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There has been plenty of upside for America from more free and open trade. A new Economist piece cites many of them: For consumers, lots of things — including clothes and home furnishings — cost the same as they did 30 years ago. Overall, China trade specifically boosts spending power by $250 a year for the average American, with lower-incomers benefiting more. Offshoring and outsourcing low-wage assembly have also boosted the productivity and wages of high-skill workers, with the design (right here) and manufacturing (over there) of many Apple products being the classic example.
But there have been downsides, too. New research finds that some American communities whose manufacturing jobs moved to Asia never really recovered. Jobless rates stayed high, worker earnings depressed. Many displaced workers never moved or found work in less-trade affected sectors as economic models had predicted. They just got stuck. But if you listen to some presidential candidates, you would think that trade has been the primary driver of the decades-long decline in manufacturing employment. If they are right, then reversing course might bring jobs back. But that economic assumption appears wrong. From The Economist:
The sharp decline in American manufacturing employment began in 2000, just as Chinese imports took off. Yet on the extreme assumption that every dollar spent on imports replaced a dollar spent employing an American, Mr Lawrence calculates that between 2000 and 2007 Chinese imports caused, at most, 188,000 of 484,000 annual manufacturing-job losses. A recent, more detailed, estimate by Daron Acemoglu, David Autor and others chalks up about 1m of 5.5m manufacturing jobs lost between 1999 and 2011 to Chinese competition (with similar-sized job losses in other industries).
This implies that many other factors are in play.Technological change is probably the prime culprit for shrinking manufacturing employment. Productivity increases in the industry have been staggering. For instance, since 1994 carmaking’s contribution to GDP—to which outsourced production by American firms does not contribute—has fallen by about 10%. But there are 30% fewer carmaking jobs. This had led to the false impression that America’s car industry has outsourced most of its work. Such are the advances in manufacturing technology that if China disappeared tomorrow, far fewer jobs would return to America’s shores than left them. … Between 2000 and 2007 Americans left 5m jobs a month and started 5.1m new ones. A million or so jobs lost to trade with China over more than a decade seems tiny by comparison.
Indeed, China itself is turning more toward machines as worker wages rise. From one of my recent The Week columns:
In response, China is making a huge automation push. Beijing planners view advanced robotics as key to raising productivity and keeping economic growth strong as the country transitions to a more service-based economy. It’s already happening, actually. The nation is on pace to soon have more industrial robots than any other advanced economy. Foxconn, a Taiwan-based company that employs over a million workers to assemble iPhones and other Apple products in mainland China, wants robots to take over 70 percent of its assembly work within three years. So when Trump says he wants to force Apple to make its products in America, what he’s really unintentionally saying is that he wants American robots to do the work of Chinese robots.
Those lost manufacturing jobs aren’t coming back in large numbers, though technological advances may mean we can create new ones here. At the same time, we need to upgrade our national safety net for workers hurt by trade — including helping them move to where new jobs are –while also preparing them for new opportunities. As The Economist concludes: “If America is to go on reaping the gains from trade, it must ensure it compensates those who lose out. You can oppose protectionism, or you can oppose redistribution. It is getting harder to do both.”