Trade Gap with China: 2.7M American Jobs Lost
Business + Economy

Trade Gap with China: 2.7M American Jobs Lost

Getty Images

The huge U.S. trade deficit with China, fueled by Beijing's actions to depress the value of its currency, displaced or eliminated more than 2.7 million American jobs between 2001 and 2011, the labor-friendly Economic Policy Institute said on Thursday in its latest look at the issue. The institute estimated that nearly 77 percent, or more than 2.1 million, of the lost jobs were in manufacturing.

The think tank receives about 30 percent of its funding from union groups, which have pressed both the administration and Congress for tougher steps to rein in the growing trade deficit with China, which hit a record $295 billion in 2011.

China, known as the world's factory because of its huge manufacturing sector, is the world's second-largest economy, having raced past Japan in recent years.

Robert Scott, the institute's director of trade and manufacturing policy research, said Chinese government intervention in currency markets to keep its yuan at a low value against the U.S. dollar was a major cause of the trade deficit.

China's undervalued currency effectively subsidizes its exports and taxes its imports, he said. Scott told Reuters he believed the yuan was still undervalued by at least 33 percent against the dollar, even though it has risen in value in recent years.

Republican president challenger Mitt Romney has pledged to formally declare China a currency manipulator on his first day in office. No Treasury Department, under both Republican and Democratic administrations, has labeled any country a currency manipulator since 1994, when China was last cited. The Obama administration has declined to label China in seven semi-annual Treasury Department reports.

Administration officials say they have made progress with China on the currency issue over the past few years without ratcheting up tensions by formally labeling Beijing. The next semi-annual report is due on Oct 15. The U.S.-China Business Council, which represents companies that do business in China, criticized the report as one-sided, saying it failed to take into account productivity gains that allow U.S. manufacturers to make more goods with fewer people.

"The U.S. is still the world's leading manufacturer - in fact, we make more than ever, and we make more than anyone else," Erin Ennis, the group's vice president, said in a statement.  In addition, the yuan has appreciated 30 percent against the dollar since 2005, without a corresponding drop in the trade gap, showing there is a limited link between the two, she said.

Last year, the institute estimated the U.S. trade deficit with China displaced 2.8 million jobs between 2001 and 2010. The slightly lower number in this year's report reflects changes made by the Bureau of Labor Statistics to benchmark jobs data, Scott said.

The biggest U.S. job losses were in the production of computers and electronics, clothing, textiles, fabricated metal, furniture and fixtures, plastics and rubber, and autos and auto parts, the report said. Job losses were spread among all 50 states, with the most in California, Texas, New York, Illinois and North Carolina, the report said. Ennis argued the overall U.S. economy has benefited significantly from trade, including with China.

In cases where workers are displaced by lower-priced imports, U.S. policymakers should devise ways to help them find new jobs rather than throw up trade barriers, she said.

(Reporting by Doug Palmer)