People wait in line to enter a job fair in New York
People wait in line to enter a job fair in New York August 15, 2011. U.S. President Barack Obama began a bus tour of the U.S. Midwest focused on jobs and the economy on Monday, aiming to leave behind doubts about his leadership that could dent his 2012 re-election prospects. REUTERS

About 2.8 million jobs, both in manufacturing and high-tech fields, have been lost as a result of the growing U.S. trade deficit with China since Beijing's entry into the World Trade Organization in 2001, said an EPI study, which was denounced immediately by the US-China Joint Business Council.

More than 454,000 jobs were lost in California alone, the largest number in any state, according to the study released by the Economic Policy Institute. In the computer and electronic parts industries, 909,000 jobs were lost nationwide.

The growing trade deficits with China have cost jobs in every one of the nation’s 435 congressional districts, plus the District of Columbia and Puerto Rico, the study found.

The report, written by Robert Scott, EPI’s director of trade and manufacturing policy research, cited illegal currency manipulation as a major cause of the rapidly growing trade deficit. Unlike other currencies, the Chinese yuan does not fluctuate freely against the dollar, but is artificially pegged in order to boost China’s exports.

China’s currency manipulation, state-owned enterprises, heavy industrial subsidies, intellectual property theft and piracy, indigenous innovation policies, rare earth mineral export restrictions and other trade-distorting practices have caused its share of the total U.S. non-oil trade deficit to soar from 69.6 percent in 2008 to 78.3 percent in 2010, the EPI said.

In New York, the EPI report disclosed that 161,400 jobs were lost as a result of the trade deficit. New York ranked third behind California and Texas in jobs lost to China.

Rapidly growing imports of computer and electronic parts, including semiconductors and audio-video equipment, accounted for more than 44 percent of the $194 billion increase in the U.S. trade deficit with China between 2001 and 2010, the study found.

“This report offers conclusive evidence that immediate action by the administration is needed to curb China’s currency manipulation, which, along with China’s blatant trade violations, are now having the same devastating impact on high-tech production that they’ve already had on the nation’s longstanding industrial base,” said Scott Paul, executive director of the Alliance for American Manufacturing, a partnership of leading manufacturers and the United Steelworkers union.

“And if President Obama won’t name China a currency manipulator,” Paul said, “then Congress will have no choice but to pass legislation that will hold them accountable. ... We urgently need a national strategy for restoring America’s global leadership in manufacturing. Challenging China’s currency manipulation would be an important first step toward developing such a strategy. It would not only cut unemployment, it would result in a much-needed increase in federal revenue.”

“Unless China raises the real value of the yuan by at least 28.5 percent and eliminates other trade distortions,” the report concluded, “the U.S. trade deficit and job losses will continue to grow rapidly in the future.”

US-China Business Council Reacts:

Reacting to the study, the US-China Business Council representative denounced it saying the report is based on the faulty assumption that every product imported from China would have been made in the U.S. otherwise.

“Much of what we import from China replaces imports from other countries, not products we make in the U.S. today... A jobs impact study that ignores the facts undermines its own credibility,” explained Erin Ennis, vice president of the council.

She said production costs in China have increased, but most of those jobs aren’t coming back to the United States, citing a recent report by UBS.

About EPI's focus on changing China's exchange rate, Ennis said, Yes, China needs an exchange rate that better responds to China's global trade flows.

But China's exchange rate is probably not as significant a factor in the U.S. trade deficit that some make it out to be, she added.