NCPA - National Center for Policy Analysis


December 22, 2006

Protectionists enormously exaggerate the negative effects of globalization by attributing virtually all manufacturing job losses to competition with China.  We are told by union leaders and some politicians that America is exporting millions of jobs to China.  This is absolutely untrue, says William H. Overholt, Director of the Center for Asia Pacific Policy at the RAND Corporation.

Scholarly studies show that most job losses in the United States are attributable to domestic causes such as increased domestic productivity, says Overholt:

  • A few years ago it took 40 hours of labor to produce a car, now it takes 15; that translates into a need for fewer workers.
  • Protectionists who blame China for such job losses are being intellectually dishonest; in fact, both China and the United States have lost manufacturing jobs due to rising productivity, but China has lost 10 times more -- a decline of about 25 million Chinese jobs from over 54 million in 1994 to under 30 million ten years later.

Globalization helps open economies adjust faster to their real competitive advantages, allowing them to employ their own people, says Overholt:

  • The most recent U.S. unemployment rate was 4.4 percent.
  • France, along with other relatively protected economies, typically has twice as high a proportion of the population unemployed because their workers are stuck in inappropriate jobs.
  • Still more protected economies, like many in Latin America, often run much higher rates of unemployment -- up to 40 percent.
  • Economies more open than the United States -- like Singapore and Hong Kong -- historically run lower rates of unemployment.

America will not benefit if an increasing number of opinion leaders and elected officials use exaggerated, partial views of inequality to try to lead us into a future of slower growth, higher unemployment and greater world tensions, says Overholt.

Source: William H. Overholt, "Globalization's Unequal Discontents," Washington Post, December 21, 2006.

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