The United States Department of State | January 11, 2005

A new study has found that the United States' growing trade deficit with China has had an increasingly negative impact on the U.S. economy, causing job losses that reach into the most technologically advanced industries in the manufacturing sector and affect every state, according to a January 11 press release by the U.S.-China Economic and Security Review Commission (USCC).

Robert Scott, director of international programs at the Washington-based Economic Policy Institute (EPI), prepared the study, "U.S.-China Trade, 1989-2003," for the commission.  EPI is a nonprofit, nongovernmental research organization that focuses on the economic conditions of lower and middle-income American workers.

"In the rapidly changing big and broad economic relationship with China, it is crucial to have a full, comprehensive understanding of the facts and scope of the relationship," USCC chairman C. Richard D'Amato said.  "With such data, we can begin to assess the impacts China is having on our economic health and our national security."

Using a methodology that determines the number of jobs needed to produce exports and imports, the EPI study found that 1.5 million jobs were lost to lower-wage Chinese competition in the 14-year period between 1989 and 2003.  During that time, the U.S. trade deficit with China rose twenty-fold, from $6.2 billion to $124 billion.  It is expected to increase another 20 percent in 2004, to $150 billion.

The study noted that the pace of job loss has more than doubled since China entered the World Trade Organization (WTO) in 2001, and that China's exports to the United States of sophisticated electronics and communications equipment requiring skilled labor are growing much more quickly than its exports of low-value, labor-intensive products.

"The assumptions we built our trade relationship with China on have proven to be a house of cards," Scott said.  "Everyone knew we would lose jobs in labor-intensive industries like textiles and apparel, but we thought we could hold our own in the capital-intensive, high-tech arena.  The numbers we're seeing now put the lie to that hope -- as China expands its share even in core industries such as autos and aerospace."

Scott's research found that the 1.5 million lost job opportunities over the course of 14 years were distributed throughout all 50 U.S. states and the District of Columbia, with employment losses of roughly 1.5 to 2.5 percent in the hardest-hit states.

The U.S.-China Economic and Security Review Commission was created in October 2000 to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People's Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action.

The full EPI report can be downloaded from the USCC Web site at:

http://www.uscc.gov/

Following is the full text of the USCC press release:
 

U.S.-China Economic and Security Review Commission

COMMISSION RELEASES STUDY ON THE JOB EFFECTS OF THE RISING U.S.-CHINA TRADE DEFICIT

Report finds these effects being felt in every state and in high-tech industries once considered "safe"

FOR IMMEDIATE RELEASE

January 11, 2005

Contact:

Kathy Michels

202-624-1409

kmichels@uscc.gov

Web site: www.uscc.gov

Washington, D.C. -- The U.S.-China Economic and Security Review Commission today released a new study titled "U.S.-China Trade, 1989-2003:  Impact on Jobs and Industries, Nationally and State-by-State."  The study was prepared for the Commission by Dr. Robert Scott of the Economic Policy Institute.

The United States' trade deficit with China increased twenty-fold over the last 14 years, rising from $6.2 billion in 1989 to $124 billion in 2003.  Moreover, it is expected to have increased by more than 20% in 2004 to over $150 billion.  This deficit is impacting an ever-broadening segment of U.S. manufacturing, including advanced technology industries like semiconductors once thought immune to lower-wage Chinese competition.

Using a state of the art input-output methodology that determines the number of jobs needed to produce exports and imports, Dr. Scott calculated that 1.5 million jobs have been displaced over the period 1989-2003 as a result of the growing trade deficit with China.  The report also calculates jobs lost by individual states and by specific industrial sectors.

Commenting on the report, Commission Chairman C. Richard D'Amato said, "In the rapidly changing big and broad economic relationship with China, it is crucial to have a full, comprehensive understanding of the facts and scope of the relationship.  With such data, we can begin to assess the impacts China is having on our economic health and our national security.  This report makes an important, groundbreaking contribution to developing that understanding."

Dr. Scott summarized the report findings as follows:  "The assumptions we built our trade relationship with China on have proven to be a house of cards.  Everyone knew we would lose jobs in labor-intensive industries like textiles and apparel, but we thought we could hold our own in the capital-intensive, high-tech arena.  The numbers we're seeing now put the lie to that hope -- as China expands its share even in core industries such as autos and aerospace."

The report's key findings are:

-- The rise in the United States' trade deficit with China from 1989 to 2003 caused displacement of production that supported 1.5 million U.S. jobs.  The loss of jobs due to the growing trade deficit with China has more than doubled since it entered the WTO in 2001.

-- China's exports to the United States of electronics, computers, and communications equipment, along with other products that use more highly skilled labor and advanced technologies, are growing much faster than its exports of low-value, labor-intensive items such as apparel, shoes and plastic products.

-- The U.S. trade deficit in Advanced Technology Products (ATP) with China is now $32 billion, equal to the total U.S. ATP deficit.

-- China is also rapidly gaining advantage in more advanced industries such as autos and aerospace products.

-- The 1.5 million job opportunities lost nationwide are distributed among all 50 states and the District of Columbia, with the biggest losers, in numeric terms:

California  (-211,045)

Texas (-106,262)

New York (-87,037)

Illinois (-74,070)

Pennsylvania (-73,612)

Florida (-65,733)

North Carolina (-65,279)

Ohio (-61,914)

Michigan (-54,313) and

Georgia (-49,589)

-- The ten hardest-hit states, as a share of total state employment, were:

Maine (-15,396, or -2.54%)

Arkansas (-19,859, -1.74%)

North Carolina (-65,279, -1.72%)

Rhode Island (-7,840, -1.62%)

New Hampshire (-9,878, -1.60%)

Indiana (-45,285, -1.56%)

Massachusetts (-48,086, -1.51%)

Vermont (-4,426, -1.48%)

Wisconsin (-41,150, -1.48%) and

California (-211,045, -1.46%)

The full report can be downloaded from the Commission's web site:  www.uscc.gov.

The Commission welcomes comments by researchers and interested parties on the contents, methodology and findings of the Economic Policy Institute report.