As background for Reason Foundation’s China Mobility Project, I was reading Daniel Ikenson’s excellent briefing paper on trade and the U.S. economy Manufacturing Discord: Growing Tensions Threaten the U.S.-China Economic Relationships. This is one of several notable and highly relevant passages:
“Regardless of manufacturing’s operating performance, the metric that matters most politically is the number of jobs in the sector. That figure reached a zenith of 19.4 million jobs in 1979 and has been trending downward along roughly the same trajectory ever since. China’s entry into the WTO and the subsequent increase in bilateral trade did nothing to accelerate the decline. Manufacturing job loss has very little to do with trade and a lot to do with changes in technology that lead to productivity gains and changes in consumer tastes. China has also experienced a decline in manufacturing jobs—in fact, many more jobs have been lost in Chinese manufacturing—for the same reasons. According to a 2004 study published by the Conference Board, China lost 15 million manufacturing jobs between 1995 and 2002, a period during which 2 million U.S. manufacturing jobs were lost.”
Ikenson notes that the value of U.S. manufacturing output has been surprisingly stable despite concerns about outsourcing to developing countries such as China. What we fail to realize is the dynamism of the economies of developing countries and the pressures that globalization puts on every industry to remain competitive. The idea that manufacturing deceline in the U.S. is a straight-line extrapolation from outsourcing to less developing countries is much too simplistic and a poor basis for public policy.