The China syndrome.

• Author: Dizikes, Peter
• Position: Economics - International trade and labor

TENNESSEE has abundant hardwood forests, and business sectors related to them thrived for many years. Yet, the state's employment levels in the flooring, furniture-making, and cabinetry industries have cratered--down more than 50% over the last decade. What happened? The Great Recession certainly hurt those trades, but there is something else: China happened. As some economists now recognize, the formal trade relationship between the U.S. and China, established in the 1990s and solidified with a World Trade Organization agreement in 2001, dramatically affected a large number of labor-intensive industries in the U.S. In those fields, jobs moved en masse to China, where workers are available at even lower wages.

That relatively sudden shift, research has shown, comes with a heavy cost to U.S. workers. When jobs vanish, the better-trained workers may bounce back, but many blue-collar ones do not--and entire communities have been punished economically. These findings run against the bullish assumptions many economists have made about international trade in recent decades. A paper coauthored by Massachusetts Institute of Technology economist David Autor analyzes the data and makes clear how significant that impact has been. "Among the most-skilled workers, we've seen lots of [job] reallocation without any dire consequences but, for the lower-skilled [workers], we just see more scarring. Their wages fall regardless of what they're doing. They're just on a permanently lower trajectory."

Consider that, from 1999-2011, as the work by Autor and his colleagues shows, import growth from China cost the U.S. about 2,400,000 jobs. In turn, about 985,000 of those were in manufacturing--a significant portion of the 5,800,000 manufacturing jobs that the U.S. lost in total in that time. Of course, as Autor notes, trade also creates employment. For instance, he observes, it is hard to conceive of Apple's monumental growth without the firm using China as its workshop, but evidence that the U.S. has experienced large job gains that counter the employment losses in sectors that compete with imports has been decidedly elusive so far.

The net impact on workers in U.S. regions heavily affected by competition from China has been particularly serious. Autor and his colleagues have evaluated the direct impact of low-wage Chinese industry on incomes in the more than 700 commuting zones (CZs), or urban areas, in the U.S. Comparing workers in CZs at the 75th percentile of...