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Does Trade With China Matter?
Progressive Populist
by Nathan Newman
May 01, 2004

Let me be clear-- I am not a protectionist. I like trade. I am in favor of poor countries trading with rich countries and hopefully getting richer in the process.

What I dislike are poor people in poor countries being exploited by their own wealthy citizens through rotten labor conditions, in order to take jobs from poor people in rich countries and make rich people in poor countries richer (and often making rich people in rich countries richer who are in alliance with rich people in poor countries.)

Got that?

So a basic starting question is whether the slave-labor like conditions in China is a threat to US jobs and to wage levels of working class folks here.

The Numbers: Some analysts will wave away the problem, noting that China's $168 billion in exports to the United States is only a bit more than 1% of the $11 trillion US Gross Domestic Product (GDP). Even good progressives will emphasize how low the dollars of investment are in China compared to the global GDP.

But dollars are not the real issue. Jobs are. And the question is how many jobs are represented by that $168 billion in exports by China.

Since Chinese workers make so much less than Americans, every dollar of Chinese exports represents many more hours of work than a dollar of US-made GDP.

Think about this back-of-the-envelope estimate (and given how poor public information is in China, estimates are all we really have on the economy in China):

It is estimated that Chinese workers make an average of about 60 cents per hour or about $1250 per year (for the equivalent of a full-time 40-hour per week worker).

So assuming that two-thirds of that $168 billion in exports represents labor costs (a conservative estimate since that's a lower labor dependence than in the US), that works out to the equivalent of 90 million Chinese workers producing those $168 billion worth of goods.  Even if we assume that a higher proportion of that $168 billion are imported components, we are still talking about tens of millions of workers becoming integral parts of the US economy.

Rethinking Who Makes Up the US Economy: So think about the US economy this way-- to produce all the goods and services Americans consume, it takes 138 million American workers and as many as 90 million Chinese workers (plus some additional number of workers from other countries producing other imported goods) to make them.

In that context, it's hard to discount Chinese production as a factor in job competition, since those millions of Chinese workers are no doubt substituting for work that could have been done by American workers. Of course, they may also sustain other jobs by providing cheaper inputs for other production in the US, but that is an empirical question-- and with the kinds of trade deficits run by US manufacturers, it's hard to buy that the imports are supporting more new jobs than are being lost.

Which might not be a terrible thing, since the Chinese deserve jobs too, except those 90 million or so Chinese workers are not being paid fully for their efforts. Instead, even as their productivity rises, their wages remain low. So that means that Chinese capitalists and US multinationals operating in China are the ones benefitting from the increased trade-- NOT the Chinese workers themselves.

Why Bad Labor Conditions Distort Markets: And if you believe in letting the "market" set wages (however problematic that idea is), it is not markets, but secret police and gulags for labor union leaders that are keeping wages down. That means that trade is not going to China because their wages reflect the most productive place to invest money, but because it is the place where slave labor conditions are keeping wages down artificially.

If Chinese workers have the right to demand the maximum wages THEY want, through free collective bargaining, then I support full trade with China on the basis of all workers getting the full fruits of their labor and all goods being produced at the point where labor costs are the lowest and productivity is the highest based on those costs.

But until that point, trade with China is a cancer on global labor conditions, growing by the day and driving all workers in a race to the bottom, as US employers demand that US workers compete with slave labor or lose their jobs.

That is not acceptable and must end.

Nathan Newman is a labor lawyer and longtime community activist. Email or see

Posted by Nathan at May 01, 2004 09:31 PM