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China's Effect on U.S. Jobs Discounted

October 24, 2003|From Reuters

Rising imports from China are not to blame for the doldrums at U.S. factories, the Federal Reserve said Thursday in a report that took issue with the standard criticism among manufacturers that China is the source of their woes.

Even as manufacturers accuse China of violating trade laws and increase pressure on the Bush administration to take action against China, the Chicago Federal Reserve Bank said other issues, such as weak export markets, were more important.

Besides economic weakness around the world, it cited a variety of homegrown factors, such as an overhang of investment from the boom years and productivity gains that have stymied job growth.

More than 2 million jobs in the U.S. manufacturing sector have vanished in the last three years, and output has grown only modestly, if at all.

U.S. manufacturers and members of Congress have accused Beijing of flouting trade laws by keeping its currency pegged to the dollar, which makes Chinese goods relatively cheap.

But the Chicago Federal Reserve Bank said concerns about Chinese competition were misplaced.

"The bulk of the current U.S. manufacturing weakness cannot be attributed to rising imports and outsourcing," economist William Testa wrote. "The overhang of excess capital goods investment and other production capacity continues to weigh on the pace of orders for new manufactured goods, as does the shallow U.S. economic recovery from the 2001 downturn."

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