In , countries out of imported more from China than from the United States. This trade dynamic has radically changed since the s, when only eight countries out of imported more from China than from the United States. Considering these ratios, it is not surprising that 60 percent of the countries that had a larger trade with the United States in ended up importing more from China by The countries that have experienced the largest shift in trade dynamics since the '80s were Myanmar, Vanuatu, Tanzania, Cameroon, Pakistan, Madagascar, Togo, Ghana, Brunei, and Paraguay.
Most of these countries are small, open economies located near China such as Vanuatu and Mongolia , have strong political ties with China such as Hong Kong and Macao , or have political tensions with the United States such as North Korea and Iran. On the opposite side, in , the countries that imported more of their total from the United States than from China were Aruba, Canada, the Dominican Republic, Honduras, St.
Lucia, Barbados, and the Bahamas. Most of these countries are geographically close to the United States such as Costa Rica and Jamaica or have strong trade agreements with the United States such as Mexico and Canada. Map 2 shows the percentage of imports that each country has been receiving from both the United States and China. Just as before, the color blue indicates that a country imported more from United States than from China that year; the darker the blue, the larger the gap between the shares.
For example, in , Canada received The difference between the share imported from China and the share imported from the United States is large. Therefore, Canada is highlighted in the map in dark blue. It is important to emphasize that knowing the trade balance between countries in not sufficient to conclude that countries worldwide have increased their trade with China at the expense of other trade relationships, including the one with the United States.
Specialization plays an important role in international trade. Generally, nations can consume more by specializing in the production of a good based on their comparative advantage. To compare the different types of goods traded with China and the United States, I have created two groups comprised of a sample of developed 7 and developing countries.
Note: Average wages by education group are from a 3-year pooled sample of workers by industry from — Manufacturing also pays comparatively high wages, for each class of worker by education , as shown in Table 1. Average weekly wages for all industries and for manufacturing are shown in data columns 5 and 6 of Table 1. The manufacturing wage premium relative to nontraded industries that is, the percent extra earned by working in manufacturing rather than in nontraded industries is Average wages in nontraded industries will be used as a benchmark for estimating the cost of jobs lost due to growing China trade deficits, later in this analysis.
Thus, manufacturing employs a higher share of workers with less than a college degree, and wages and benefits in manufacturing are significantly higher than in the rest of the economy. Wages in the manufacturing sector are above average because manufacturing is a high-productivity, capital-intensive sector. Unionization rates are higher in manufacturing In addition, workers in manufacturing are much more likely to have employer-sponsored health insurance ESI than those employed in other sectors of the economy.
More than two-thirds of manufacturing workers Employment and wages by race and ethnicity are reported in Table 2. The employment picture for minority groups as of — is mixed. For some minority groups, manufacturing employment shares data column 4 were below their shares of the total employed population column 3. Black workers constituted Note: The white, black, Asian, and "other" race categories exclude Hispanics; the Hispanic ethnic designation includes individuals of any race.
Average wages by race and ethnicity are from a 3-year pooled sample of workers by industry from — In contrast, Hispanic and Asian workers had above-average employment shares in manufacturing. Hispanic workers made up Asian workers made up 5. Manufacturing jobs are good jobs, because they pay high wages, and both Hispanics and Asians earn higher wages in manufacturing than in the economy as a whole. At first glance, it appears that Asians enjoy a much higher manufacturing wage premium than Hispanics.
The average manufacturing wage premium for Hispanic workers in — was only 3. The difference between wage premiums of Hispanic and Asian manufacturing workers is explained, in part, by their very different educational profiles, as shown in Table 3. In , only Achievement gaps are much greater at the college graduate level.
Note, omits workers with some college see notes in text for explanation. Wage estimates in manufacturing are thus biased downward. In manufacturing, Average wages are from a 3-year pooled sample of workers by industry from — Source: U.
Census Bureau , Table at , Table 1 and Table 2 in this report, and author's analysis. Differences in educational attainment help explain differences in the manufacturing wage premiums by race. Although not shown in table 3, more than one-third of Hispanics Employment of Hispanics is concentrated in industries such as food processing, and many of those employees have less than a high school education.
Table 2 showed a wide variance in the manufacturing wage premiums, ranging from 3. This theory is tested by developing rough estimates of education-adjusted manufacturing wage premiums in the third column of Table 3. These are compared with actual, observed premiums for the four largest demographic groups, and for all workers, in columns 4 and 5 of Table 3. These shares are used with actual manufacturing wage premiums for all workers in these three educational groups from Table 1.
The estimated wage premiums by race and ethnicity are biased downward because workers with some college education are assigned the high-school wage premium in the simulation. The results of the simulation do suggest that there is a pattern of racial disparities in manufacturing wages. The data in column 4 show that actual wages for Hispanics were about 15 percent less than the education-adjusted estimates, and actual wages for black workers were about 13 percent less than the education-adjusted wages.
Actual wages for white workers were about 10 percent above the predicted levels, so the gap between white and Hispanic and black workers is in the range of 23 percent to 25 percent. The simulation also suggests that differences in educational attainment are largely responsible for the gap between the actual wage premiums earned by Hispanic workers 3.
Most of this gap disappears in the simulated wage ratio in column 5 in Table 3, where both Hispanic and black workers earned about 85 percent to 87 percent of their simulated, education-adjusted wages. Despite the evidence of racial disparities in manufacturing wages for most minorities, manufacturing still remains an important source of good jobs with excellent benefits for all minorities.
