Since China’s entry into the World Trade Organization in 2001, enormous trade deficits with the Asian nation have resulted in the loss of millions of jobs and precious export capacity, decidedly lower wages and less bargaining power for American workers and the accumulation of massive amounts of foreign debt, according to a new study conducted by the Economic Policy Institute.
   
“We have allowed the Chinese government to game the system for far too long, with serious consequences for the U.S. economy,” said the report’s author, EPI economist Robert Scott.  

From 2001, the year China entered the WTO, until 2008, persistent trade deficits with China resulted in the loss of 2.4 million American jobs, or roughly 345,500 jobs per year.  Well over half of those jobs were in the manufacturing sector, where total employment fell by 1.6 million jobs during that period.   

The hardest hit industry was computer and electronics products, which lost 627,000 jobs in the seven year period following China’s ascension into the WTO.  Other manufacturers that experienced steep job losses in that period were fabricated metal producers and apparel and accessory producers, both of whom lost over 100,000 jobs.   

But even those not directly affected by increased trade with China have likely felt the sting in one form or another.  According to the study, 70 percent of American workers, or 100 million people, have been affected by trade with China, likely in the form of reduced wages or bargaining power.  In fact, according to the EPI, in 2006 a typical full-time median-wage earner lost $1,400 in wages due to trade with China. 

“China’s repression of labor rights has suppressed wages, thereby artificially subsidizing exports,” Scott said.

Those job and wage losses have been driven by the huge trade deficit that China has accumulated with the U.S. through various illegal trading practices such as dumping, illegal subsidies and currency manipulation.  Although those practices were supposed to end when China entered the WTO, they have not and, in some cases, have only worsened over time.  

“The Treasury Department should publicly declare China to be a currency manipulator, and the Congress should authorize tariffs of at least 25 percent if China doesn’t start playing by fair rules,” Scott said.  

Through mercantilism, China has managed to grow its trade surplus with the U.S. from $84 billion in 2001, to $270 billion in 2008.  Each year, America’s trade deficit with China increases by $26.6 billion, on average.   

Mounting trade deficits have enabled China to accumulate trillions of dollars in currency reserves, much of it denominated in dollars.  In December, China reportedly held $2.4 trillion in currency reserves, with nearly 70 percent of that in the form of dollars.  China uses its massive stockpile of currency reserves to buy out American companies, assets and properties.   

“The growing U.S. trade deficit with China has displaced huge numbers of jobs in the United States and has been a prime contributor to the crisis in manufacturing employment over the past seven years,” the report concludes.  “Moreover, the United States is piling up foreign debt, losing export capacity, and facing a more fragile macroeconomic environment.”

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