According to a study sited by Trade gap with China costs the US $37 billion in wages, the US's growing trade deficit with China is costing the US middle wage jobs. The study says that the US has lost 2.7 million jobs since 2001 when China joined the World Trade Organization. Workers relocated to other industries supposedly saw a decrease in pay as well. In short, this article is showing the negatives of trade with China and insisting that the US should limit trade between the two countries to some extent.
However, this article fails to look into other factors that come into play. For instance, it fails to site any information on the price of goods in the market upon opening more trade to China, which should lower prices of those goods which we are importing. Therefore, the relative prices of such goods would be lower for some Americans. This article could be getting at the Pareto optimal outcome of the situation. By opening trade with China, the US has seen a drop in jobs in certain sectors while seeing a decline in prices of imported goods. This results in some being better off while those workers in sectors that are now imported are worse off. This demonstrates a Pareto optimal outcome which states that for some to be better off, some must also be worse off. Opening trade will lower prices in the economy as a whole, but not everyone will benefit from the decision.
Trade in fact should involve two or more partners. If no partners then,it is not trade. US can not see the gap as a hindrance to make trade with China. The principle states well(Pareto) that, there should be losers in the winners. Therefore, opening trade with China, having trade deficit and lose in the Job markets all these can never hinder trade partnership in the terms of trade.
ReplyDeleteThe lose of trade by losing jobs by Americans and taking jobs to China, gives America to import at low prices, and export at high prices. China, then gain trade to manufacturing business, but exports cheaply.
Therefore, I agree with the facts we got in class about PARETO OPTIMUM that, there should be gaining and losing in trade between the trade partners. Let US continue trading with China an never fear the trade gap of $ 37Bill of wages.
Although the U.S. has supposedly "lost $37 billion in wages", I would be interested to learn how the United States' economy itself has actually been impacted. As we learned, trading may hurt some specific individuals within an economy, but as a whole it tends to benefit the overall welfare of both countries. The article is negatively directed at our trade with China, but I think it is necessary to look at the issue as a whole, not on the individual level.
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