Claims that “Barbarians are at the gate!” are prolific these days. One such claim has it that some barbarians are already within the gate. The barbarians in mind are Chinese imports.
The claim is that cheap Chinese imports have gutted U.S. manufacturing, destroying millions of U.S. manufacturing jobs.
There are many problems with the claim.
For one, U.S. manufacturing hardly appears to be in decline, never mind gutted. Federal Reserve data show that U.S. industrial capacity is greater than it has ever been. It is 18 percent greater than it was in 2000, when trade with China was liberalized.
U.S. manufacturing production, too, has reached an historic high. Despite falling by 19 percent during the Great Recession, U.S. manufacturing output is now 9 percent greater than it was in 2000.
The idea that U.S. manufacturing is in decline is based on the decrease in manufacturing employment. Manufacturing employment reached a peak of 19.4 million in 1979. It was down to 17.2 million in 2000, and down to 13.5 million just before the Great Recession.
The recession pushed it down to 11.5 million. But it has increased each year since 2010, and now stands at 12.8 million.
Are Chinese imports to blame for the decrease in U.S. manufacturing employment?
Doubtful.
By far the most significant reason for the decrease in U.S. manufacturing employment since 2000 is technological advance. To be producing 9 percent more output with 25 percent fewer workers is an extraordinary increase in productivity.
A prominent 2013 study estimated that Chinese imports accounted for as much as one million of the four million decrease in U.S. manufacturing employment between 1990 and 2007.
More recent research suggests that estimate is incorrect.
The more recent research takes into account the fact that the bulk of U.S. trade in goods is in industrial supplies and capital goods, products that you and I, as consumers of retail goods, never see.
In 2017, 54 percent of goods imported by the U.S. were industrial supplies and capital goods; 23 percent were consumer goods. In the same year, 65 percent of goods exported by the U.S. were industrial supplies and capital goods; 12.5 percent were consumer goods.
Which U.S. firms import industrial supplies and capital goods? To a large degree, U.S. exporters. Purchasing lower-priced, quality inputs makes U.S. exporters more competitive and able to export more.
Which foreign firms import U.S. produced industrial supplies and capital goods? To a large degree, foreign exporters. Purchasing lower-priced, quality inputs makes foreign exporters more competitive and able to export more.
A consequence? U.S. imports and exports of goods stimulate each other.
The data show it. Since 2002, inflation-adjusted U.S. goods imports have increased by 88 percent, while inflation-adjusted U.S. goods exports have increased by 101 percent.
The same is true of U.S. trade with China. Since 2000, U.S. imports of goods from China have increased by 405 percent, while U.S. exports of goods to China have increased by 697 percent.
That also means that goods we import often have a significant amount of U.S. content, while goods we export often have a significant amount of foreign content.
That is especially true of Chinese imports. A Federal Reserve study published just two weeks ago found that 56 cents of every dollar in U.S. imports from China actually goes to U.S. firms and workers.
Taking all that into account, recent research suggests that Chinese imports have had little effect on U.S. manufacturing employment.
At times, there truly are barbarians at the gate. Far more common are cries of “Barbarians are at the gate!” when, in fact, there aren’t.
Reg Murphy Center