Zero-sum mentality won’t raise US employment

Edited and translated by People's Daily Online

The Obama administration has brought trade cases against China nearly twice that of the Bush administration, and is creating a trade enforcement unit to investigate “unfair trade practices” in China and other countries. At the same time, the White House vowed to do all it can to solve the severe unemployment problem. Will these trade protectionist measures really be an effective solution to unemployment?

The U.S. economy has been sluggish since it plunged into a prolonged recession caused by the subprime mortgage crisis in 2008. The country did not regain its 2007 level of gross domestic product (GDP) until the second half of 2011, but employment remains far below its pre-crisis level. The United States really needs to increase employment.

The main reason for the slow U.S. economic recovery is that the country has been stuck in a deep structural recession. As the global financial crisis seriously damaged the U.S. financial system, banks and other financial institutions as well as ordinary citizens all need to restructure the balance sheet, dispose of bad assets, and reduce debt leverage.

This is a slow process. International trade and outsourcing are not the major causes of the high unemployment rate that plagues the United States. Statistics showed that the U.S. trade deficit was inversely, instead of directly, proportional to the country’s unemployment rate. From 2006 to 2009, the U.S. trade deficit had been halved, while its unemployment rate increased 100 percent.

Due to the weak domestic demand, the United States pins its hope on export and has proposed the plan of doubling its export in five years. If it strengthens its trade protection measures to restrain other countries exports, other countries will definitely restrain the United States' export too, which will go against the United States' original intention.

In the past two years, the growth rate of the United States' export to China was much higher than the growth rate of its overall export, and therefore, deliberately starting trade frictions against China completely goes against the United States' plan of doubling its export.