I don’t entirely agree with Bradley A. Thayer and Lianchao Han’s take on our trade war with China, expressed at The Hill, but I think that their statement of its sources are on target:
In 1987, China’s trade surplus with the U.S. was only $2.7 billion, one-twentieth of Japan’s. By 2018, the People’s Republic of China’s trade surplus with the U.S. had reached nearly $418 billion, 150 times what it was three decades ago. In the past 30 years, China has snatched an astronomical $4.4 trillion from the U.S. Additionally, there is an estimated $300 billion to $600 billion annual loss from China’s theft, and at least 3 million highly paid U.S manufacturing workers lost their jobs because of competition from China. Chinese government-subsidized or forced labor produced billions of dollars worth of cheap goods that have been dumped onto the U.S. market.
This newly gained wealth has helped China create a dystopian nation, modernize its military into a formidable force, take the South Sea as its inland water, expand its political influence globally, rewrite international laws and norms, export its ideology and development model to developing countries, and contend for dominance in international politics.
That didn’t need to happen and, in particular, it didn’t need to happen at the pace that it did. It was an artifact of mercantilist Chinese policies. We dug a trap for ourselves and then fell into it. Climbing out will be neither easy nor painless but it’s something we must do for the health of our own economy and society. The transition mostly involves changing our behavior.
Those who fall back onto abstract arguments in favor of free trade ignore that we have never had free trade with China. We have had trade carefully managed to ensure that the benefits of trade go mostly to China and secondarily to top managers of big corporations who’ve reaped most of whatever economic surplus the Chinese allowed to flow in this direction.
Thinking that Trump has mismanaged that trade war or is a blowhard is fair enough. But if you want to return to the status quo ante, it’s incumbent on you to explain how the 50%+ of the American people who will never get college degrees will earn a decent living. I don’t think we can do that absent a diverse economy based on more than retail, health care, and education.
I say, with a straight face and in all seriousness, that Trump is the best President in my lifetime. I’m 76 years old. And I actually enjoy his antics. He says what needs to be said. Without him, we would have the sadistic monster Hillary Clinton as President, and we would be well done the road to a communist/pedophile dictatorship. Again, I mean those words seriously.
Before Trump came on the scene, everyone in Washington was perfectly happy with our relationship with China. No one in Washington gave rat’s fart for the plight of our working class. Free trade and open borders were “plus double good.”
I’ve come to believe that this problem is existential for the nations’ future and no Democratic candidate will address it. Biden in fact is most likely to quickly return to business as usual with China as it has been profitable for his family and probably everyone else in his life.
I’m with Bob. I played “76 Trombones” all day long on my last birthday. I’ve seen them all since Harry S Truman. Dwight Eisenhower gave us the Interstate Highway system, the largest and by far the most successful infrastructure project in all history. Ronald Reagan drove the Soviet Union to the ash heap of history. Donald Trump has driven a revival of the American spirit to a level not seen since VJ day. He has confused and confounded the enemies of a just and civil society. He has driven the Lilliputians before him and the lamentations of their women are pure comedy gold. His enemies have belittled him, they have slandered him, they have borne false witness against him, and in their madness they have made the fatal mistake of underestimating him. Hubris begets Nemesis.
I dont see that much hope in what Trump is doing. We might end up with a better trade relationship with China, but I think our real goal should be better jobs here in the US. Europe didnt send all of their manufacturing to China, we did. If it wasn’t China it would be somewhere else. The base problem lies with our investor class and the wealthy for whom policy is now written. Even if Trump blunders through things with China and we have a positive outcome, we won’t see much change here in the US since he will not focus on changing anything that would harm him or his peers. You mentioned elsewhere doing away with the income tax, which I have long supported for a number of reasons. That might help some since then income tax policy couldn’t be used to the advantage of the wealthy, but I suspect we just see some other tax or regulation used to enable the investor class.
The same pretty much goes with immigration. Trump has just one trick, the wall. Since I seem to be the only person here who has ever climbed over a wall, I have to tell you it isn’t that hard. If your goal is to just make it a little harder to come to the US, then the wall is your answer. If you dont want illegal immigrants to come here and take jobs, then you have to focus on the work place. A strong E-verify system or something similar. Strong punishments for the companies that employ people illegally. Instead we get an occasional raid on a town where everyone knows the company town employs a lot of illegals. They get deported and nothing happens to the company. Rinse and repeat.
Of course you get the whining from the conservatives that this might hurt small businesses. First, that is pretty easy to fix with subsidies, tax breaks or whatever. Heaven knows the federal govt is good at giving out money, and the GOP is just as bad, they just give it out to different people than the Dems. Second, I have to think this complaint is really being driven by the business wing (rich people) of the GOP. They dont really want that flow of cheap labor coming across the border to stop.
So when Trump is done jobs in the US won’t be much different since we will not have addressed our real problems. Immigration won’t be solved. Fortunately he is pretty lazy and not especially competent so he won’t really do that much bad stuff either. He got taxes cut, just like every other GOP president. He has cut some regulations, but we arent seeing any growth from that, we just have his deficit driven growth continuing at about the same rate as the prior 7 years. However, the guy has been successful at creating a cult of personality like seldom seen before in the country. (I have never been interested in celebrity culture, so I dont really understand this.) That is his greatest accomplishment.
