Thursday, April 11, 2024

16 percent of the decline in manufacturing employment between 2000 and 2007 has been attributed to the rise in import competition from China

See Secretary Yellen Should Talk to the White House Economists by Veronique de Rugy.

"Secretary Janet Yellen has a strong message to China:

The US lost 2 million jobs in the years after China joined the WTO, Yellen said on Monday. “That really led to the hollowing out of industrial production in many parts of the country,” she added. “I simply would say it would not be acceptable to the United States or to President Biden to allow this to happen again.”

Meanwhile, the White House economists released the president’s economic report, which included this footnote (footnote 30 of the International Trade chapter that starts on page 173) about what really caused the loss of manufacturing jobs:

Close to a fifth (16 percent) of the decline in manufacturing employment between 2000 and 2007 has been attributed to the rise in import competition from China (Caliendo, Dvorkin, and Parro 2019). Firms that reorganized activities away from the production of machinery, electronics, or transportation equipment and toward wholesale, professional services (including research and development), and management drove almost a third of the negative manufacturing employment decline between 1990 and 2015 (Bloom et al. 2019). Several factors have been analyzed to understand the surge in U.S. imports from China during this period, including the United States granting China permanent normal trade relations in 2000, China’s accession to the World Trade Organization in 2001, reduced trade and investment policy uncertainty associated with these policy actions, and China’s own trade and domestic reforms (e.g., tariff reductions and privatizations) (Lincicome and Anand 2023).

(H/t to Scott Lincicome.)

The estimate of 2 million jobs lost to trade with China has been seriously challenged. For instance, on X, Lincicome explains:

For context: 16% of the ~3.5M US mfg jobs lost bt 2000-07 would be around 560k, not 2M.

That said, we can admit that increased trade with China nevertheless did cause pain for some workers. But rather than scapegoating trade for this pain, it would be much more useful to look at the reasons behind the failure of workers whose jobs were lost to adjust. This failure is real, and we should care about it. Removing barriers at the federal, state, and local levels that have created incentives to drop and remain out of the labor force, or that obstruct workers’ abilities to move to places where jobs are plentiful and wages are higher, should be a priority. Waging a war against trade to address a problem of adjustment it didn’t cause won’t make these issues go away. It will make them worse.

By the way, the nostalgia about manufacturing jobs that is so prevalent on the New Right these days isn’t shared by younger generations. Apparently, the shipyard industry has a problem competing with service-industry jobs:

The Navy has a fast food problem, and is struggling to figure out what to do about it.

A generational wave of shipyard worker retirements over the past several years mixed with younger workers choosing good-paying service industry jobs has put the Navy and ship industry in a bind, and it’s not clear how they get out of it."

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