As shown in Table 2, minority workers earn wage premiums of 3. Overall, manufacturing jobs offer an average wage premium of In addition to offering excellent wages and benefits, especially to workers with a high-school degree or less education, manufacturing also generates a number of other benefits for the domestic economy. Although manufacturing was responsible for only 11 percent of U.
Thus, manufacturing has an outsized footprint in the domestic economy. Manufacturing is also a very important employer of scientists and engineers. In , there were 1. Furthermore, 35 percent of all engineers worked in manufacturing Rothwell and Wial Other industry classifications in this paper have excluded such workers.
Manufacturing is also a tremendous driver of demand for the rest of the economy. It is a huge consumer of everything from basic commodities food, fuel, minerals, and forestry products to sophisticated business services such as accounting, business management, research and development, and legal services.
When purchased inputs are included, the value of gross manufacturing output was responsible for Many observers e. Forty years ago, General Motors Corp. Over time, they have found it more profitable to outsource those activities to external service providers who sell their services to GM and other manufacturers. But just because those transactions now take place at arms-length does not mean that those jobs in commodity and service industries are not directly supported by manufacturing production.
The total U. Because the United States has excess unemployment and is operating far below capacity, shrinking the deficit would have a multiplier effect on employment, GDP, and the economy Scott, Jorgensen, and Hall But that does not change the fact that many of the manufacturing jobs displaced over the past four decades have simply been transferred to service firms elsewhere in the economy.
But for that domestic outsourcing, domestic manufacturing would have continued to grow with the economy, and its share of employment in the domestic economy would have remained roughly stable, or declined at a much slower rate than it actually did. The fact remains that manufacturing plays a central role in the domestic economy.
The research that manufacturers produce generates very high rates of productivity growth, which is diffused throughout manufacturing and the economy, and which has been responsible for a significant proportion of the overall growth of the U. Although the share of manufacturing in the domestic economy has declined significantly in the past four decades, the number of manufacturing workers employed was roughly constant, ranging between 16 million and 19 million between and Since April , 5.
The growth of international outsourcing, and of the manufacturing goods trade deficit in particular, has been responsible for a large share of those job losses. China is one of the leading currency manipulators in the world, and has also engaged in widespread repression of labor rights, dumping, subsidies, and a host of other unfair trade practices that have combined to give it a huge and unfair advantage in trade with the United States and other nations Scott The remainder of this paper will examine the impacts of China trade on U.
Total exports as reported by the U. International Trade Commission include re-exports. The employment estimates shown here are based on domestic exports only. See Scott , endnote 9 for additional details. Despite the collapse in world trade between and caused by the Great Recession, the U.
In that period, the U. Unless China raises the real value of the yuan by at least a third and eliminates these other trade distortions, the U. Although China did respond to international pressure in the late s and allowed some appreciation in the yuan, it was too little and too late to help arrest the widening U. The effects of trade on employment were estimated in Scott When analyzing the effects of trade on employment, the issue is simple: Increased exports support U.
Thus, it is trade balances—the net of exports and imports—that determine the number of jobs created or displaced by trade agreements. Unless trade deals such as the agreement to bring China into the WTO in promise to reduce the U. Rather than reducing trade deficits, past trade deals have actually been followed by larger trade deficits Scott This is not some radical stance on trade—it is textbook economics.
Specifically, in macroeconomic terms the United States had too little spending on domestically produced goods and services, with total spending Y defined as:. Where C is consumer spending, I is investment spending, G is government purchases of goods and services, X is exports, and M is imports. While trade agreements lead to higher X, they also lead to higher M, Krugman wrote. Exports support demand for domestically produced goods, so higher X increases employment.
However, the growth of imports reduces demand for domestically produced goods, which reduces domestic employment. Changes in exports to and imports from China between and , and their implications for total U. The net employment effect of trade depends on the changes in the trade balance. An improving trade balance can support job creation, but growing trade deficits usually result in growing net U.
The United States has had large trade deficits with China since , which increased in every year except , when U. The employment impacts of the growing U. The model included U.
See Scott for details on model structure and data sources. The model estimates the amount of labor number of jobs required to produce a given volume of exports and the labor displaced when a given volume of imports is substituted for domestic output.
Jobs displaced by the growing China trade deficits are a net drain on employment in trade-related industries, especially those in manufacturing. Even if increasing demand in other sectors absorbs all of the workers displaced by trade which is unlikely , job quality likely suffers because many nontraded industries such as retail and home health care pay lower wages and have less comprehensive benefits than traded-goods industries, as shown in this report.
Job displacement rose to 3,, jobs in Rising trade deficits have displaced a growing number of jobs every year since China joined the WTO, with the exception of during the Great Recession. The U. Meanwhile, the U. These figures illustrate the damage done when China took advantage of the Great Recession to expand its beggar-thy-neighbor trade policies 14 through currency manipulation and other illegal and unfair trade policies, which undermined job creation in the U.
Between and alone , jobs were lost due to growing trade deficits with China, either by the elimination of existing jobs or by the prevention of new job creation Table 5. The continuing growth of job displacement between and despite the relatively small increase in the trade deficit reflects the relatively rapid growth of U. The share of U. Detailed data on the employment impacts by industry of growing trade deficits with China from to are used below to estimate the impacts of growing U.
The effects of growing U. The data reported in the table reflect the effects of three macroeconomic forces. We also thank Jennifer Peck for able research assistance. Download Citation Data. Share Twitter LinkedIn Email. Working Paper DOI You may change your billing preferences at any time in the Customer Center or call Customer Service.
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