The end of "policy uncertainty" helped send U.S. manufacturing jobs to China

Posted by scapozzola on 01/10/2013

As we reported earlier this week, a new study has linked a sharp drop in American manufacturing employment after 2001 to the U.S. granting permanent normal trade relations (PNTR) to China in late 2000.

The study, by the Federal Reserve’s Justin Pierce and Yale’s Peter Schott, has been widely covered, including by Marketwatch.

Marketwatch's article focused on an intriguing conclusion of Pierce and Schott, namely that the granting of PNTR to China ended Washington's "policy uncertainty" toward Beijing. Prior to PNTR, the possibility of future tariffs had helped to "keep more U.S. manufacturing at home."

But after PNTR, according to Pierce and Schott, U.S. manufacturers felt free to shift plants and jobs to China. Essentially, they no longer had to worry about sudden tariff increases.

Pierce and Schott say the result was a sharp acceleration in the outsourcing of U.S. manufacturing. Jobs in the sector fell to 13.7 million in 2007 from 17.2 million in 2000, according to the U.S. Labor Department.

ManufactureThis has long maintained that Beijing's predatory trade practices, including massive subsidies and illegal currency manipulation, have adversely affected U.S. manufacturers.

But it's nice to see a fresh voice offering similar concerns.

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