September 27th, 2011
07:06 AM GMT
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(CNN) – For decades, the economic wisdom has been that lower trade barriers create better wealth for both parties.

Outsourcing low-skilled, low-wage jobs to an India or Mexico helps those developing economies, while that loss of industry in a developed economy like the United States is more than offset by lower product costs and an employee talent pool that finds work higher up the economic food chain. Everybody wins.

A new study, however, suggests that when it comes to China, the economic benefit to the U.S. may be less than previously thought.

“The study, conducted by a team of three economists, doesn't challenge the traditional view that trade is ultimately good for the economy,” writes Justin LaHart, who first reported the study for the Wall Street Journal. “Workers who lose jobs do eventually find new work or retire, while the benefits from trade, such as lower prices, remain. The problem is the speed at which China has surged as an exporter, overwhelming the normal process of adaptation.”

The study estimates that the cost to government in increased costs such as unemployment benefits erode as much as two-thirds of the total benefits the U.S. enjoys from lower priced products or boosts in sales to an economically stronger China.

The study does not factor in direct economic losses to those in the U.S. left unemployed when business leaves for China. According to the Economic Policy Institute, the trade deficit with China cost the U.S. 2.8 million jobs from 2001 to 2010.

The value of annual Chinese imports has increased “a staggering 1,156% from 2001 to 2007,” according to the report, written by David Autor of the Massachusetts Institute of Technology, David Dorn of the Center for Monetary and Financial Studies in Madrid and Gordon Hanson of the University of California in San Diego.

Speaking to the Wall Street Journal, Nobel Laureate Michael Spence said current economic theories have never been tested against the blistering growth seen from China and other developing markets. "It's not like we can look to the past and ask ourselves what happened last time this happened, because there wasn't a last time," he told the Journal.

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Filed under: AsiaChinaUnited States

soundoff (17 Responses)
  1. JamesRaynor

    omg. Obama's face describes the situation perfectly.

    September 27, 2011 at 7:49 am |
  2. Qutubuddin

    September 27, 2011 at 7:59 am |
  3. ProUSA

    Something has to change. It's not getting any better. It's getting worse.. So, something has to change! Trade barriers must be strengthened!

    September 27, 2011 at 8:12 am |
  4. kissmybums

    Look at Obama's body language in the picture: "I am haviing a headache!"

    September 27, 2011 at 8:32 am |
  5. kissmybums

    It was the USA that imposed "globalization" on China, India and others. USA banged on the door of China and insisted that China traded with the USA, and trade China did.

    September 27, 2011 at 8:34 am |
  6. scndnv

    Obama, trying out his bestest serious face.

    September 27, 2011 at 9:24 am |
  7. dozo


    September 27, 2011 at 9:41 am |
  8. 奥巴牛

    We Chinese media told us the United States of America to buy high quality and inexpensive good afraid of Chinese high quality and inexpensive goods to seize market share in the United States and nationalism is the deliberate destruction of messing up!

    September 27, 2011 at 12:08 pm |
  9. Hello ?

    What did you really think would happen after you moved all of your manufacturing industries to China ?

    Are people really THAT stupid or THAT short-sighted ?

    Greed and stupidity has seen your jobs, your industry and your wealth exported to China.

    Your exported industrial might will supply the Chinese with sufficient capital – your capital – to take control of all the factors of production in every country on Earth while stupid, short-short sighted individuals continue to support this invasion in slavish deference to free-market capitalism.

    All this while the Chinese refuse to appreciate their currency, aggressively purchase huge swathes of US debt and refuse to allow foreign ownership of capital in their own country.

    Soon the Chinese will control enough of your land, your wealth, your debt and your jobs to drop all pretenses and fearlessly pursue their geopolitical agenda supported by a million strong standing army and the best military hardware money can buy.

    The American President can see it happening.

    Why can't you ?

    September 27, 2011 at 12:35 pm |
  10. Big_Kev

    Not long ago, the Americans and it's Western Allies did everything they could to try and stop the spread of Communism. Their propaganda was that Communism was evil, restrictive, backward and very bad for everyone. Countless innocent lives were lost all because of American idealism during the war. Millions more suffered through to this day because of the cruel Orange Agent that was sprayed over a large area of millions by the Yanks before their ass got kicked by the Communists all the way back to the US of A. Yep, America's way of stopping communism was to wipe out masses of innocent lives. Now, these same idiots are kissing the Communist Chinese ass to lend them some more money to bail them out. If this is any indication, and with China moving forward so fast, rich and powerful, maybe Communism ain't so bad after all, eh??

    September 27, 2011 at 1:14 pm |
  11. Mike Hunt

    WITCH HUNT: U.S. requires Canadian banks to hand over account information ...

    September 27, 2011 at 2:00 pm |
  12. skeptic

    We are not just losing jobs through outsourcing. We are also losing jobs through highly skilled workers import.

    When we imported 60,000 highly skilled workers each year from China and India, those workers send their money back to China and India to invest. That's a net drain from the U.S. economy.

    September 27, 2011 at 2:06 pm |
  13. dieshard

    WE import foreign workers, and THROW AWAY U.S. workers!!!!! How would you like to train your indian replacement FOR YOUR OWN JOB????????? MY company forced its I.T. workers to train their replacements under the guise of "SUMMER VACATION workers. WE got our vacation time and as we came back to work WE WERE FCKING FIRED, FIRED for taking an UNPAID VACATION???????????????? 45 of us got shtcanned in 3 weeks. OUR personal effects were thrown in the trash!!!!!! Thankfully when the firings started some were able to save some things. BY the way the lowest seniority was 12 years to 18 years of service!!!!!!! THESE indian workers are making $12.oo an hour and living in a dormitory setting at $300 a week!!!! plus their food expenses????? SLAVE LABOR THAT IS WHAT IT IS?!!!!!!!!!! BTW The company also denied our unemployment claims for 5 months. THEY then went bust and came back in another name. Thank you Wisconsin and our azzhole governor, SCREW YOU ALL!!!!!!!!!!!!!!!!!!1

    September 28, 2011 at 2:47 am |
  14. eieieio

    Wake up call! Improve America via Technology investment and sound energy policies. Focus on sourcing technology and products at home. Don't whine... just do it!
    Let's listen to the scientists, engineers and savvy business people v. the lawyers, politicians (mostly lawyers) and talk show hosts. Technology and Business will grow the country v. lawsuits and regulation and talking heads' opinions.

    i'd run for congress if it wasn't such a money game to get in.

    September 28, 2011 at 5:04 am |
  15. André

    Simple to correct: The tax payer has no obligation to pay those who do not work. Leave that to charity organizations.

    September 28, 2011 at 6:12 am |
  16. TOM TOM

    Its Funny... over a year ago, I checked the CIA web site on World comparisons... as of money in the BANK, the Bank Accounts of Countires around the world, CHINA has 147 TRILLION (FIRST PLACE) in the BANK-AMERICAN CASH, AMERICA has -135 TRILLION in the RED (thats NEGATIVE) DEAD LAST OF THE LIST, Follow the MONEY DAD always told me, there you will find the PROBLEM.

    October 11, 2011 at 1:54 am |
  17. TOM TOM

    You could have a REVOLUTION just by being a SMART CONSUMER!!!!

    October 11, 2011 at 1:55 am |

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