Article Analysis Essay on China's Entrance Into WTO Cost the U.S. 3.4 Million Jobs

Introduction

The article got published on October 23, 2018, and it concerns the repercussions of the increasing trade deficit in the United States for the years 2001 to 2017 (Buchwald, October 2018). A trade deficit is a gap between imports and exports of a nation. The trade deficit between the United States and China in 2017 alone is an astounding $376 billion. That is how much China is making from trading with the United States. The two major economic superpowers the United States and China ranked first and second respectively in the world, are once again on a win-lose financial see-saw which has seen the manufacturing industry hit the most in the United States.

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Between 2001 and 201774% of jobs lost hailed from the manufacturing industry. While in the United States workers in the manufacturing industry were laid off, the electronics and computer parts industry contributed the most to the United States' trade deficit: 1.2 million jobs lost representing more than a third of all of them. $167.3 billion of the trade-deficit from electronics and computer imports alone. On the positive side, when China joined the World Trade Organization (WTO) in 2001, the prices of imports reduced by an average of 7.6%. However, the cost of living went up marginally higher, resulting in a negative cost-benefit ratio over nearly two decades.

It turns out that cheap is expensive because the cheap imported goods soon meant the manufacturing industry, stores, and retailers made a smaller profit ratio on imported commodities. China has a high production rate of products primarily in the manufacturing industry. These products flooded the international market and more so the United States because of the favorable trading conditions of the USD to the Chinese Renminbi/ Yuan. To save on losses, employers in the manufacturing industry laid off workers to limit production costs. The study also found out that China's economic growth has slowed down. Exports are what hold the Chinese economy together (Buchwald, October 2018). Hence if the United States can reduce its trade deficit, it would mean not only creating jobs for its citizens but securing financial superpower status.

Addressing the current US-China trade deficit is not a straight-forward solution. The most economical option is to merely stop importing goods from China, but that is hardly practical. There is a demand in the United States, a big one that only a big commodity producer such as China can supply. What the United States government can do is make a modified plan for an unfunded tax cut, something which has been proposed by the executive to mixed reactions.

An unfunded tax cut is a gradual tax raise in disguise. Unfunded tax cuts if distributed equally across the population will result in more misery especially for those citizens earning little, surviving by minimal wages. The unfunded tax cut should be imposed on corporations with huge turnovers and employees in the top 30 percentile in income earnings. A plan such as this will take years to balance the trade deficit, but it makes the most economic sense.

Conclusion

I think it would be best if the US government intentionally weakens the dollar to encourage exports and make imports more expensive. The dollar is the world's reserve currency. It is not the strongest, but it is the most trusted in all exchanges. Employees at the Navy Exchange Beauty Salon hence would make more profit by exporting their products. The government may be reluctant in weakening the dollar though because it would lower the buying power of the US at the global markets. I think a weakened dollar would still bounce back after a couple of months or two years tops seeing that it is most trusted and preferred currency in the world.

References

Elisabeth Buchwald. (October 2018) "China's entrance into WTO cost the U.S. 3.4 million jobs, new study finds". Market Watch. Retrieved From https://www.marketwatch.com/story/chinas-entrance-into-wto-cost-us-34-million-jobs-new-study-finds-2018-10-23

Chapter 10: "The International Trade and Capital Flows" in the text Principles of Macroeconomics by OpenStax is available under a Creative Commons Attribution 4.0 license. Feb 25, 2016 OpenStax.

Chapter 19: Macroeconomic Policy Around the World in the text Principles of Macroeconomics by OpenStax is available under a Creative Commons Attribution 4.0 license. Feb 25, 2016 OpenStax.

Chapter 20: "International Trade" in the text Principles of Macroeconomics by OpenStax is available under a Creative Commons Attribution 4.0 license. Feb 25, 2016 OpenStax.