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China Did Not Trick the US -- Trade Negotiators Served Corporate Interests

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How the US-China trade deficit grew
How the US-China trade deficit grew
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The New York Times ran an article last week with a headline saying that the 2020 Democratic presidential contenders faced a serious problem: "how to be tougher on trade than Trump." Serious readers might have struggled with the idea of getting "tough on trade." After all, trade is a tool, like a screwdriver. Is it possible to get tough on a screwdriver?

While the Times' s headline may be especially egregious, it is characteristic of trade coverage which takes an almost entirely Trumpian view of the topic. The media portray the issue of some countries, most obviously China, benefiting at the expense of the United States. Nothing could be more completely at odds with reality.

China has a huge trade surplus with the United States, about $420 billion (2.1 percent of GDP) as of 2018. However, this doesn't mean that China is winning at the expense of the United States and because of "stupid" trade negotiators, as Trump puts it.

The U.S. trade deficit with China was not an accident. Both Republican and Democratic administrations signed trade deals that made it easy to manufacture goods in China and other countries, and then export them back to the United States.

In many cases, this meant that large U.S. corporations, like General Electric and Boeing, outsourced parts of their operations to China to take advantage of low-cost labor there. In other cases, retailers like Walmart set up low-cost supply chains so that they could undercut their competitors in the U.S. market.

General Electric, Boeing, Walmart and the rest did not lose from our trade deficit with China. In fact, the trade deficit was the result of their efforts to increase their profits. They have little reason to be unhappy with the trade deals negotiated over the last three decades.

It is a very different story for workers in the United States. As a result of the exploding trade deficit, we lost 3.4 million manufacturing jobs between 2000 and 2007, 20 percent of the workers in the sector. This is before the collapse of the housing bubble led to the Great Recession. We lost 40 percent of all unionized jobs in manufacturing.

This job loss not only reduced the pay of manufacturing workers, but as these displaced workers flooded into other sectors, it put downward pressure on the pay of less-educated workers generally. This is a pretty awful story, but it is not a story of China tricking our so-called stupid negotiators; it is a story of smart negotiators who served well the interest of corporations.

For some reason, the media always accept the Trumpian narrative that the large trade deficits the U.S. runs with China (and most of the rest of the world) were the result of other countries outsmarting our negotiators, or at least an accidental result of past trade deals. The media never say that large trade deficits were a predictable outcome of a trade policy designed to serve the wealthy.

The fact that trade is a story of winners and losers within countries, rather than between countries, is especially important now that our trade conflicts are entering a new phase, especially with China. While not generally endorsing Trump's reality TV show tactics, most reporting has taken the position that "we" in the U.S. have genuine grounds for complaint with China.

The complaints don't center on the under-valuation of China's currency, which is a problem for manufacturing workers. Rather, the issue that takes center stage is the supposed theft by China of our intellectual property.

While this sort of claim is routinely asserted, the overwhelming majority of people in the United States have never had any intellectual property stolen by China. It is companies like Boeing, GE, Pfizer and Merck that are upset about China not respecting their patent and copyright claims, and they want the rest of us to have a trade war to defend them.

If the goals of trade policies were put to a vote, these companies would be hugely outnumbered. However, they can count on the strong support of the media in both the opinion pages, and more importantly, the news pages. The issue is entirely framed in their favor, and dissenting voices are as likely to be heard as in the People's Republic of China.

There is a lot at stake in preserving the myth that ordinary workers were hurt as just an accidental byproduct of globalization. The story is that it just happens to be the case that hundreds of millions of people in the developing world are willing to do the same work as our manufacturing workers for a lot less money.

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Dr. Dean Baker is a macroeconomist and Co-Director of the Center for Economic and Policy Research in Washington, D.C. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University. (more...)
 
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Thomas Brown

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Just outstanding! Best explanation of China and Trade issues I've seen. Every politiian should be forced to read this. This article should be a campaign ad for the truth. Further more it shows duicity of all past administrations and the incompetence of tbe current Liar in chief. Remind us often of your explanation here. Thank you!

Submitted on Tuesday, Aug 20, 2019 at 12:28:18 PM

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Thomas Brown

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Just outstanding! Best explanation of China and Trade issues I've seen. Every politiian should be forced to read this. This article should be a campaign ad for the truth. Further more it shows duicity of all past administrations and the incompetence of tbe current Liar in chief. Remind us often of your explanation here. Thank you!

Submitted on Tuesday, Aug 20, 2019 at 12:28:29 PM

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Stan Crawford

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""we" in the U.S. have genuine grounds for complaint with China."China did not steal jobs from American's, U.S. corporations went there after the unpatriotic, immoral, unethical Ronald Reagan fired the union FAA Air Traffic Controllers. To encourage CEO's to out-source/off-shore American manufacturing, for bigger Shareholder ROI, exploit cheap labor and circumvent EPA laws. Union membership is at an all time low in the USA and Shyster Don with his MAGA tripe is out to cut even more.


It was Reagan's administration of most convicted Felons and others whose misguided policies (not following through on Carter's Energy Policy), now have China leading the world in fast-train and alternative energy use and research. Reagan's inept policies laid the foundation for the PRC/CCP to now threaten US economic/military interests and Taiwan. An Australian think tank now believes the US will have difficulty in upholding its defense commitments in Asia, due to China's near technological parity with the USA.


I'm rather behooves me the MSN does't do more research on tRump family products made in China and tariff exempt? More reports on family farmers not receiving bailouts while corporate ones do. How many auto workers, along with retail/sales jobs gone due to tRump's trade war?


With King Con Don as our Socialist POTUS (bailing out corporate farmers) and his administrations of UN-reliability in fulfilling its commitments now has many countries signing onto the BRI, knowing their economic future has greater success with China than the USA. Europe is setting up a new currency exchange to continue trade with Iran.


Rather embarrassing the past 40 years the USA first provided billions of $'s in weapons to Reagan "Freedom Fighter's," now costing the country trillions of $'s and scores of US soldiers/innocent killed, maimed and committing suicide in the farce War of Terror against these relabeled "Terrorist's." Putting untold millions into poverty, while China has brought out of poverty untold millions.


tRump doesn't realize it yet, but his days of "deals" with China are over! they will wait out till 2020 to see what transpires. It is China who will ultimately have the USA come begging for a deal. China is out to prove its brand of "Socialism" will destroy western "Capitalism" and the companies who chose to relocate to China sold a section of the rope that will be used to hang itself.


I spent between 2003-2015, teaching (babysitting) at four different medical schools related to hospitals my great great grandfather built between 1866-1901, the last being China's #2 medical School WCSM/Huaxi, and its was "enlightening" to see the comical, inept administration try and explain why over half their 5th and 8th year students failed my final exam. I'm not a medical doctor or possess a PHD (Piled Higher/Deeper).


.chinamissions.com/

Submitted on Tuesday, Aug 20, 2019 at 7:20:41 PM

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"Less pay for U.S. doctors means lower cost health care, just as lower pay for textile workers means cheaper clothes."

Maybe if you are trading a chicken for an annual checkup with a rural doctor. The insurance companies and HMO's are dictating the cost of healthcare not the doctors. The "You get what you pay for" model does not typically lead to healthy outcomes.

Submitted on Tuesday, Aug 20, 2019 at 11:40:05 PM

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