By Tom Still
MADISON – Every time a manufacturer announces a layoff in Wisconsin, someone finds a way to blame the Chinese. Brett Favre’s injured thumb on his passing hand? The Chinese probably had something to do with that, too.
Some of the “don’t-trade-with-China” talk that dominates the airwaves and the bar stools these days may be justified, given that Chinese factory workers earn only 61 cents per hour compared to $16.14 for the average U.S. manufacturing worker. Foreign investment in China is soaring, and clothes, toys, shoes, furniture and computers once stamped “Made in U.S.A” are being produced in places such as Zhejiang, Hangzhou and Hong Kong.
If the Chinese are to be faulted every time a job is lost in the United States, however, it also makes sense to credit them when American consumers pay less for products they want – or when U.S. jobs are created to meet China’s enormous appetite for goods and services.
The debate over how to trade, freely and fairly, with China is not a one-way street. The economic calculus of costs and benefits reveals that protectionism will only hurt the United States over time.
For starters, relatively few of the jobs lost in the U.S. economic downturn that began in 2000 have wound up “offshore,” a category that includes China as well as India, the Philippines, Thailand and Mexico. Federal officials estimate that only 15 percent of the 2.81 million lost American jobs have reappeared elsewhere.
But aren’t the rest of those jobs being eliminated by low-wage foreign competition? That’s the argument in the textile industry, which last week prevailed upon the Bush administration for limits on certain types of clothing imports from China.
Like most manufacturers, however, textile makers have been eliminating jobs for years. And if quotas actually provide temporary relief to manufacturers, they come at the expense of consumers, who pay more and have less selection. Even as U.S. textile makers lose business to China, American cotton growers are gaining business: China is the fastest-growing export market for U.S. cotton.
In Wisconsin, it’s worth noting that China’s thirst for imported goods and materials matches with some of the state’s historic and emerging strengths. Electrical machinery and equipment, power generation equipment, oilseeds, plastics, vehicles and wood products are high on China’s shopping list.
And China has been bending over backwards of late to reduce trade frictions with the United States, most notably with this month’s purchase of more than $1 billion in General Motors cars and auto parts. Many of those cars and parts will have roots in Wisconsin. The Chinese have also signed contracts worth $1.7 billion to buy commercial airliners and jet engines from Boeing and General Electric, with the promise to buy more as China builds internal transportation networks.
China is expected to pass Germany this year as the world’s third-largest vehicle market behind the United States and Japan. China is the fastest-growing aviation market in the world and expects to open more than 100 airports in the next decade.
There’s more to come: China will inevitably become an importer of information technology as it tries to build a knowledge-based economy. According to the Federal Reserve Bank, China has 19 personal computers per 1,000 people. The United States has 625. The United States spends $2,924 per capita on information and communications technology annually; China spends $53. The United States has nine times the scientists and engineers engaged in research and development. China has 184 secure Internet servers; the United States, 78,126. The United States has 20 times as many Internet users per capita.
With a population that is 4.5 times the size of the United States, China cannot be ignored as a market for U.S. goods and services. Instead of erecting trade barriers to save jobs that probably cannot be saved, the United States should be seizing opportunities to trade with an awakening economic giant.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.