A much cited study by Autor, Dorn and Hanson found that the surge in imports from China reduced employment in numerous local US labor markets during the period from 1990 to 2007. Of course that was a period where the overall labor market did pretty well, with unemployment trending lower. But what about the period since 2007?
A new study suggests that the China shock was considerably smaller than previously estimated, and basically came to an end in 2008. Here’s The Economist:
But the new report argues, in effect, that a $100 manufactured import from China does not represent $100-worth of Chinese manufacturing competition. Some of that value will have been counted already (if, for example, a phone casing had been imported to America, stuffed with components and returned to China for final assembly). Some represents the non-manufacturing inputs (including services and metals) required to make the product. And some of that $100 will have been created outside China by its foreign suppliers, including American firms. Properly measured, the report argues, the “China shock” looks less bad, hitting a third fewer jobs and ending in 2008 rather than persisting indefinitely.
The current trade war with China is like a general fighting the last war. It’s time to move on. As Ramesh Ponnuru recently observed, the best way to respond to China is to join the TPP trade agreement with other Pacific rim nations:
In suggesting that companies should relocate production from China to Vietnam, Trump is recapitulating the logic of the strategy he abandoned at the start of his term when he abandoned the Trans-Pacific Partnership. The TPP would have enabled companies to make that decision rather than just exhort them to do it.
READER COMMENTS
Manfred
May 30 2019 at 2:33pm
The “new report” includes as co-authors a “Chinese government think-tank”, says The Economist.
This report may be a good one, but it seems a little bit self-serving.
Phil H
May 31 2019 at 1:39am
All this is true, but I’m afraid it represents a very bad misreading of what Trump is doing. I don’t believe there is any sense in which Trump has an economic objective in the China trade war, and it is a mistake to engage with it as if he does. It’s like trying to analyze a bullfight in terms of slaughterhouse efficiency. Trump is simply creating enemies to puff up his own “tough guy” image. It’s a media policy, not an economic policy.
(That’s why Central American immigrants must be “bad guys”, as well. And it’s why the US left the Iran agreement and the Paris treaty. The only thing I don’t understand is why he doesn’t use Russia for the same purpose. Either he really is in Russia’s thrall, which I still find hard to believe, or he’s just exercising his contrarian streak, I guess.)
Scott Sumner
May 31 2019 at 3:45pm
Phil, I agree that Trump is a contrarian, and that this explains many of his seemingly puzzling moves (compare Iran and N. Korea.). But even as a private citizen during the 1980s, he was highly critical of America’s trade deficit. He really does seem to worry about this issue.
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