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Dragon's 'giant sucking sound'
jolts US
By Emad S Mekay
WASHINGTON - Thirteen years ago, fringe
presidential candidate Ross Perot lamented what he
colorfully termed "a giant sucking sound" of US
jobs heading to Mexico. Now it seems Perot was
looking in the wrong direction.
According
to a new report, the ballooning trade deficit with
China is the biggest worry for US workers, costing
at least 1.5 million jobs since 1989. It also
threatens to leave more workers from traditionally
protected sectors unemployed in the future, says a
study released on Tuesday by the Economic Policy
Institute (EPI), a pro-labor research group based
in Washington DC.
The institute said US
trade deficit with China has swelled 20-fold over
the last 14 years, from US$6.2 billion in 1989 to
$124 billion in 2003. It is expected to have risen
by more than 20% last year, to over $150 billion.
The report was prepared for the US-China Economic
and Security Review Commission, a panel set up by
Congress that has pushed for a tougher approach
toward China on trade. Established in October
2000, the panel has 12 members whose duties
include submitting an annual report on the
national security implications of the US economic
relationship with China.
Reflecting the
growing concern in the US establishment over
China's trading prowess, US Commerce Secretary
Donald Evans said on Wednesday that China risks a
backlash from the US because of subsidies to its
state-run companies and its currency policy. "When
China's leaders fail to produce results on the
points of friction in our trading relationship,
their failure only empowers the critics within the
US political system," Evans said while addressing
the American Chamber of Commerce in Beijing.
The EPI report finds that US exports
increased from $5.8 billion in 1989 to $26.1
billion in 2003, a four-fold increase. However,
imports rose from $11.9 billion to $151.7 billion
in the same period, a 12-fold increase on top of a
base that was already twice as large as exports.
As a result, the US-China trade deficit increased
by nearly 2,000%, says the report.
The
report recommends a re-examination of US strategy
toward China, especially because the Asian country
is also rapidly winning ground in advanced
industries such as car manufacturing and aerospace
products that have provided the foundations of the
United States' industrial base for generations.
Semiconductor technology, once thought immune to
lower-wage Chinese competition, is now open for
Chinese imports. "The assumptions we built our
trade relationship with China on have proved to be
a house of cards," said Robert E Scott, director
of international programs at EPI. "Everyone knew
we would lose jobs in labor-intensive industries
like textiles and apparel, but we thought we could
hold our own in the capital-intensive, high-tech
arena. The numbers we're seeing now put the lie to
that hope - as China expands its share even in
core industries such as autos and aerospace."
According to the study, China's exports to
the US of electronics, computers, and
communications equipment, along with other
products that use more highly skilled labor and
advanced technologies, are growing much faster
than its exports of low-value, labor-intensive
items such as apparel, shoes and plastic products.
In fact, China now accounts for the entire $32
billion US trade deficit in so-called "advanced
technology products". That shift, in turn, reduces
the demand for high-tech workers and skilled
business professionals in the US. "It is hard to
overstate the challenges posed by this export
behemoth," says the report.
The 1.5
million job opportunities lost across the US are
distributed among all 50 states and the District
of Columbia, with the biggest losers including
California (211,045), Texas (106,262), New York
(87,037), Illinois (74,070), Pennsylvania
(73,612), Florida (65,733), North Carolina
(65,279), Ohio (61,914), Michigan (54,313), and
Georgia (49,589). The report points a finger at
what it says is an undervalued Chinese currency,
making it difficult for US firms to export to
China while it subsidizes China's exports to the
US.
"China's refusal to revalue its
exchange rate despite the enormous demand for its
currency is also a major contributor to the growth
of the US trade deficit," says the report. It also
challenges assumptions about China's entry into
the World Trade Organization (WTO). The membership
was supposed to provide the opening for a rapid
growth in US exports to trim down the trade
deficit with China. While the export growth rate
has gone up since 2001 from a small base, the
value of those exports has been inundated by a
rapidly rising tide of imports.
The WTO is
based on a free trade and investment agreement
that has provided international investors with a
unique set of guarantees designed to stimulate
foreign-direct investment and the movement of
factories around the world, especially from the US
and Europe to low-wage locations such as China and
Mexico. WTO agreements are often criticized as
lacking any real labor or environmental standards,
making it cheaper for multinational corporations
to relocate factories and businesses to areas with
the lowest costs.
Multi-national companies
from around the world have used the protections
for investment and intellectual property provided
by the WTO to quickly expand investment,
production, and exports from China, says the
report. The US remains China's primary market for
exports. "Thus the WTO and the broader process of
globalization have tilted the economic playing
field in favor of investors, and against workers
and the environment, resulting in a race to the
bottom in wages and environmental quality," the
report concludes.
(Inter Press
Service) |
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