CINCINNATI (Reuters) - The U.S. trade deficit with China cost 2.3 million American jobs between 2001 and 2007, the Economic Policy Institute said on Wednesday in a report likely to fuel debate about free trade ahead of November elections.
Even when they found new jobs, workers displaced by job loss to China saw their earnings decrease by an average of $8,146 each year because the new jobs paid less, according to the report, funded in part by labor unions.
"This report is groundbreaking because it shows the extent of damage caused by Chinese cheating," said Scott Paul, executive director of the Alliance for American Manufacturing, which helped fund research for the report by EPI, a left-leaning Washington think tank.
"(We hope) it will help to focus the debate on trade to where it needs to be right now with respect to China," Paul said, noting that free trade is shaping up as a major issue in the November presidential election, especially in closely fought battleground states like Ohio.
U.S. manufacturers, labor unions and many lawmakers have long accused China of manipulating its currency to give Chinese companies an unfair advantage in international trade, and are pressing China to continue to allow the yuan to rise against the U.S. dollar to help level the playing field.
China has said the United States should recognize how much its yuan currency has already risen against the U.S. dollar -- it is about 20 percent higher since China revalued its currency in July 2005.
China has also said the fact that Americans save much less of their incomes than do the Chinese has fueled the trade deficit. Chinese-made goods have been snapped up in recent years by U.S. consumers looking for low prices.
The EPI report showed more than two-thirds of the jobs displaced by China trade deficits were in manufacturing and more than half came from the top half of the U.S. wage distribution. U.S. factory jobs typically pay well and include health insurance coverage and retirement benefits.
The manufacturing sectors hit hardest by the trade deficit with China included computers and electronics, apparel and fabricated metal products. Service sectors like administrative support services and professional, scientific and technical services also saw large job displacement because of the China trade deficit, EPI said.
Contrary to popular belief, jobs lost to China were not necessarily low-skilled, the report showed. Thirty-one percent of the jobs lost were among workers with college degrees.
"A dramatic example is the loss of 200,000 scientists and engineers within the manufacturing sector, a 10.7 percent drop," the nonpartisan AAM said in a statement. AAM represents some U.S. manufacturers and the United Steelworkers of America.
The issue of free trade has dominated campaign debate in parts of the United States, including industrial Rust Belt states like Ohio, Michigan and Pennsylvania -- all of which are politically divided and will be closely contested by the presidential contenders.
Democratic candidate Barack Obama has promoted a message of more trade restrictions -- of "fair trade not free trade" -- while Republican John McCain has embraced free trade as a way for America to win new markets and stay competitive.
Terry Straub, Vice President of Public Affairs and Government for U.S. Steel Corp., said American manufacturing could only compete if Chinese "cheating" were stopped. He said pressure will be on politicians during the campaign to protect U.S. workers.
"Until we address distortions of the free market, such as dumping, subsidies and illegal currency manipulation, we'll continue to see a hollowing out of our high-tech productive capacity, as well as the very good jobs that go with it," Straub said. "As the candidates campaign this fall, we expect to see these very real issues discussed."
Editing by Eric Walsh