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    Greater China
     Jan 13, 2005
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)

China becomes No 3 trading nation
(Jan 12, '05)

The Dragon stirs in a wary world
(Dec 25, '04)

China-US: Double bubbles in danger of colliding
(Jan 23, '04)


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