Does China trade hurt Michigan?

Opinion pieces and speeches by EPI staff and associates.

[ THIS OP-ED ORIGINALLY APPEARED IN THE DETROIT NEWS ON SEPTEMBER 29, 2006. ]

Corporations, politicians and economists frequently claim that trade and U.S. investment in China create jobs and many other benefits for our economy. They are wrong. In fact, imports from China eliminated 54,000 jobs in Michigan alone between 1989 and 2003 and surging imports of Chinese auto parts now threaten the manufacturing backbone of Michigan's economy.

In theory, trade should benefit the economy, but the international trading system's rules favor multinational corporations at the expense of working people, so the costs of trade with China far outweigh the benefits.

Exports support jobs in the United States while imports displace domestic production and jobs. In 2005, our imports from China were $244 billion while our exports were only $42 billion, generating a $202 billion trade deficit. This deficit has cost about 1.5 million jobs nationwide through 2003. In the past two years alone, the deficit increased 43 percent, and job losses increased, too.

If U.S. companies invest in China, for example, by building assembly plants supplied by U.S.-produced parts, jobs could be created here at home. But little of that is happening. So what are U.S. companies doing in China? They are mostly buying billions of dollars worth of goods from Chinese and other foreign-owned companies and shipping them to the United States. For example, Business Week reports that Wal-Mart was responsible for one-eighth of U.S. imports from China in 2003, worth about $15 billion.

The worst part of this story is that Chinese goods have been made artificially cheaper and more competitive by the Chinese government's currency manipulation. The U.S. companies that import those goods are taking advantage of unfair trade practices at the expense of U.S. workers. The next wave of imports from China is already hitting the United States. Auto parts imports totaled $4.3 billion in 2005, and they are on pace to increase 30 percent in 2006. These increases will hit Michigan and surrounding states especially hard and painfully bring to light that U.S. investment in China is not helping us at home.

Robert E. Scott is a senior international economist with the Economic Policy Institute in Washington, D.C.

[ POSTED TO VIEWPOINTS ON OCTOBER 5, 2006 ]