China’s entrance into WTO cost U.S. 3.4 million jobs, new study finds

October 23, 2018
Editor’s note:  Letting China into the World Trade Organization was a mistake. 

The explosive growth in the U.S. trade deficit that came from China joining the World Trade Organization cost an estimated 3.4 million jobs, according to a new report released Tuesday.

The study of the impact in the growth in the trade deficit between 2001 and 2017, published by the Economic Policy Institute, showed that it hit the manufacturing sector in particular, where 74% of those jobs were lost.

Screen_Shot_2018-10-23_at_11.31.44_AM.pngIt is especially significant that the majority of jobs displaced were within the manufacturing sector, said Robert Scott, a co-author of the report and the director of trade and manufacturing policy research at EPI. “Workers who are displaced from manufacturing jobs tend to drop out of the labor force,” he said. While the reduced demand for domestically produced goods resulted in job losses across the country, the report finds that the 10 hardest-hit states ranked by job shares displaced were New Hampshire, Oregon, California, Minnesota, North Carolina, Rhode Island, Massachusetts, Vermont, Wisconsin, and Texas.

There were job losses in every single state and congressional district. The 17th district in California — represented by Rep. Ro Khanna, smack in the middle of Silicon Valley — was the hardest hit, with an estimated 59,500 jobs displaced.

Not surprisingly, the trade deficit in the computer and electronic parts industry grew the most, resulting in 1.2 million jobs lost.

The 3.4 million number was calculated by first estimating the amount of labor needed to produce a given volume of exports, and then the labor displaced when imports are substituted.

While some regions have been devastated by layoffs and factory closings, others just aren’t growing as fast as they otherwise could have, the report contends.

“China’s economy is slowing and the only thing keeping them alive is exports,“ Scott said. “If we eliminate the trade deficit which I think we can do, we would end up hiring more in high tech industries.”

On the flip side, after China joined the WTO in 2001, U.S. consumers benefitted from lower prices of imported goods. Manufacturing prices dropped by 7.6 % as a result of China’s WTO entry between 2000 and 2006, according to a July 2018 report published by the Federal Reserve Bank of New York.

There is no question that some jobs have been lost a result of the lower prices of goods that were imported, said Andy Rothman, a former a former U.S. diplomat in Beijing who’s currently an investment strategist at Matthews Asia, a privately owned firm which specializes in investing in Asia. “The biggest problem is we as a nation didn’t do a good job at helping people with the adjustment.”

“President Kennedy knew trade would create winners and losers and made the Trade Adjustment Assistance Act to help displaced workers,” he said. “Congress has not adequately funded the program compared to countries like Germany.”

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  • Bruce Bishop
    You can double that 3.8 million jobs lost. The entire industry where I used to work — decorative lighting — had been offshored to China by 1995, taking tens of thousands of jobs from Americans. The offshoring started in 1985, not in 2000.

    Those “high tech” jobs that were supposed to be our fallback are also being done in China, using technology and intellectual property they stole from us.

    Also, there are the “corollary” jobs. Each manufacturing job brings with it 2.9 other jobs, unrelated to manufacturing. Those families, who lived middle class lifestyles, on one factory job, needed food, clothing, homes, cars, recreation, doctors, dentists, lawyers, cops, firemen, teachers, farmers, and, of course, schools for their kids. There were millions of Americans whose jobs were the result of the demand created by those millions of well-paid manufacturing workers.

    Those factory workers, who used to earn $50K per year, with excellent benefits, wound up working at BigBoxMart, or BigBurger, for $20K, with little or no benefits. The fact that a TV that used to cost $700, now costs $200, is not enough to offset that kind of economic loss. It has been said that cheap Chinese goods save the typical U.S. family about $2,500 per year, but it’s costing the typical U.S. family about $15,600 per year in lost wages.