A new report from the Economic Policy Institute (EPI) reveals the effect that China’s admittance to the World Trade Organization (WTO) has had on U.S. workers and the domestic economy.
According to Robert E. Scott, researcher of The China Toll, “between 2001 and 2011, the trade deficit with China eliminated or displaced more than 2.7 million U.S. jobs, over 2.1 million of which (76.9 percent) were in manufacturing.”
Nearly 2.7 million jobs have been lost to China. 662,100 of these losses came between 2008-2011 according to the study. The computer and electronics industry has been hit particularly hard with 1,064,800 jobs displaced, 38.8 percent of the 2001–2011 total.
Wages of workers with less than a four year college degree have been driven down by competition from less developed countries. Roughly 70 percent of that workforce, nearly 100 million workers, have felt the chilling effect.
Other highlights/lowlights from The China Toll include:
The more than 2.7 million U.S. jobs lost or displaced by the trade deficit with China between 2001 and 2011 were distributed among all 50 states, the District of Columbia, and Puerto Rico, with the biggest net losses occurring in 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).
The states hardest hit by the economic recession saw job losses equal to or greater than the national job loss to China rate.
Jobs displaced due to growing deficits with China equaled or exceeded 2.2 percent of total employment in the 12 hardest-hit states: New Hampshire (20,400 jobs lost or displaced, equal to 2.94 percent of total state employment), California (474,700, 2.87 percent), Massachusetts (92,700, 2.86 percent), Oregon (50,200, 2.85 percent), North Carolina (110,300, 2.67 percent), Minnesota (72,300, 2.66 percent), Idaho (18,200, 2.65 percent), Vermont (8,000, 2.43 percent), Colorado (57,800, 2.38 percent), Texas (239,600, 2.26 percent), Rhode Island (11,800, 2.24 percent), and Alabama (43,900, 2.20 percent).
The Congressional districts hardest hit by this problem were those which had large concentrations of high tech manufacturing.
The hardest-hit congressional districts were concentrated in states that were heavily exposed to growing China trade deficits in computer and electronic products and other industries such as furniture, textiles, apparel, and durable goods manufacturing. The three hardest-hit congressional districts were all located in Silicon Valley in California, including the 15th (Santa Clara County, which lost 44,700 jobs, equal to 13.77 percent of all jobs in the district), the 14th (Palo Alto and nearby cities, 32,700 jobs, 10.20 percent), and the 16th (San Jose and other parts of Santa Clara County, 29,000 jobs, 9.55 percent). Of the top 20 hardest-hit districts, seven were in California (in rank order, the 15th, 14th, 16th, 13th, 31st, 34th, and 50th), four were in Texas (31st, 10th, 25th, and 3rd), two were in North Carolina (4th and 10th), two were in Massachusetts (5th and 3rd), and one each in Oregon (1st), Georgia (9th), Colorado (4th), Minnesota (1st), and Alabama (5th). Each of these districts lost at least 11,400 jobs, or more than 3.7 percent of its total jobs.
Perhaps the main cause of this trade deficit is China’s currency manipulation. The Chinese yuan is attached to the U.S. dollar at a rate that encourages a large trade surplus against the United States, whereas other countries peg their currency freely to the U.S. dollar, the study explains:
As of June 30, 2012, China held a total of $3.24 trillion in foreign exchange reserves (Bloomberg News 2012), about 70 percent of which were held in U.S. dollars. This intervention makes the yuan artificially cheap relative to the dollar, effectively subsidizing Chinese exports. Although the yuan has appreciated significantly since 2005, economist H.W. Brock (2012) estimates that the Chinese currency is still massively undervalued, and is “arguably one-sixth of what it should be” (Miller 2012). New research by Joe Gagnon (2012, 3) estimates that massive currency manipulation, especially by countries in Asia, has raised “the current account of the developing economies by roughly $700 billion [per year], relative to what it would have been.” Gagnon also notes that this “amount is roughly equivalent to the large output gaps in the United States and euro area. In other words, millions more Americans and Europeans would be employed if other countries did not manipulate their currencies…” (Gagnon 2012, 1). China is the single most important currency manipulator, based on both its massive currency intervention over the past decade and its share of global current account surpluses.
This growing problem is unlikely to change without a drastic policy shift from top level officials in Washington. Unfortunately, the distinction between the two candidates’ positions is not as stark as many would like. For Obama, making good on his 2008 campaign promise to combat this growing problem has been easier said than done.
Read the entire EPI report here.