US Job Losses not China's Fault: Commentary

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Last updated at: (Beijing Time) Monday, August 18, 2003

US Job Losses not China's Fault: Commentary

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World economic restructuring has meant that many countries play changing roles in production. But now, with some US manufacturers claiming bankruptcy and dismissing employees, many Americans are blaming China for the crunch their country is feeling.

However, the charge is unfounded, and what is happening in the United States is simply a part of the larger restructuring phenomenon.

Yet, a coalition of US furniture makers said Wednesday that they would ask authorities to raise tariffs on Chinese wood furniture.

They said the shipment of US wood furniture declined by 21 per cent between 2000 and 2002 while the import of Chinese furniture rose by 121 per cent during the same period. They claimed Chinese furniture is the very cause of job losses in the US furniture manufacturing sector.

Not long before the incident, on July 30, bankruptcy was filed by Pillowtex Corporation, headquartered in North Carolina, one of the 10 biggest textile manufacturers in the United States.

The company said it was unable to supply products at prices that could satisfy customers and make profit at the same time. The over 6,000 lost jobs at Pillowtex were taken as justification for the company to cry out against made-in-China products: China is the second largest textile exporter to the United States.

The US Department of Labour reported that in July 44,000 jobs were lost and the jobless rate stood at 6.2 per cent. It was a little lower than June's 6.4 per cent but remains one of the highest rates in the past decade.

Alerted, the plant managers, especially those in hard-hit sectors such as manufacturing, are venting their ire on China-made products.

As consumers, on the one hand, Americans welcome the lower-priced imports from China; while on the other, the American manufacturers blame the same products for their lost market share. China is also blamed for the rising unemployment rate in the United States.

The complaints are understandable.

However, it doesn't require much grey matter to figure out that what they have seen as the problem is far from being the whole truth.

Since many developing countries, such as China, which used to be locked behind trade barriers, opened up late in the last century, world economic integration has accelerated at an unprecedented speed, fueled by free trade, free capital flow and a global market.

Countries with comparative advantages have combined to form a long chain from raw materials to finished product.

The world's labour-intensive industries naturally migrate to locations where abundant labour is available, and low wages are a major factor in cutting production costs.

With modest living expenses, workers in these new markets can accept less wages, although they are no less productive than their counterparts in developed economies.

This is a result of world economic restructuring.

China is being blamed just because it happens to be one of the locations which meet most requirements of globalized production.

If manufacturing jobs don't go to China, it goes without question that they will go to other countries with low production costs, like India, Viet Nam or Malaysia.

Certainly, these jobs are not going back to the United States, where the manufacturing industry, with its relatively high costs of production, is not as competitive in the globalized era as it used to be.

China has become a part of the global production chain, whether others like it or not. And China's position benefits others.

It is true that Chinese products have penetrated the US market, but they are often made in factories owned by firms from the United States or other countries, as China is the world's major destination for foreign investment. Much of the profit goes into the pockets of foreign investors.

Americans railing at mass layoffs may forget they are enjoying the comfortable prices and good quality of China-made products themselves.

As Rodney D. Ludema, an expert in international trade with Georgetown University, said: "The manufacturing industry's efforts to keep out Chinese-made products may effectively retain some jobs, but it will be at the price of consumers' interests and the industry's innovation. They should get prepared for the perpetual disappearance of some manufacturing positions."

The cure for the problems of US industry is not to erect trade barriers, but to resort to innovation to enhance its competitiveness.

As a matter of fact, while exporting manufacturing jobs, the US economy is witnessing an upgrade in its industrial structure.

The restructuring will make the US economy more effective, said Ludema in an interview with the Washington Observer Weekly.

It is not a new phenomenon for the US manufacturing industry to lose jobs to other countries. This time, the timing has complicated the issue. It is only one year away from the US presidential election. The pure economic issue is in danger of getting enmeshed in politics.

Eyeing the votes in states where manufacturing centres are located, politicians from both parties have expressed their concerns over the issue of manufacturing job losses, according to the Wall Street Journal.

Another sign is that the US Government is weighing a renewal of restrictions on Chinese-produced textile products, under pressure from textile companies.

Major trade partners to each other, China and the United States have common interests. Their roles are decided by their different economic endowments.

Ignorance of that difference and unfair charges can do nothing but hurt normal trade relations between the two sides. (China Daily News)

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