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Economist

“Who’s Afraid of the Dragon?”

“SHOULD a free trader laugh or cry? On October 12th, Congress finally ratified long-stalled trade pacts with Colombia, Panama and South Korea. But the previous day the Senate threw down the gauntlet to China. It passed, by a stonkingly bipartisan margin of 63-35, a bill that would authorise the Commerce Department to impose countervailing tariffs on Chinese imports it deems to have benefited from an undervalued currency. The bill is unlikely to pass in the House, but the vote is a sign that China-bashing, always popular in Congress, has become more so as America’s job market has struggled…  The bill’s advocates, some of whom claim, implausibly, that the yuan is as much as 40% undervalued, reckon driving away Chinese imports will bring some of those jobs back. But are their claims justified? A new paper by three economists: David Autor, David Dorn and Gordon Hanson, looks at the effects of rising Chinese import competition on regional American labour markets from 1990 to 2007. They find that regions whose manufacturers had higher exposure to competition from Chinese imports saw higher overall unemployment, lower labour force participation and reduced wages. Every $1,000 of additional Chinese import exposure in a region per worker lowered the employment rate by 0.77%, enough to add up to several percentage points in the worst affected areas. Mr Autor says that more recent data corroborate these trends.”

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