There’s a widespread perception that trade with China caused increased unemployment in America. This is false. Imports from China did reduce jobs in some industries, but this did not have any effect on the overall unemployment rate, as even more jobs were generated in other industries.
Last year, the Chinese trade surplus rose to nearly a trillion dollars. If the mercantilists were correct, then China should be experiencing a boom in manufacturing employment. In fact, just the opposite is occurring—millions of manufacturing jobs are being lost and China’s unemployment rate is higher than ours.
The Financial Times reports that jobs are being lost in a wide range of manufacturing industries:
The FT points out that while some jobs have migrated to other East Asian countries, the main issue is automation:
Manufacturing is far from dead in China, however. In a factory in Panyu on the outskirts of Guangzhou, humans work in synchronisation with machines to churn out new electric vehicles every 53 seconds. . . .
But in parts of the line — such as when seven robots lift, rotate and fit windscreens on chassis passing on a conveyor belt — humans are vastly outnumbered by machines.
Other tasks, such as the hazardous welding and coating of car doors are entirely automated, while the overall automation rate of the final assembly process is about 40 per cent.
That is by design, says Li Xiaoyu, an engineer: the factory has a goal of reducing its human workforce by 10 per cent a year.
Automation was also the primary cause of job loss in US manufacturing. Unfortunately, politicians have blamed the job loss on trade, and this has contributed to the global rise in nationalism. If trade really were the issue, then China’s vast trade surplus would be generating lots on manufacturing jobs. Instead, they’ve lost over 7 million such jobs, just since 2011:
Analysis of 12 labour-intensive manufacturing industries between 2011 and 2019 by academics at Changzhou University, Yancheng Teachers University and Henan University found that average employment shrank by roughly 14 per cent, or nearly 4mn roles, between 2011 and 2019. Roles in the textile industry shrank 40 per cent over the period.
An FT analysis of the same 12 sectors between 2019 and 2023 found a further decline of 3.4mn jobs..
