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March 25, 2010

China Trade Deficit Toll: 2.4 Million Jobs

Robert Scott of the Economic Policy Institute (EPI) just came out with a terrific new study on the job losses that the U.S. economy has suffered because of the sky-high deficit with China.  It estimates that the rise in the deficit with China since it entered the WTO (2001) has displaced 2.4 million jobs.  

Between December 2007 (when the recession began) and February 2010, the U.S. economy lost 8.4 million jobs.  This means that if our deficit with China reverted back to its level in 2001 instead of being at its current level, the U.S. economy could generate about one-fourth of the jobs that it lost during the Great Recession.

What’s great about this study is that it estimates job losses in each congressional district.  Previous studies from EPI looked at deficit-induced job losses only down to the state level. With this study, Scott uses a different dataset that surveys millions of people per year, so there are enough respondents in each congressional district to get job loss estimates. Check out where your district ranks in job losses here (and here for an alphabetical listing).

Fortunately, there is a lot of movement in Congress to get China to allow its currency to appreciate against the U.S. dollar. Last Monday, 130 members of Congress, led by Representative Mike Michaud, sent a letter to Treasury Secretary Tim Geithner and Commerce Secretary Gary Locke urging them to officially designate China as a currency manipulator in its April 15th report.  Yesterday, the House Ways and Means Committee held a hearing on China’s currency policy, its impact on the U.S. economy, and steps that the U.S. could take to press China to revalue it currency.  Most economists believe that China’s currency is undervalued by about 40 percent, making imports from China artificially cheap for the U.S. and U.S. goods more expensive in China.


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Don Juan of Austria

Unfortunately, most economists are right-wing morons (at least on trade), and so they will ignore this study, pontificating about the importance of competitiveness behind their own moat of tenure and/or government employment.

If we started outsourcing economics to China the way we have manufacturing, I think we might see two effects:

1- there would be no drop in the quality or amount of economic apologias for our China trade policy

2- now unemployed, U.S. economists might wake up to reality

Elaine Cullen

Although I think that the trade deficit statistics with China are important, the U.S.'s trade deficit with China is just part of a larger pattern of record trade deficits with almost all countries. As well, the trade deficit with China is not from Chinese companies but foreign companies producing goods in China. Very few products from Chinese companies are imported into the U.S. A fair percentage are U.S. companies exporting back, but a large percentage are other country's companies, including Japan and Germany. What is notable is the massive foreign direct investment that Japan first and Germany second are making worlwide and it is their companies, not only from Japan and Germany, but from third countries where they have invested, that are benefitting financially

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