What are the side costs of trade with China?

There is a new study from David Autor, Gordon Hanson, and David Dorn:

The study rated every U.S. county for their manufacturers’ exposure to competition from China, and found that regions most exposed to China tended not only to lose more manufacturing jobs, but also to see overall employment decline. Areas with higher exposure also had larger increases in workers receiving unemployment insurance, food stamps and disability payments.

The authors calculate that the cost to the economy from the increased government payments amounts to one- to two-thirds of the gains from trade with China. In other words, a big portion of the ways trade with China has helped the U.S.—such as by providing inexpensive Chinese goods to consumers—has been wiped out. And that estimate doesn’t include any economic losses experienced by people who lost their jobs.

…Dartmouth College economist Douglas Irwin said the new research paints too bleak a picture. There are, he says, important benefits from trade that aren’t captured—because nobody has figured out how to measure them. For example, commodity-producing countries the U.S. exports to have been boosted by China’s growth, creating greater demand in those nations for U.S. goods. “But if we had more exports of (Caterpillar) heavy equipment to Australia, that’s not being measured” as a gain from trade with China, he says.

The original paper is here.


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