China Killed 1 Million U.S. Jobs, But Don't Blame Trade Deals | KUOW News and Information

China Killed 1 Million U.S. Jobs, But Don't Blame Trade Deals

Apr 18, 2016
Originally published on April 22, 2016 4:45 pm

This week, NPR and some member stations will be talking about trade on the campaign trail and in communities around the country.

Economists for decades have agreed that more open international trade is good for the U.S. economy. But recent research finds that while that's still true, when it comes to China, the downside for American workers has been much more painful than the experts predicted.

And that's playing out on the presidential campaign trail in a big way.

'Disastrous' Trade Agreements?

If you're Bernie Sanders and you want to get your supporters fired up at a rally, bashing trade deals like the North American Free Trade Agreement and the Trans-Pacific Partnership is a good way to go. Sanders recently said to huge applause that his opponent Hillary Clinton wasn't qualified to be president because she supported "every disastrous trade agreement, which has cost us millions of decent-paying jobs."

Likewise, in a Fox News debate, Donald Trump said the TPP is "a horrible deal."

"It's a deal that was designed for China to come in as they always do through the back door and totally take advantage of everyone," he said.

But it's worth noting that China isn't even part of the TPP deal. The TPP is actually seen as an attempt to limit China's power and influence in trade. So Trump's criticism there is "just off-the-scales wrong," says David Autor, a labor economist at MIT.

Autor has been researching trade with China for years. He says the political rhetoric is often a confused mess, but it gets loud applause at rallies and debates because it's tapping into something real. "I think what politicians are correctly responding to is the reality that the last 35 years have been bad ones for blue-collar Americans," he says.

During that period, wages have been stagnant. Millions of manufacturing jobs have disappeared. It's not just trade that's to blame. Technology plays a big role: With computers and automation, factories and all kinds of other workplaces need fewer people. And that kills a lot of jobs.

1 Million U.S. Factory Jobs Lost To Trade With China

If you look at NAFTA and trade with Mexico, Autor says, not that many U.S. workers have been harmed. But China, his research shows, is a different story. "China's rise is really a kind of a world historical event," Autor says. "This is the largest country in the world. It has caused a wholesale substantial contraction of U.S. manufacturing employment."

Autor says from 2000 to 2007, trade with China destroyed nearly 1 million U.S. manufacturing jobs. That's apart from other job losses due to technology and productivity gains and automation.

Trade theory doesn't say all workers will be protected. It says trade will make both countries better off. But how can that be true if trade with China has been so painful?

To understand that, let's consider U.S. trade with another country: France.

An Explanation Using Some Cheese And Toy Cars

The U.S. makes good airplanes and cars, and the French make good cheese.

So in an interview with Autor in his office at MIT, NPR's Chris Arnold gave him some toy cars to represent the U.S. To play France, Arnold had some hunks of Camembert and brie.

"I'll be France and you're America with the cars. So, how does this work where we both win?" Arnold asked.

"OK," Autor explained, "you make some really good gourmet food, and we'd sure like to eat it. I guess I could take some of my Chevy workers and I could say, 'Go spend two days a week making cheese and stop putting on hubcaps.' But they probably wouldn't be very good at it, and the end result would be bad cheese, fewer cars. Why don't we just trade? I'll give you some trucks, and you give me some gourmet food, and we'll both be doing the thing that we're good at. We'll both be focusing on our area of comparative advantage."

This is the magic of trade. With two countries doing what they're best at with the same number of workers and money and materials invested, together, they can create more, higher-quality stuff than either of them could separately. In that sense, it creates wealth for both countries.

China was different, though. For one thing, it's huge. And it began exporting all kinds of things U.S. manufacturers were already making, but China was selling them cheaper. That might not have been such a big deal if China wasn't so big. And more quickly than economists predicted, China was able to transform its rural society of nearly 1 billion low-wage workers into a cheap-labor manufacturing superpower.

"It was the proverbial boulder sitting on the top of a mountain for 100 years, and one day it started to roll down, and, you know, it is rather disruptive to those in the valley below," Autor says.

Disruptive because the Chinese boulder squashed a lot of American manufacturing jobs.

Still, "I don't want to go too far with that analogy," says Autor, "because we still win from trade with China."

Trade's Benefits Are Diffuse, But The Pain Is Concentrated

Everything from the shoes you're wearing, your watch, kitchen appliances, phone — so many things in our lives are cheaper or better because of international trade that, overall, despite the loss of jobs, Autor says, the U.S. and China still both come out ahead.

But here's the rub: Those benefits are large but diffuse. The harm — the pain for U.S. blue-collar workers — is concentrated. "If I lose my job at a furniture factory where I've worked for decades, no amount of cheaper toys and raincoats at Wal-Mart is going to make me whole again," Autor says.

So he wishes that this is what the national conversation could be about: Instead of bashing trade deals, he'd like to see a lot more focus on what can be done to help workers who've been displaced by trade. He says other developed countries do a much better job of this — and the U.S. is pretty lousy at it.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

KELLY MCEVERS, HOST:

For decades, economists pushed for more open international trade. They say it's good for the U.S. economy. But recent research shows when it comes to China, trade has hurt American workers more than the experts predicted. This week, NPR and some member stations are reporting on trade for our project A Nation Engaged. Now NPR's Chris Arnold looks at why the issue resonates with voters this election season.

