[lbo-talk] Does Trade With China Matter?

Nathan Newman nathanne at nathannewman.org
Thu Mar 25 08:52:32 PST 2004



>----- Original Message -----
>From: "Doug Henwood" <dhenwood at panix.com>
>>-So why is retail shrinking, with all those Chinese goods to sell?
>
>Overbuilding in the previous period is one answer,

-Aha! Gotcha!! The major problem with U.S. employment is hangover from -the bubble. Outsourcing/offshoring is only a minor part of the -problem.

Actually, I don't think retail is so much part of the bubble, except indirectly in the luxury goods sector, but more due to a general trend of hyper-competition in the retail sector running smack into Wal-Mart and the Internet cutting the need for the traditional diversified retail outlets.


> and retail is going
>through a structural shakeout, partly due to Wal-Mart,

-Wal-Mart opens stores like crazy and employs vast numbers of people.

Does it employ more people than the stores it displaces? It makes its money because it moves more volume of goods per dollar spent than competing stores. The wave of bankruptcies in retail sure means a lot of retail employees have lost their jobs. ======

As for service jobs and China


>But it's often easier to locate those services closer to the worksite--
>especially the lower-level services, from janitorial to food delivery jobs,
>that are completely integrated into the core manufacturing jobs. Send
>manufacturing jobs to a location and many of the services will follow.

-Why should a trend that's at least 20 years old suddenly manifest -itself in the last 2-3 years? We heard this argument in the 1980s and -early 1990s from EPI and others, and service employment expanded -nontheless.

What exactly manifested itself in the last 2-3 years?

One trend is the so-called decline in manufacturing jobs, which I noted was partly fake, since what was really happening was that jobs previously counted as manufacturing were being reclassified as service jobs because manufacturing firms were outsourcing service components of their internal operations. That's been going on for decades.

The other trend is accellerating manufacturing trade coming out of China, which takes not only manufacturing jobs but service jobs associated with those manufacturing jobs. That trend, it is argued, has accellerated in the last few years.

I think the manufacturing losses are a quite different issue from the tech bubble excesses, which has more to do with the debate over outsourcing to India. Yes, some of the job loss in the tech sector is no doubt due to the bubble collapse. I was predicting that part of the job loss back in 1998 when I finished by Ph.D. dissertation. See http://www.nathannewman.org/diss/chap4.html#n And some of the job loss is due to technological replacemen of jobs. But a real part is loss of routine programming jobs and not-so-routine work. However, unlike China where repressive government policy by that government is the bad actor, I see the loss of tech jobs to India as due to the bad and short-sighted policies of the US government which underfunded tech research in the 1990s and undermined the strengths we had in that area-- essentially the main thrust of my diss and book.

So don't conflate the loss of manufacturing jobs to China and the loss of programming jobs to India. They are different phenomena and prescriptions for dealing with them are different. ===

As to the effect of China on other low-wage countries--


>Since those jobs are moving because China often pays even lower wages with
>worse labor conditions, then the effects on US workers will still be worse,
>both in accellerated jobs losses and greater threats by management to move
>jobs unless wages and benefits are slashed.

-But weren't you arguing earlier that China explained weak job growth?

Yes, and China can be causing job losses in both Indonesia and Mexico AND the United States. And putting downward wage pressure on all of them.

-Real wages are flat, not down, and labor market slack could explain -most of it. The effect of China is >0%, but you sound as if it's -close to 100%. -As the BW article points out, most of the kinds of manufacturing done -in China has no competition in the U.S. - it's mostly low-end stuff -that left the U.S. years ago.

Come on-- China is manufacturing a whole range of things at this point, from cell phones to cars, all of which are either still made in the US or were until a couple of years ago. China is not just a bunch of garment sweatshops anymore; it increasingly is involved in every kind of manufacturing possible.


>The whole point of my original post is that I don't think these percentage
>of GDP measures are enough, given the low dollar amounts paid to Chinese
>workers.

-Your first back-of-the-envelope calculation had 90% of the Chinese -manufacturing workforce working for the U.S. market. If Chinese -exports were displacing U.S. manufacturing as much as you say, it -would show up as in increase in imports regardless of how cheap the -products are. But there's no evidence of such an import surge.

Of course there is a surge in imports from China. Imports from China have surpassed Japan and Mexico, previously our largest suppliers of imported goods.

My back of the envelope calculation indicates that the export sector is larger than public statistics indicate-- and the point about support services being included in de facto manufacturing applies in China as well -- or there are other distortions of the trade statistics that make things suspect.

Part of my problem with the debate is that common sense of most Americans rightly says that when everything they buy -- electronics, clothes, furniture, etc. -- is no longer made in the United States, but is now made largely in China, it's just hard to believe all the econ blather that this is natural and nothing significant. Especially when combined with the fact that China is a dictatorship that is ruthlessly suppressing any labor organization that might try to raise wages.


>Why is trying to
>locate the cause of a problem - weak U.S. job growth - the same as a
>"kneejerk defense" of China? And why not focus on our crappy
>treatment of the unemployed and displaced instead of finding the root
>of our problem in China?

I was responding to your statement that even discussing Chinese abuses is a way of distracting attention from structural problems in the US. My day-to-day political job is nothing but challenging problems in US government policies, stupid economic decisions, and mistreatment of US workers by the US government and our companies.

Of course there are problems with US policy, but if US capitalists can essentially flee to slave labor in China every time labor standards are raised in the US, we can't convince any local, state or federal official to support raising those standards. The existence of the "right to work" south helped undermine labor standards in the US, as textiles and other manufacturing fled the Northeast and the Midwest in the 60s, 70s and 80s, and now they are being further undermined as manufacturers have been able to flee to slave labor in places like Indonesia and now China.

The sad thing is that activists struggled for years to raise labor standards in a place like Indonesia, cheered when Sukarto was pushed out and free labor unions had a chance to organize, and now even their labor standards are being undermined by China.

China is the enforced scab labor of the globe, the "low road" undermining every high road attempt in manufacturing anywhere else in the world.


>When I interviewed Jagdish Bhagwati this
>morning, he spent a lot of time criticizing the Dems for not pushing
>for retraining, income support, and wage insurance. Why shouldn't we
>do the same?

A welfare state for the unemployed is a nice thing, but it's not a job where workers have power over their lives and a claim to control of economic resources.

As for training, give me a break. Have you just become a complete liberal on job issues? Training is useful, but only if workers get some guarantee that the jobs they train for won't disappear like the jobs they just lost.


>China's not some black hole that's going to suck us all down
>into its gravitational field. If we had a civilized welfare state and
>a more sensible fiscal policy, our labor market wouldn't be so weak
>and workers wouldn't be taking so many hits.

-I don't get what your policy prescription is - tariffs on Chinese -goods? Sanctions?

Yes. Until they respect ILO labor standards, shut down trade. Period.

And yes, I'd love for Europe to apply the same standards to industries in the US that violate labor standards.

-- Nathan Newman



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