https://www.aei.org/publication/the-china-trade-shock-is-over-sorry-theres-no-going-back-now-what/The China trade shock is over. Sorry, there’s no going back. Now whatJames Pethokoukis
August 12, 2016
On an alternative universe, Earth 2, perhaps, the American presidential election has focused on the big economic challenges facing the modern US economy. In particular, the Democratic and Republican candidates have offered and debated detailed plans for reforming education, regulation, and the safety net as the automation of physical and knowledge work continues to advance.
As Marco Rubio said during his GOP convention acceptance speech: “Today’s technological revolution carries extraordinary opportunities – even more, I believe, than the Industrial Revolution ever did. But we have not yet seized these opportunities, nor is it guaranteed that we will. Whether we do or do not will depend on the actions we take, the leaders we choose, and the reforms we adopt.” Hillary Clinton struck similar themes at the Democratic gathering.
On Earth Prime, though, the debate is a retrograde one, a debate ruined by economic nostalgia for yesterday’s America. Instead of facing the future, there’s talk of somehow undoing globalization. In this mindset, it’s all been downhill since the immediate postwar years. As a National Bureau of Economic Research study put it, “At the end of World War II, the United States was the dominant industrial producer in the world.” And then added: “This was obviously a transitory situation.”
Other advanced economies would recover. And “third world” economies would begin to catch up. It was inevitable — especially once China decided to open its economy. As David Autor, the MIT economist who’s been researching the China “trade shock,” says in today’s Wall Street Journal that China’s economy and massive labor force was a “500-ton boulder perched on a ledge.” But Autor has also said, quoted by Reuters, “The worst of the China shock as we measured it is over. The next 20 years will look nothing like the last 20…. That’s the lesson that is not reaching our political discourse whatsoever.”
Of course there are regions still feeling the aftermath of that trade shock. Coincidentally, both the WSJ and Reuters have excellent stories out today (linked above) focusing on the devastated furniture industry in Hickory, North Carolina. Both document how slowly workers adjusted, and how little government policy helped. Yet the community seems to be finally moving forward, attracting new industry (such as data centers for Apple, Google, and Facebook) and somewhat reviving its manufacturing base.
The four-county Hickory metro area of 350,000 has added more than 2,800 manufacturing jobs since 2010, and furniture manufacturers nationally have added 30,000 jobs over the past five years. … Officials in Hickory say trade worries now take a back seat to issues like adequate financing for greenfield projects, training for workers, and how to stem an exodus of local young people to big cities…. At the Manufacturing Solutions Center, which helps match local suppliers with other companies, such as small startups developing custom clothing lines, director Dan St. Louis said moving the most tedious jobs overseas seemed inevitable. Today, however, businesses that have invested in robotic machines or in development of high-tech fabrics for medical, sports and other industries, cannot find qualified workers, St. Louis said. “We have been telling kids for 20 years don’t get into manufacturing it will all be gone, it will all be in China,” he said. “Call a recruiter and say you need a textile mechanic and they will laugh at you.”
