Saturday, September 1, 2012


Jobs displaced due to U.S. trade with China as a share of state employment, 2001–2011


  1. Between December 2001 and December 2011, 3.9 million U.S. manufacturing jobs were lost (Bureau of Labor Statistics 2012a). The growth of U.S. trade deficits with China was responsible for the displacement of more than 2.1 million manufacturing jobs in this period, or about 54 percent of manufacturing jobs lost.16

    The employment impacts of trade identified in this paper can be interpreted as the “all else equal” effect of trade on domestic employment. The Federal Reserve, for example, may decide to cut interest rates to make up for job losses stemming from deteriorating trade balances (or any other economic influence), leaving net employment unchanged. This, however, does not change the fact that trade deficits by themselves are a net drain on employment.

    Many of the mechanisms that could offset employment losses caused by growing trade deficits are not operating in the current downturn. The Federal Reserve cannot cut interest rates any further than it already has, and interest-rate-sensitive industries such as residential construction are not experiencing employment gains from lower rates. In short, in today’s economy with its high unemployment rate, jobs displaced due to trade deficits with China are much more likely to be actual net, economy-wide losses than simply job reallocation's.

  2. U.S. multinational companies, including Google Inc., Cisco Systems Inc., and Forest Laboratories Inc., save billions of dollars in taxes annually by shifting profits into subsidiaries in tax havens, often using techniques with nicknames like “double Irish” and “Dutch sandwich.”

    Under current law, U.S. companies owe the 35 percent U.S. corporate tax rate on all the income they earn around the world. They get credits for tax payments to foreign governments, and they don’t pay the U.S. anything until they bring the money home.

    Camp, the U.S. Chamber of Commerce and Republican presidential candidate Mitt Romney say the U.S. tax system makes it harder for American companies to compete internationally with businesses from the U.K., Germany and Japan whose home countries don’t impose additional taxes on foreign profits.

  3. Has the Great Rebalancing already started? (China)

    The most interesting thing is that even if CPI remains stable month-on-month, it will turn negative year-on-year in January 2013. And if it continues to decline month-on-month at current rates, we could see negative year-on-year CPI as early as August/September.

    June CPI increased 2.2% from a year ago, slightly lower than market consensus of 2.3%. June PPI dropped 2.1% on yearly basis, versus the median forecast of a 2.0% decline. On a monthly basis, CPI and PPI were down 0.6% and 0.7% respectively. The consumer price index has posted three consecutive months of negative monthly growth, and it was also the second consecutive month-on-month fall of PPI. Moreover, the year-on-year PPI growth has been negative for four months.