, Oregon, California, North Carolina, Minnesota, Massachusetts, Wisconsin, Vermont, Indiana, and Idaho—ranging from 2.81% to 3.66% of total state employment. The report is authored by EPI Director of Trade and Manufacturing Policy Research Robert E. Scott and Data Analyst Zane Mokhiber.
“The growing trade deficit has been driven by China’s history of currency manipulation and private investors bidding up the value of the U.S. dollar, making imports cheaper in the U.S. market and American-made goods more expensive for overseas consumers,” Scott said. “However, the Trump administration’s trade deal with China maintains an extremely unfavorable exchange rate and fails to address the key structural concerns responsible for the long-term trade imbalance, including China’s huge subsidies and massive excess capacity in a wide range of industries. This deal is nothing more than a gift to Wall Street and Beijing.”
Job losses have occurred in every industry, including sectors in which the United States has historically held a competitive advantage, but were concentrated in manufacturing. A staggering 2.8 million jobs—three-fourths of the total jobs lost in this time period—were in manufacturing. Additionally, global trade in advanced technology products has been dominated by China. Between 2001 and 2018, the trade deficit in the computer and electronic parts industry grew the most—leading to the loss of 1.3 million jobs, 36% of total job losses.
Supporters of China’s entry into the World Trade Organization in 2001 claimed that the move would create jobs and increase U.S. exports to China. However, China has continued to engage in unfair trade practices, which have limited the growth of U.S. exports. Meanwhile, growth in outsourcing by multinational companies has created a flood of Chinese imports into the United States, leading to rapidly growing trade deficits and corresponding job losses. The U.S. trade deficit with China has increased annually by $19.8 billion, or 10.0%, on average since 2001. Overall, the U.S trade deficit with China has grown from $83.0 billion in 2001 to $419.5 billion in 2018, an increase of $336.5 billion.
“A fundamental transformation of the U.S.–China trade relationship is long overdue,” said Thea Lee, president of EPI. “The top American trade priority must be to address the structural roots of the imbalanced and unfair trade relationship with China, including by ending currency misalignment and Chinese government subsidies to key industries. We need real dialogue with the Chinese government to make progress toward compliance with internationally recognized workers’ rights, ideally in coordination with our allies.”
The impact of the trade deficit with China is not limited to direct job losses. Competition with low-wage countries drives down wages and reduces bargaining power for millions of workers throughout the U.S. economy. Scott and Mokhiber find that trade with low-wage countries like China is largely responsible for reducing wages by nearly $2,000 per worker per year for all of the 100 million U.S. workers without college degrees. Most of that income was redistributed to corporations and to workers with college degrees at the top of the income distribution.
Read the Full Study Here.
Study ” Unilateral Grant of Market Economy Status to China would put Millions of EU Jobs at Risk”
One of his most famous works in Europe is a study titled “Unilateral Grant of Market Economy Status to China would put Millions of EU Jobs at Risk” and was published in September 2015. This landmark study by the EPI reveals that if the EU grants Market Economy Status (MES) to China, the EU could lose up to 3.5 million jobs and 2% of GDP. If the EU surrenders to Chinese pressure for Market Economy Status, Europe would permanently lose the ability to set proper anti-dumping measures on unfairly dumped Chinese imports. Such a capitulation would severely damage the competitiveness of EU manufacturing industries, undermining still fragile European economies.
Professor Robert E. Scott, author of the study and Director of Trade and Manufacturing Policy Research at EPI, commented on his findings saying, “Abandoning the possibility of obtaining relief from state-financed dumping would expose EU producers to a flood of cheap products from China, destroying employment and business investment in manufacturing.”
The EPI study calculated that MES for China would directly put at risk up to 1 million European jobs in affected industries, with knock-on losses of 1 million additional indirect jobs in related sectors. Subsequent negative income effects could lead to as many as 3.5 million job losses over the next three to five years, according to EPI. The hardest hit countries would be Germany, Italy, UK, France and Poland.
Professor Scott added, “If China continues its strategy of developing overcapacity and dumping, job losses – especially in import sensitive industries – could be even higher. Sectors such as steel, ceramics, aluminium, paper, glass, auto parts as well as chemicals and environmental technology industries, which already suffer from Chinese dumping, would be particularly affected. Market Economy Status could put 2.7 million jobs in these highly vulnerable industries at particular risk.”
The study was presented by AEGIS Europe in Brussels in September 2015. AEGIS Europe is an alliance of 30 manufacturing industry associations that advocate free and fair international trade. AEGIS Europe highlights that everyone accepts that China meets only one of the five EU criteria necessary to be considered as a market economy.
Reacting to the report, AEGIS spokesman Milan Nitzschke said, “China is not a market economy and cannot be recognised by EU policy makers as such. China has been lobbying for MES for many years, but in the last five years its leadership has doubled subsidies to Chinese industry, resulting in even greater overcapacity, overproduction and dumping.”
“Around 50 vital EU anti-dumping measures currently in force would be nullified by MES. China would be able to expand its strategic dumping across all sectors of European manufacturing. Other major trading partners, such as the US or Japan, are not expected to grant MES to China: there is no reason for the EU to do so either”, added Mr Nitzschke.
Read the full report here.
Other reports and articles by Professor Scott
August 16, 2017 “We still haven’t recovered well-paying construction and manufacturing jobs”
January 31, 2017 “Growth in US-China trade deficit between 2001 and 2015 cost 3.4 million jobs”
November 7, 2016 “The TPP is a door for dumped and subsidized imports from China: it would enhance, not limit, China’s influence in the region”
September 2, 2016 “Manufacturing job loss: the consequences of malign neglect of the dollar and Chinese overcapacity”
December 9, 2015 “A Conservative Estimate of the ‘Walmart Effect’ – Wal-Mart’s growing trade deficit with China has displaced more than 400,000 U.S. jobs”
August 11, 2015 “Manufacturing Job Loss – Trade not Productivity is the Culprit”