Romney's 'crackdown on China' will not create US jobs

An Expert's View about Business Environment in China

Posted on: 1 Nov 2012

At the Oct. 16 presidential debate, Romney said, "And for me, this is about jobs…We don't have to live like this. We can get this economy going again. My five-point plan does it. Energy independence for North America in five years. Opening up more trade, particularly in Latin America. Cracking down on China when they cheat. Getting us to a balanced budget. Fixing our training programs for our workers. And finally, championing small business."

The Romney campaign maintains unfair trade practices are enabling China to take employment opportunities away from the US. Historical data, however, suggests otherwise.

There is no correlation between China's growing exports to the US and the loss of jobs in the country, as indicated by chart 1 below.

The latest unemployment spike, for example, came on the heels of the financial crisis, which saw the housing market collapse and major businesses failing, forcing massive layoffs. Joblessness peaked in October 2009 at 10 percent.

The chart further shows the US job market opening up even as China's exports were increasing. Moreover, there has been no noticeable drop in employment even when the yuan reform started.

Between November 2009 and December 2011, the unemployment rate in the US decreased steadily although China continued to ship a significant amount of goods there.

Meanwhile, US exports to China during the same 26-month period displayed marked growth. This suggests external trade helps to ease the job market situation, particularly in the US export sector.

According to the US Department of Commerce, merchandise exports from metropolitan statistical areas have risen nearly 40 percent since 2009. In the same statement, acting Secretary Rebecca Blank said higher exports are creating more jobs and expanding outbound shipments are helping the US recover from the economic crisis.

Jobs not automatic

Adding weight to the argument against tough measures on China is the fact that production in the country continues to be mainly low end.

This orientation is reflected in chart 2, which breaks down China's key exports to the US by product.

The chart shows toys, home, leisure and sporting products, computers, accessories and parts, garments and fashion accessories, and machinery and equipment representing the bulk of China's US shipments.

Most of these products are made using labor-intensive processes, usually the low-paying and low-skill kind.

So even if a crackdown does result in some manufacturing jobs reverting to the US, these will be the type that will be of no interest to white-collar America. The US is already the center for sophisticated manufacturing projects, IT and other high-tech services. A return to low-value production will not help advance the US economy.

A recent Forbes article said a crackdown on China will reduce living standards in the US, minimize variety and advancements in the job market, and even bring down the level of pay.

Similarly, trade sanctions such as anti-dumping measures will not generate new jobs in the US due to high manufacturing costs there. Operations will simply shift to developing countries with low production costs, including Thailand, India, Vietnam and Bangladesh.

In the case of tires, the 35 percent anti-dumping tariff did reduce imports from China. But it also boosted procurement from Thailand, Indonesia and Mexico, negating the measure's efforts to create employment opportunities in the US tire industry.

To sum up, it will take more than a "get tough on China" attitude to create jobs in the US. America should also look at internal imbalances in the economy and emphasize exports further to open up the job market.

Read the full report on Romney's 'crackdown on China' will not create US jobs. Global Sources is a leading B2B portal and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines and trade shows.

Posted: 01 November 2012

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