Last week, when most politically involved Americans - elected and otherwise - and most of the media were understandably focused on health insurance reform, the American Manufacturing Organization and the Economic Policy Institute released a report, "Unfair China Trade Costs Local Jobs," written by Robert E. Scott.
Since Beijing joined the World Trade Organization in 2001, U.S. trade and the trade deficit with China have soared. The impact on American workers has been disturbing, particularly in electronic equipment and computers. Through the end of 2008, 2.4 million U.S. jobs have been "lost or displaced," 345,500 jobs a year. The hardest hit states are California, Texas and North Carolina, but the effect has been felt in every Congressional district.
Click here for the interactive version of the map.
What's to blame? According to the study, it's China's suppression of the value of its currency (the renminbi), government policies that give Chinese businesses an unfair trade advantage, labor rights suppression, environmental degradation and subsidies of production of goods for export. None of those conclusions haven't been debated previously. But the heat's been rising, particularly with the U.S. job market still deep depressed. A correction of 41% appreciation of the renminbi against the dollar is needed to bring the two currencies into balance, the EPI report states.
"China's cheating is causing America to lose more than just the capacity to make widgets in the one-sided trade arrangements with China," said Scott Paul, executive director of the Alliance for American Manufacturing, which helped finance the study. "Sophisticated electronics and high-tech products that once were made in the United States are increasingly being made in China instead."
Here are highlights of the study:
• The 2.4 million jobs lost/workers displaced nationwide since 2001 are distributed among all 50 states, the District of Columbia, and Puerto Rico, with the biggest losers, in numeric terms: California (370,000 jobs), Texas (193,700), New York (140,500), Illinois (105,500), Florida (101,600), Pennsylvania (95,700), North Carolina (95,100), Ohio (91,800), Georgia (78,100), and Massachusetts (72,800).
• The hardest-hit states, as a share of total state employment, are New Hampshire (16,300, 2.35%), North Carolina (95,100, 2.30%), Massachusetts (72,800, 2.25%), California (370,000, 2.23%), Oregon (38,600, 2.19%), Minnesota (58,800, 2.17%), Rhode Island (10,600, 2.01%), Alabama (39,300, 1.97%), Idaho (13,500, 1.97%), and South Carolina (38,400, 1.97%).
• Rapidly growing imports of computer and electronic parts (including computers, parts, semiconductors, and audio-video equipment) accounted for more than 40% of the $186 billion increase in the U.S. trade deficit with China between 2001 and 2008. The $73 billion deficit in advanced technology products with China in 2008 was responsible for 27% of the total U.S.-China trade deficit. The growth of this deficit contributed to the elimination of 627,700 U.S. jobs in computer and electronic products in this period. ...
• The hardest-hit Congressional districts had large numbers of workers displaced by manufacturing trade, especially in computer and electronic parts, 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, 26,900 jobs, 8.3% of all jobs in the district), the 14th (Palo Alto and nearby cities, 20,300 jobs, 6.3%), and the 16th (San Jose and other parts of Santa Clara county, 18,200 jobs, 6.0%).
Sens. Chuck Schumer, Sherrod Brown and Lindsey Graham have revived 2007 legislation that would require the Treasury Department to determine if currencies were misaligned against the dollar and make it easier to impose import duties to compensate for any misalignments. Two weeks ago, Brown said at a news conference: "President Obama has outlined a plan to double exports but you simply can’t do that if you don’t address the currency issue. China’s current policy is out-and-out protectionism."
Paul Krugman has said economic growth would run 1.5 percent more "if China stopped restraining the value of its currency and running trade surpluses." That's a view not shared by Shaun Rein of the China Market Research Group, a market intelligence firm. Even though Chinese Premier Wen Jiabao has said he does not think the yuan is undervalued, some Chinese leaders seem to believe otherwise. Why is this an issue now?
The debate is far from academic. In the coming weeks, the Obama administration faces a series of politically charged deadlines set by Congress to decide whether to continue negotiating with China over currency and trade issues or to take a more confrontational stance and name China a currency manipulator.
If the administration labels China a currency manipulator, it would face further Congressional pressure to impose punitive tariffs on many Chinese goods.
April 15 is a day of reckoning for many Americans who have waited to the last minute to deal with their taxes. This year it also marks the day when the Treasury Department will issue a report about whether China manipulates its currency "for purposes ... of gaining unfair competitive advantage in international trade." The administration has twice before not made such a declaration when previous reports were released, but pressure is mounting to do so. Last week, Treasury Secretary Tim Geithner got an earful from a panel of economists at a House Ways and Means Committee, one of them saying that if the U.S. didn't act on currency manipulation for diplomatic reasons it would be viewed as "wimps of the Western world."