The top line of the press release emphasizes the main findings.
WASHINGTON – As the nation’s economic woes mount, a new study details the devastating impact that the growing U.S. trade deficit with China is having on American jobs, wages and key industries. Between 2001 and 2007, 2.3 million American jobs were lost due to the China trade gap, including 366,000 last year, according to the report released today by the Economic Policy Institute (EPI).The EPI used an input-output sector specific model of the U.S. economy to estimate these impacts. The full report contains some revealing arguments and text.
Those displaced workers lost an average of $8,146 in wages last year, a total of $19.4 billion, as they took lower-paying jobs. China is also the predominant source of downward pressure on wages of other production workers, about 100 million Americans. Competition from low-wage workers in less developed countries and less bargaining power here at home pushed the median wage for full-time workers without a college degree – about 70 percent of the U.S. workforce – down about $1,400 in 2006.
The authors note that the trade deficit with China is supported by a range of anticompetitive tactics.
A major cause of the rapidly growing U.S. trade deficit with China is currency manipulation. China has tightly pegged its currency to the dollar at a rate that encourages a large bilateral surplus with the United States. Maintaining this peg required the purchase of about $460 billion in U.S. treasury bills and other securities in 2007 alone.2 This intervention makes the yuan artificially cheap and provides an effective subsidy on Chinese exports. The best estimates place this effective subsidy at roughly 30%, even after recent appreciation in the yuan(Cline and Williamson 2008).
In addition, the report summarizes China's subsidy of key industries, and its suppression of workers rights.
One of the more intriguing results from this study is the balance between the wages of workers gaining from trade with China and the wages of workers in sectors loosing from trade with China. Typically, workers in exporting industries earn higher wages. In the case of our manipulated and distorted trade with China that isn't the case.
The growth of trade deficits with China shifts jobs from better-paid traded goods industries into jobs in non-traded sectors where wages are significantly lower on average. Moreover, average wages in import-competing industries were higher than those in export industries. Thus, the growth in the overall volume of trade (imports plus exports) with China substituted lower-paying export jobs for higher-paying jobs in import-competing industries. This somewhat surprising finding stands economic logic on its head. Economic theory would suggest that the United States should specialize in producing goods that intensively use high-skilled, highly educated (and highly paid) workers and import labor-intensive goods that use more low-skilled labor. In fact, low-wage commodity sectors were some of the largest exporters of goods from the United States to China.