July 5, 2016 I By: TIM WORSTALL
I have been making the point for some time now that trade with China doesn’t change the number of jobs in the United States. That trade deficit will change the type of jobs being done, that’s entirely true, but it won’t change the number of jobs. For the number of jobs is determined by the level of aggregate demand in the US economy and that, in turn, is determined by the mixture of fiscal policy from Congress and monetary policy from the Federal Reserve. Yes, I know, this isn’t what we’re sometimes told and it’s also not what most people believe. It does however have the saving grace that it is actually true.
Trade changes which jobs are done, not the number of jobs.
I am of course more extreme in my interpretation of this – I am a well known extremist thus my views are indeed extreme:
An interesting new paper showing that changes in trade laws concerning China did indeed reduce American manufacturing employment. This will be taken as a measure of how much poorer such Chinese imports have made us. This is of course wrong. It is those very manufacturing job losses which show us how much richer trade with China, imports from China, have made us.
Yes, I really am saying that losing manufacturing jobs to Chinese imports makes us richer.
We have indeed lost some manufacturing jobs as a result of that trade with China. But we have not lost jobs in total – quite apart from anything else the general unemployment rate has not risen at the same time.
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