China is to blame for millions of lost U.S. manufacturing jobs, new study finds

Many economists have long blamed automation as main culprit
By JEFFRYBARTASH

Robots are not to blame for the loss of millions of U.S. manufacturing jobs.
Millions of Americans who lost manufacturing jobs during the 2000s have long ”known” China was to blame, not robots. 

And many helped elect Donald Trump as president because of his insistence that China was at fault.
Evidently many academics who’ve studied the issue are finally drawing the same conclusion.
For years economists have viewed the increased role of automation in the computer age as the chief culprit for some 6 million lost jobs from 1999 to 2010 — one-third of all U.S. manufacturing employment. 

Firms adopted new technologies to boost production, the thinking goes, and put workers out of the job in the process. 

Plants could make more stuff with fewer people.

In the past several years fresh thinking by economists such as David Autor of MIT has challenged that view. 

The latest research to poke holes in the theory of automation-is-to-blame is from Susan Houseman of the Upjohn Institute.
Academic research tends to be dry and complicated, but Houseman’s findings boil down to this: The government for decades has vastly overestimated the growth of productivity in the American manufacturing sector. 

It’s been growing no faster, really, than the rest of the economy.
What that means is, the adoption of technology is not the chief reason why millions of working-class Americans lost their jobs in a vast region stretching from the mouth of the Mississippi river to the shores of the Great Lakes. 

Nor was it inevitable.
Autor and now Houseman contend the introduction of China into the global trading system is root cause of the job losses.
Put another way, Bill Clinton and political leaders who succeeded him accepted the risk that the U.S. would suffer short-term economic harm from opening the U.S. to Chinese exports in hopes of long-run gains of a more stable China.
No longer needing to worry about U.S. tariffs, the Chinese took full advantage. 

Low Chinese wages and a cheap Chinese currency — at a time when the dollar was strong — gave China several huge advantages. 

Companies shuttered operations in the U.S., moved to China and eventually set up research hubs overseas in another blow to the America’s economic leadership.
The cost to the U.S. is still being tallied up.
For one thing, it left countless families devastated and deprived many areas in the middle of the country of a good fountain of economic opportunity. 

Manufacturing jobs have long been a great source of economic mobility for less educated Americans. Those who lost their jobs had to fall back on menial, less well-paying work.
Most recently, some of the states that lost the most from the hollowing out of the manufacturing sector paved the way for the 2016 election of Trump and the huge political upheaval in Washington that is still ongoing. 

Trump better understood what blue-collar workers were thinking and who they blamed.

The growing recognition of the tradeoffs of free trade might compel American lawmaker to craft policies more suited to helping American workers, Autor and others argue.

Rogue Nation

China’s a trade cheat
By Fareed Zakaria

Employees work inside an LCD factory in Wuhan, China. 

Ever since the resignation of top advisers Gary Cohn and H.R. McMaster, it does seem as if the Trump White House has gotten more chaotic, if that is possible. 

But amid the noise and tumult, including the alarming tweets about Amazon and Mexico, let’s be honest — on one big, fundamental point, President Trump is right: China is a trade cheat.
Many of the Trump administration’s economic documents have been laughably sketchy and amateurish. 

But the Office of the U.S. Trade Representative’s report to Congress on China’s compliance with global trading rules is an exception worth reading. 

In measured prose and great detail, it lays out the many ways that China has failed to enact promised economic reforms and backtracked on others, and uses formal and informal means to block foreign firms from competing in China’s market. 

It points out correctly that in recent years, the Chinese government has increased its intervention in the economy, particularly taking aim at foreign companies. 

All of this directly contradicts Beijing’s commitments when it joined the World Trade Organization in 2001.
Whether one accepts the trade representative’s conclusion that “the United States erred in supporting China’s entry into the WTO,” it is clear that the expectation that China would continue to liberalize its markets after its entry has proved to be mistaken.

Washington approached China’s entry into the world trading system no differently from that of other countries that joined in the mid-20th century. 

As countries were admitted, the free world (especially the United States) opened its markets to the new entrants, and those countries in turn lowered barriers to their markets. 

That’s how it went with such nations as Japan, South Korea and Singapore. 

But there were two notable factors about these countries: They were relatively small compared with the size of the global economy, and they also lived under the American security umbrella. 

Both factors meant that Washington and the West had considerable leverage over these new entrants. Singapore had 2.2 million people and a gross domestic product of $19 billion when it joined the GATT (the precursor to the WTO), while South Korea had 30 million people and a GDP of $41 billion. 

Japan was larger, with 90 million people and a GDP of under $800 billion. (All GDP figures are adjusted for inflation.)
And then came China, with 1.3 billion people and a GDP of $2.4 trillion when it joined the WTO in 2001. 

That was almost a fifth of the U.S. economy. 

The Chinese seemed to recognize that once they were in the system, the size of their market would ensure that every country would vie for access, and this would give them the ability to cheat without much fear of reprisal. 

Moreover, Beijing was never dependent on Washington for its security. 

It had fought a war against American troops in the 1950s with some success and had grown into a great power in its own right.
The scale and speed of China’s integration into the world trading system made it a seismic event. 

The distinguished economist David Autor, along with two colleagues, has published study after study on the impact of the so-called China Shock. 

They conclude that about a quarter of all manufacturing jobs lost in the United States between 1990 and 2007 could be explained by the deluge of Chinese imports. 

Nothing on this scale had happened before.
Look at the Chinese economy today. 

It has managed to block or curb the world’s most advanced and successful technology companies, from Google to Facebook to Amazon. 

Foreign banks often have to operate with local partners who add zero value — essentially a tax on foreign companies. 

Foreign manufacturers are forced to share their technology with local partners who then systematically reverse engineer some of the same products and compete against their partners. 

And then there is cybertheft. 

The most extensive cyberwarfare waged by a foreign power against the United States is done not by Russia but by China. 

The targets are American companies, whose secrets and intellectual property are then shared with Chinese competitors.
China is not alone. 

Countries such as India and Brazil are also trade cheats. 

In fact, the last series of world trade talks, the Doha Round, was killed by obstructionism from Brazil and India, in tandem with China. 

Today the greatest threat to the open world economy comes from these large countries that have chosen to maintain mixed economies, refuse to liberalize much more and have enough power to hold firm.
The Trump administration may not have chosen the wisest course forward — focusing on steel, slapping on tariffs, alienating key allies, working outside the WTO — but its frustration is understandable. 

Previous administrations exerted pressure privately, worked within the system and tried to get allies on board, with limited results. 

Getting tough on China is a case where I am willing to give Trump’s unconventional methods a try. Nothing else has worked.