Michael Strain explores the long-term impact of the American decision to open up trade with China.
Few issues in the public square are uncontested. But the narrative that the United States’ decision, driven by elite considerations, to open trade with China led to the loss of a large number of manufacturing jobs and deindustrialization comes close. Democrats and Republicans, the mainstream media, commentators of all stripes, and even economists hold, advance, and defend this version of events. And yet every part of it is off base.
Did growing US trade with China following the 2000 decision to permanently normalize trade relations and China’s accession to the World Trade Organization in 2001 lead to a large reduction in manufacturing employment? In their 2013 paper, economists David Autor, David Dorn, and Gordon Hanson find that rising exposure to Chinese import competition is associated with a net reduction in US manufacturing employment of 1.5 million from 1990–2007. In work with Daron Acemoglu and Brendan Price, they find that up to 2.4 million jobs were lost through 2011 due to competition with Chinese imports.
To assess whether these are large numbers of job losses, place them in the context of broader US labor market dynamism. From 2000 to 2007, more than five million workers, including around 425,000 manufacturing workers, separated from their employers in a typical month. There was nothing special about that period—these magnitudes have been similar over the last five years.
Moreover, when it comes to trade liberalization, import competition is only half the story. In the 1980s, 1990s, and 2000s, trade with China, and globalization more broadly, led to growing opportunities for US exporters.
Economic theory suggests that trade liberalization should have little effect on aggregate US employment because job losses from import competition can be balanced by job gains in export-intensive firms and sectors.
