USCBC: EPI Study on US Jobs, Trade Deficit, and China Currency is Wrong

“EPI’s methodology is the same kooky math, different year. EPI still basing calculations on an unrealistic premise of ‘what if we didn’t import anything from China?’.”

WASHINGTON, DC, December 12, 2014 – A study from a Washington think tank released this week again attempts to calculate US manufacturing job losses based on trade with China and once again uses flawed methodology that distracts from the real challenges facing the US economy and the trade relationship with China, the US-China Business Council (USCBC) said today.

"The Economic Policy Institute's (EPI) briefing paper, “China Trade, Outsourcing and Jobs,” is the same kooky math, different year. EPI is still basing its calculations on the scenario of ‘what if every product we import from China was instead made in the United States?’ As USCBC has said repeatedly to previous versions of this EPI report, this assumption is faulty and is decades wrong," said USCBC Vice President Erin Ennis.

"Much of what we import from China today simply replaces imports from other countries like Japan, Singapore, and South Korea, not products we make in the US today," Ennis said. "A jobs impact study that ignores the realities of global supply chains and modern manufacturing techniques undermines its own authority.

“Furthermore, EPI continues to want to make the link between currency appreciation, the trade deficit, and American jobs. China’s currency has appreciated over 30 percent against the dollar since 2005, but there has been no significant corresponding decrease in the trade deficit, showing there is a limited link between the two.

“In addition, a 2011 St. Louis Federal Reserve Bank report debunked the idea that appreciation of China’s currency would create significant jobs in the US. As they rightly noted, ‘RMB appreciation would increase import prices without bringing many job opportunities back to the United States,” Ennis said.

EPI continues to attribute job losses solely to the goods trade deficit and fails to take into account the significant productivity increases that have been achieved by today’s modern US manufacturers that require fewer people to produce more goods.

“America makes more things with fewer jobs as productivity has risen over the past 40 years,” Ennis said. “The decline of manufacturing employment in the United States is a long-term trend that has been going on for decades, well before China was a major trade partner.”

Some workers nonetheless do lose their jobs to lower-cost imports. US policymakers need to ensure these workers have the opportunity to transition to new work in growth sectors of the economy.

“The overall US economy has benefited significantly from trade in general and trade in China in particular,” Ennis said. “The key is not to build walls around the United States or pursue the failed isolationist policies of the past. We must make sure our companies and workers stay competitive and remain the global leaders in manufacturing – and that means encouraging more innovation, improving our education system, and getting our own fiscal house in order.”

The US-China Business Council (USCBC) is a private, nonpartisan, nonprofit organization of roughly 220 American companies that do business with China. For over four decades, USCBC has provided unmatched information, advisory, advocacy, and program services to its membership. Through its offices in Washington, DC; Beijing; and Shanghai, USCBC is uniquely positioned to serve its members' interests in the United States and China.