Steve
Actually, they did:
The graph above is from the NBER and illustrates EU manufacturing employment. For a long time Germany was insulated from the loss because they were exporting “factory in a box” setups to China but those days are over, as that dip in 2008-2009 illustrates. Now Germany is running a trade deficit with China and they’re chafing at it, too.
I notice that you claim that without evidence. I think that without the massive subsidies that China provided to their industries manufacturing job loss in the U. S. would have been much, much slower and probably somewhat lower. No other country or group of countries was in a position to provide that level of subsidy.
You need to look at manufacturing everywhere and over a longer time period, which you can find at the link from Sumner. Manufacturing jobs have been dropping almost universally. This is most likely from automation. So your evidence that that jobs dropped just proves that Europe (and when we say Europe Germany is the driving force) is losing jobs, not that they went to China. Germany maintains a strong manufacturing base. It has not sent all of its manufacturing to China, and continues, if you look at what they export to China, to export lots of manufactured good to China. China exports back a lot of manufactured goods, and some of those are from some German companies that move there, but it mostly comes from the industry we helped build.
https://www.econlib.org/archives/2016/12/europe_has_a_ma.html
“I notice that you claim that without evidence.”
Hard to provide alternate world evidence I will concede. Only time will tell. I am predicting we won’t see much change if our trade balance with China changes.
Steve
I’m sorry but that’s simply false. Automation didn’t suddenly skyrocket in 2000-2001 but that is when the U. S. granted China most favored nation trading status and China was admitted to the WTO. It’s the only credible explanation.
That claim is equivalent to saying that, since the number of brick and mortar bookstores has been declining for many years, Amazon has nothing to do with the steep decline since 1996. 2-3 million manufacturing jobs in the U. S. and many in the EU basically vanished over an 18 month period in 2000 and 2001. Here’s another one:
The drop from 1970 to 2000 in manufacturing jobs as percent of all jobs (the metric Sumner is using, not total jobs that you are using) likely isn’t due to China. He is using a different measurement. That said, he is responding to a paper by Pierce that said the following. Please note that I am referring to Europe, not the US (though the drop is similar for most of that period.) I didnt even really mention the US in that last comment.
“Abstract: This paper links the sharp drop in US manufacturing employment after 2000 to a change in US trade policy that eliminated potential tariff increases on Chinese imports. Industries more exposed to the change experience greater employment loss, increased imports from China, and higher entry by US importers and foreign-owned Chinese exporters. At the plant level, shifts toward less labor-intensive production and exposure to the policy via input-output linkages also contribute to the decline in employment. Results are robust to other potential explanations of employment loss, and there is no similar reaction in the European Union, where policy did not change.”
That paper said that there was a sharp drop in the number of manufacturing jobs in the US that was NOT seen in the EU. The EU just had the steady decrease it had been having before 2000, or in other words Europe (Germany) did not send so many of its manufacturing jobs to China like we did, supporting my initial claim. Sumner claims that he thinks the rapid drop in the US after 2000 is still just automation effect. If we are now talking about the US then I would agree that jobs going to China was a big factor, though automation is part of it.
Steve
The error is in thinking of the economy as a physical phenomenon rather than a social or behavioral one. Jobs don’t increase or decrease due to some physical phenomenon applied continuously but as a consequence of decisions made and actions taken. A slow constant decrease is likely due to automation but not the sort of sudden, sharp decrease in the 2000-2001 period, seen both in the U. S. and Europe. The difference in degree between the drop in the United States and Europe as a result of China’s admission to the WTO is because Germany had “normalized” trade with China previously.
Step by step, we here in the United States and the Europeans have made quite a number of bad decisions over the period of the last 40 years.
In the United States business investment had been decreasing for a couple of years prior to the sudden drop in manufacturing employment. For the decrease to have been due to automation would have required a preceding increase in business investment. That didn’t happen. The increase in business investment that started in the 1980s and continued through the early to mid 1990s had already ended years before. As I said back in the early Aughts right around the time I started this blog the recession of the early Aughts wasn’t due to a shortfall in personal consumption expenditures but due to a shortfall in business investment. That’s why the Bush Administration policy response to it (decreasing personal income taxes) was wrong.
In the case of Germany, I cannot find any evidence of anything like normalization until Shroder took office in 1998. If you look at German manufacturing jobs, at link, you never see the sudden drop like we had in the US. The closest they had to a sudden drop was the decrease from 1993-2000, at bit over 10%, and during that time period they were still consolidating East Germany with the West. So, you must access to info I dont have since I am just not seeing a big drop in German jobs that would correlate with increasing trade with China. Their trade with China tripled under Shroder, but in that time period their drop in manufacturing jobs looks to be a gradual drop.
http://ftp.iza.org/dp10469.pdf
As I said earlier Germany ran a substantial trade surplus with China for years but that is no longer the case.