CHRIS ARNOLD, BYLINE: If you're Bernie Sanders and you want to get your supporters fired up at a rally, bashing trade deals like NAFTA and the TPP is a good way to go.

(SOUNDBITE OF ARCHIVED RECORDING)

BERNIE SANDERS: Every disastrous trade agreement which has cost us millions of decent-paying jobs...

(SOUNDBITE OF ARCHIVED RECORDING)

DONALD TRUMP: The TPP is a horrible deal.

ARNOLD: Here's Donald Trump in a primary debate on Fox.

(SOUNDBITE OF ARCHIVED RECORDING)

TRUMP: It's a deal that was designed for China to come in, as they always do, through the back door and totally take advantage of everyone. And we don't have smart people making the deal.

(APPLAUSE)

ARNOLD: Actually, China isn't even a part of the TPP trade deal, so as far as Trump's comments there...

DAVID AUTOR: That's off-the-scales wrong.

ARNOLD: David Autor is a labor economist at MIT. He says the political rhetoric is often a confused mess, but he says it's tapping into something that's very real.

AUTOR: I think what politicians are correctly responding to is the reality that the last 35 years have been bad ones for blue-collar Americans.

ARNOLD: Wages have been stagnant, and millions of manufacturing jobs have disappeared. Now, you can't just blame trade, though. Technology plays a very big role here. With computers and automation, factories in all kinds of other workplaces need fewer people, and that kills a lot of jobs. Autor says by comparison, if you look at NAFTA and trade with Mexico, that really has not been very harmful for U.S. workers, but China - his research shows that's a different story.

AUTOR: China's rise is really kind of a world historical event. This is the largest country in the world. It has caused a wholesale substantial contraction of U.S. manufacturing employment.

ARNOLD: Autor says in less than a decade, starting in the year 2000, trade with China destroyed about 1 million U.S. manufacturing jobs. Now, trade theory doesn't say that all workers will be protected. It says that trade will make both countries better off. But what happened here?

OK, let's forget about China for a moment and consider U.S. trade with another country - France. The U.S. makes good airplanes and cars, of course, and the French - well, the French make good cheese.

ARNOLD: Have a little bag of...

AUTOR: Oh, my God.

ARNOLD: ...My goodies.

AUTOR: OK.

ARNOLD: So here I have some French cheeses.

AUTOR: OK, there we go.

ARNOLD: I'm sitting with David Autor in his office at MIT, and in the middle of our interview, I pull out some useful items to help him explain how trade is supposed to work.

ARNOLD: For you, David, I brought some...

AUTOR: OK.

ARNOLD: ...Little cars.

AUTOR: Matchboxes.

ARNOLD: Yeah.

AUTOR: Matchbox cars.

ARNOLD: So I'll be France, and you're America with the cars. So how does this work where we both win?

AUTOR: I say, you know, you make some really good gourmet food there, Chris, and we'd sure like to eat it. I guess I could take some of my Chevy workers, and I could say, you know, go spend two days a week making cheese, and you know, stop putting on hubcaps. But they probably wouldn't be very good at it, and the end result would be...

ARNOLD: Bad cheese.

AUTOR: ...Bad cheese, fewer cars.

ARNOLD: So instead of that...

AUTOR: Why don't we just trade? And I'll give you some trucks, and you give me some gourmet food, and we'll both be doing the think that we're good at. We'll be focusing on our area of compared advantage.

ARNOLD: And this is the magic of trade. With two countries doing what they're best at with the same number of workers and the same amount of money invested together, they can create more higher-quality stuff than either of them could separately. In a sense, it creates wealth for both countries.

China was a bit different, though, because for one thing, it was a huge, and it began exporting all kinds of things that U.S. manufacturers were already making, just doing it cheaper. And much more quickly than economists predicted, China was able to transform its rural society with about a billion low-wage workers into a cheap-labor manufacturing superpower.

AUTOR: It was the proverbial boulder, you know, sitting at the top of a mountain for a hundred years. And one day, it just started to roll down, and you know, it is rather disruptive to those in the valley below.

ARNOLD: That would be the American manufacturing workers getting squashed by the Chinese boulder.

AUTOR: I mean, I don't want to go to far with that analogy because we still win from trade with China.

ARNOLD: Everything from the shoes that you're wearing, your watch, kitchen appliances, your phone - so many things in our lives are cheaper because of international trade that overall, despite the loss of jobs, Autor says that the U.S. and China still both come out ahead. The problem, though, is that these benefits are diffuse, but the harm, the pain - that's concentrated.

AUTOR: If I lose my job at a furniture factory where I've worked for decades, no amount of sort of, you know, cheaper toys and raincoats at Walmart is going to make me whole again.

ARNOLD: So Autor wishes that this is what the national conversation could be about. Instead of bashing trade deals, he'd like to see a lot more focus on what we could do to help workers who've been displaced by trade. He says other developed countries do a much better job of this, and the U.S. is pretty lousy at it. Chris Arnold, NPR News, Boston. Transcript provided by NPR, Copyright NPR.