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Trade Deficit with China Cost US 2.8 Million Jobs, Report Says

A new report released today (Sept. 20) finds that the growing U.S. trade deficit with China has cost America 2.8 million jobs, largely in manufacturing since China's entry into the World Trade Organization (WTO) in 2001, according to a study released today by the Economic Policy Institute (EPI), a non-partisan, progressive research think tank that regularly takes of the cause of middle to low-income wage earners.

The following states suffered the most job losses:

California (454,600)
Texas (232,800)
New York (161,400)
Illinois (118,200)
Florida (114,400)
North Carolina (107,800)
Pennsylvania (106,900)
Ohio (103,500)
Massachusetts (88,600)
Georgia (87,700).

Between 2001 and 2010, the computer and electronic parts industry was hit the hardest, as more than 909,400 jobs were displaced, according to the report. The rapidly growing number of imports of computer and electronic parts, including semiconductors and audio-video equipment, accounted for more than 44 percent of the $194 billion increase in the U.S. trade deficit with China during that time.

The report, written by EPI’s Director of Trade and Manufacturing Policy Research Robert E. Scott, cites illegal currency manipulation as a major cause of the rapidly growing U.S. trade deficit with China. Unlike other currencies, the Chinese yuan does not fluctuate freely against the dollar, but is artificially pegged in order to boost China’s exports.

"This report offers conclusive evidence that immediate action by the administration is needed to curb China's currency manipulation, which, along with China's blatant trade violations, are having the same devastating impact on high-tech production that they've already had on the nation’s longstanding industrial base," said Scott Paul, executive director of the Alliance for American Manufacturing (AAM), a partnership of America's leading manufacturers and the United Steelworkers union.

"And if President Obama won't name China a currency manipulator," Paul said, "then Congress will have no choice but to pass legislation that will hold them accountable.

"We urgently need a national strategy for restoring America’s global leadership in manufacturing," he added.

"Challenging China's currency manipulation would be an important first step toward developing such a strategy.  It would not only cut unemployment, it would result in a much-needed increase in federal revenue."

"Global trade in advanced technology products — often discussed as a source of comparative advantage for the United States — is instead dominated by China," the report concludes.

A total of 453,100 jobs were lost or displaced from 2008 to 2010 alone — even though imports from China and the rest of world collapsed in 2009 during the height of the global financial crisis. In fact, the report notes the U.S. trade deficit with China increased $8 billion during the so-called Great Recession, despite a collapse in world trade at that time.

The report cited other industrial sectors hit hard due to the growth in the trade deficit with China between 2001 and 2010, including apparel and accessories (178,700 jobs), textile fabrics and products (92,300), fabricated metal products (123,900), plastic and rubber products (62,000), motor vehicles and parts (49,300), and miscellaneous manufactured goods (119,700).

China’s currency manipulation, state-owned enterprises, heavy industrial subsidies, intellectual property theft and piracy, indigenous innovation policies, rare earth mineral export restrictions and other trade-distorting practices have caused China’s share of the total U.S. non-oil goods trade deficit to soar from 69.6 percent in 2008 to 78.3 percent in 2010.

Jeanette Mulvey
Jeanette Mulvey

Jeanette has been writing about business for more than 20 years. She has written about every kind of entrepreneur from hardware store owners to fashion designers. Previously she was a manager of internal communications for Home Depot. Her journalism career began in local newspapers. She has a degree in American Studies from Rutgers University. Follow her on Twitter @jeanettebnd.