Trade deficit costs North Carolina more than 220,000 jobs in ’07, report says

Research Triangle Park, N.C. — North Carolina’s economy lost more than 222,000 jobs in 2007 due to the “corrosive effect” of the U.S. trade deficit, according to a new study from the Economy Policy Institute.

Focusing on what it calls the “non-oil trade deficit,” the EPI says currency manipulation by China and other countries has triggered an exodus of manufacturing jobs overseas.

North Carolina lost 5.4 percent of its total employment base despite the fact U.S. exports have increase by more than 40 percent since 2000 to $1.13 trillion last year, the report said. The U.S. trade deficit actually shrank in 2007 to $473 billion, down $48 billion from the record set in 2006.

Statewide unemployment in North Carolina reached 6.9 percent in August, a six-year high.

The United States spends hundreds of billions of dollars a year to import foreign oil, and that outflow of wealth has triggered considerable debate during the current presidential election campaign as oil prices have surged to record levels.

Overall, the U.S. economy shed 5 million jobs due to non-oil trade in 2007. North Carolina, which has been hammered in recent years by the loss of manufacturing and textile employment, ranked eighth among the job losers in percentage terms. North Carolina is the nation’s 10th largest state.

South Carolina, meanwhile, lost 6.2 percent of its job base (121,100) and Georgia lost 4.5 percent (186,000).

California topped the jobs lost list at 696,300 followed by Texas at 405,300. Every state and the District of Columbia shed jobs, the report found.

Most of the jobs lost were in motor vehicle parts, computer and electronic parts, apparel and accessories.

Robert Scott, the author of the report and the institute’s director of international programs, said the ending on “unfair trade practices” is crucial if the U.S. is to staunch the flow of jobs.

“The non-oil trade deficit has displaced huge numbers of jobs in the United States and been a prime contributor to the crisis in manufacturing employment,” he wrote. “The unfair trade practices of many U.S. trading partners — especially the distortion of exchange rates through the currency intervention policies of China and other Asian governments — are an important cause of that deficit.

“The best estimates are that these governments need to raise the value of their currencies against the U.S. dollar by 18% to 41%,” he added. “By manipulating their currencies, these countries have made their exports artificially cheap and raised the relative cost of U.S. exports. Eliminating these distortions would increase U.S. exports and slow the growth of U.S. imports.”

In order to balance currencies, the report said China needed to adjust its exchange rate by 31.5 percent.

Other reevaluations would force major changes on currencies in Hong Kong (29), Indonesia (22.6), Japan (19), Malaysia (30.7), Philippines (18.2), Singapore (41.2), Thailand (17.9) and Taiwan (26), the report concluded.

“Elimination of the U.S. trade deficit over the next few years can create millions of new jobs in manufacturing and other trade-related sectors of the economy and help the domestic economy recover from the devastating effects of the current downturn,” Scott wrote. “Ending unfair trade practices can significantly improve the fundamentals of the domestic economy and restore sustainable, broadly shared growth of jobs and income.”