[By Guancha Observer Network, Ruan Jiaqi]

Ten years after China joined the World Trade Organization (WTO) in 2001, the U.S. and Western countries fabricated the so-called "China Shock" theory and hyped it up, claiming that American manufacturing suffered a structural impact due to a surge in Chinese imports, and blamed China for their own long-standing unemployment issues to divert attention.

On May 27th local time, the website of The Wall Street Journal published a commentary article co-authored by James J. Heckman, the 2000 Nobel Laureate in Economics and a renowned American economist, along with Hanming Fang, an economics professor at the University of Pennsylvania, exposing the "truth" hidden behind the so-called "China Shock" discourse.

The article mentions that the term "China Shock" was first formally introduced in an academic study by three American economists, including David Autor, in 2016. Since then, it has been misinterpreted by U.S. politicians and commentators to widely argue that China's rise has led to the loss of up to 2.4 million jobs in the U.S.

"This is a widespread misunderstanding," the article points out. David's research only focused on changes in manufacturing employment in local labor markets and cannot reflect the overall employment situation in the U.S.

In fact, the "China Shock" propagated by some Westerners had only "localized and short-term impacts" on employment. In contrast, the surge in Chinese imports actually benefited the U.S., not only increasing the overall scale of employment but also genuinely improving consumer welfare.

James Heckman, video still

In their article, Heckman and others stated that increasing evidence shows that Chinese imports have not caused nationwide net unemployment in the U.S., but rather reshaped the distribution of jobs.

The article cites a recent study by the authoritative U.S. economic think tank, the National Bureau of Economic Research (NBER), which found that the local job losses caused by the surge in Chinese imports were largely offset by job growth in other regions.

One manifestation of this is that while employment in the manufacturing-intensive regions of the Midwest and South declined, service industry positions in high-tech centers such as the West Coast and Northeast emerged in large numbers.

Through supply chain analysis, researchers discovered that, in fact, during the period from 2000 to 2007, the so-called "China Shock" slightly increased the total number of jobs in the U.S. This is because more favorable Chinese imports reduced costs for American businesses and consumers, thereby stimulating demand and job growth in other industries.

Considering broader impacts, each region affected by trade with China experienced an average net employment increase of 1.27%, accompanied by an average wage increase. The article specifically noted that even in some areas seemingly most severely impacted by import competition, when adding new service industry jobs, the overall employment effect remained positive.

The article also wrote that it must be emphasized that acknowledging the promoting effects of Chinese imports on the U.S. economy does not entirely deny the difficulties faced by American manufacturing workers during the transition period. However, the so-called "pain" of America's industrial heartland mainly stems from workers' own choices—"the key point is that after these workers became unemployed, they mostly stayed in place and did not move to other places to actively seek new job opportunities."

However, as people gradually adapted to trade competition from China, the employment situation in the U.S. would present another hopeful scene. The article writes that through absorbing young labor force, foreign immigrants, women, and university graduates into the service sector, the employment situation in areas affected by trade gradually recovered after 2010.

Nevertheless, the hype and exaggeration of some individuals regarding U.S. employment issues "conceal the substantial benefits that U.S.-China trade brings to the U.S. economy."

The most obvious benefit is that American consumers pay lower prices for almost all goods, from clothing, electronics to furniture. A study found that for every 1 percentage point increase in imports from China, U.S. consumer prices decrease by about 1.9%. This influence, similar to the "Wal-Mart Effect," particularly benefits middle- and low-income families who allocate more of their budgets to purchasing cost-effective goods produced by China.

American businesses also benefit. Manufacturers using imported components or raw materials become more globally competitive due to reduced input costs. For example, an American company can purchase low-cost Chinese parts to reduce production costs, maintain product prices, and potentially hire more workers.

"Most studies on the 'China Shock' do not consider these positive impacts on producers or consumers," the article emphasizes. "Any fair assessment of China's impact on the U.S. must take these factors into account."

Beyond human factors, the article reminds us that when discussing the so-called "China Shock," we should also consider another major factor reshaping manufacturing—automation trends.

The article points out that even if the U.S. were to somehow cut off trade with China, many factory jobs would still be lost. These jobs are actually being replaced by machines and software, unrelated to Chinese imports. A commonly cited analysis shows that approximately 88% of the manufacturing jobs lost during the first decade of the 21st century were due to productivity gains brought about by automation and similar methods.

Daron Acemoglu's findings also prove this point: from 1993 to 2007, the number of industrial robots operating in the U.S. and Western Europe tripled. During this period, the proliferation of industrial robots in the U.S. resulted in the loss of between 360,000 and 670,000 jobs.

Therefore, in the case of unchanged total demand for goods, the popularization of automation inevitably leads to a reduction in American workers' jobs, "regardless of whether the goods come from China."

At the end of the article, Heckman bluntly stated that blaming China's trade for U.S. employment problems is dangerous because the U.S. risks making both a wrong judgment and adopting a wrong solution.

Regarding the Trump administration's use of tariff measures under the guise of "saving manufacturing," the article criticized, "The practice of imposing tariffs to reverse the situation is a costly therapy."

"Moreover, this problem was misdiagnosed from the start."

Heckman, a staunch opponent of Trump's tariff policies, supports the principle of free trade. According to reports by American media outlets like Business Insider in April, Heckman and 24 other American economists jointly initiated a "anti-tariff declaration" campaign calling for opposition to Trump's harmful tariff policies, pointing out their misleading nature and warning of the potential for self-inflicted recession in the U.S.

On May 12th, China and the U.S. issued a joint statement from Geneva trade talks agreeing to reduce tariffs by 115% within 90 days. On May 14th, the latest tariffs between China and the U.S. were implemented.

In an interview with Chinese media, Heckman expressed his pleasure at China's courage to stand up against the U.S. at a critical moment and say "no" to the so-called "reciprocal tariffs." He believes that China's economy is full of vitality and that attempts to isolate China will not succeed.

This article is an exclusive piece by the Guancha Observer Network and cannot be reprinted without permission.

Original source: https://www.toutiao.com/article/7509371786350445090/

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