Trade-gap study focuses on China

China's entry into the World Trade Organization has widened the U.S. trade deficit and cost Washington and Oregon more than 14,500 jobs since 2001, a congressional commission heard yesterday.

This worsening of the trade picture wasn't supposed to happen.

"China's entry into the trade governing body was supposed to provide openings for sufficiently rapid growth in U.S. exports to reduce the trade deficit with China," said Robert Scott, an economist at the Economic Policy Institute based in Washington, D.C.

Instead, imports from China jumped one and one-half fold in three years, far outstripping the rise in U.S. exports to China, according to a study Scott conducted for the commission.

Scott spoke at a Seattle field hearing of the U.S.-China Economic and Security Review Commission, a 12-member group appointed by Congress to investigate trade relations between the countries and to recommend policy.

The testimony pointed out many ill effects to U.S. businesses and workers from a more open global economy, and raised alarms among commissioners who feared more high-tech and high-skill jobs would vanish.

Scott said his study found job loss has been slowing in low-skill apparel and shoemaking, but accelerating in high-tech sectors.

"We're talking really about the crown jewels of our economy," commission member Michael Wessel said.

The study found Washington lost production facilities supporting 7,628 jobs from 2001 through 2003 due to the trade imbalance with China, while Oregon lost 6,966. And the pace is picking up. In the 1997-2001 period, Washington lost 6,346 jobs and Oregon 5,974.

Overall, since 1989, the U.S. has lost production supporting 1.5 million jobs to China. And the pace of growth in the deficit with China continues to rise — up 30 percent in 2004 after a 25 percent gain in 2003, Scott said.

While the commission is focused on China, the U.S. trade deficit touches most nations. The deficit probably reached $600 billion last year, analysts said, after figures this week showed it had climbed to $561 billion in November from $497 billion in 2003.

Beyond job loss, the imbalance weighs on the U.S. debt. News that the U.S. trade gap with China grew to $11.1 billion in December suggests the U.S. borrowed from China to buy those imports, because China is among the biggest lenders to the U.S.

"It means that we are going to, sooner or later, repay China $11.1 billion, plus interest, just for our December 2004 purchases," Rep. Jim McDermott said.

Commission members noted that not all the high-tech jobs are going to cheaper workers in India and Eastern Europe. Outsourced jobs went to Sweden, Canada and the U.K.

"It's not just rich versus poor, it's rich versus rich competing for that slice of the high-tech pie and we are losing that race," said commissioner June Teufel Dreyer.

Panelists said the commission should tell Congress to increase pressure on China to raise the value of its currency. The undervalued yuan, Scott said, puts U.S. exports at a disadvantage.

Panelists also said the U.S. should stop allowing corporations to export to cheaper labor markets technology and jobs developed in the U.S. "We need to make it more lucrative for companies to stay here and penalize them for going overseas," commission chairman C. Richard D'Amato said.

Beyond that, he said, Congress could appeal to business leaders' moral sense.

"There's an attitude issue we need to address," he said. "We can't regulate attitude, but we can make people stop and think."

Alwyn Scott: 206-464-3329 ascott@seattletimes.com