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Would slashing the trade deficit with China create jobs in the U.S.?

By staff

Part three of a three-part interview with Professor Masao Suzuki

This is part three of a three-part interview. Click for part one and part two of this interview. Fight Back!: President Trump seems intent on risking on a trade war with China in order to narrow the U.S. trade deficit. Trump thinks the U.S. trade deficit means that the U.S. is a loser, and by bringing down the trade deficit the U.S. economy will grow by the same amount, creating jobs and income here in the U.S. What do you think?

Masao Suzuki: I think that this is wrong.

For example, let’s see what would happen if Trump were to cut imports from China by $100 billion over the next year. Instead of tariffs, he could ban the sale of Chinese-made cell phones and personal computers, which came to about $110 billion last year. Would this boost the U.S. economy by $100 billion?

It would, but only if Americans spent that $110 Billion on U.S.-made cell phones and personal computers. The fact is that U.S. cell phone manufacturers such as Apple have offshored all of their cell phone production. The same with U.S. computer manufacturers such as Dell and HP. Ironically, the only major computer company still making personal computers in the U.S. is Lenovo, a Chinese company.

Fight Back!: So what would happen instead?

Suzuki: Some Americans would turn to cell phones made in other countries. For example, the south Korean company Samsung, which is one of the world’s largest cell phone makers, assembles many of its cell phones in Vietnam. So one effect would be to increase imports from Vietnam and other cell phone exporting countries, meaning no net fall in the total U.S. trade deficit.

Others would choose to spend their money on other goods and services, although many consumer goods – clothes, shoes, TVs, electronics, etc. – are also imported. But many would just wait the year or two it would take for Apple, Samsung and other manufacturers to move their manufacturing out of China to another country, like Vietnam. So, what would happen in a year or two is that trade deficit would shift to other countries.

Fight Back!: What about in the meantime?

Suzuki: Apple has only about a week’s worth of inventory, other manufacturers a little more. So, starting in about a week, Apple runs out of cell phones and computers to sell, followed soon after by other companies. The Apple store has more than 30,000 employees in the U.S., many of who would lose their jobs while Apple scrambles to move its production out of China. Add to this the workers at other cell phone and computer companies, trucking and shipping workers.

So in the near term the impact of a ban on Chinese imports would be higher prices for cell phones and computers, and job losses. A trade war with China involving higher tariffs could have the same effect – and this is not even taking into account retaliation by China, which has already targeted U.S. soybeans and aircraft after Trump called for tariffs on $50 billion in Chinese imports.

Fight Back!: The underlying issue is that millions of manufacturing jobs, many of them unionized with decent pay and benefits, have disappeared from the U.S. in the last 20 years. If slashing the trade deficit won’t help, what would?

Suzuki: Some of the job losses in manufacturing are because of automation or other improvements in productive technology. For example, in steel the more labor-intensive open hearth production using iron ore has been largely replaced by electric arc production uses a lot less labor. In auto too, production of cars and light trucks has remained the same while employment has fallen.

But it is true that that there has been a large increase in imports of auto sedans, washing machines, etc. as U.S., European, and Japanese corporations shift production to other countries, in particular Canada and Mexico, with NAFTA. But Mexican workers have not benefitted from NAFTA nor have American workers – only the big car companies have. So dismantling so-called free trade agreements like NAFTA, whose real purpose was to ease the ability of corporations to move production and jobs in search of profits, is needed.

But it is important to recognize that manufacturing jobs are not inherently ones with good pay and benefits. It took the unionization of basic industry through massive struggle during the 1930s, and then more struggle by unionized workers following World War II, to win higher pay and benefits.

During the 1980s many labor leaders adopted the “made in the USA” slogan and targeted imports of Japanese cars. But this did not stem the decline of good union jobs as companies moved production to the non-union South and increased automation.

So, I think that what is really needed is for the labor movement to take up their most powerful weapon, the strike, and use it to fight for better pay and benefits.

#UnitedStates #MasaoSuzuki #China #tradeDeficit