Seems like there ain't nobody wants to come down here no more
They're closing down the textile mill across the railroad tracks
Foreman says these jobs are going boys and they ain't coming back
To your hometown...
For obvious reasons, I generally like Bruce Springsteen's poignant vignettes about shattered American dreams. So realistic he is, The Boss. As far back as 1984 when his Born in the USA album came out, he sussed out what many economists refuse to believe in 2010--these jobs are going boys and they ain't coming back. It is something of a truism that manufacturing tends to hold romantic notions for lefties in a post-industrial age [affecting grandpaw's drawl]: "Back in my day, we didn't have no steenkin' LBOs, CDOs, SIVs an' HIVs. We actually made stuff and sold it to the furriners." But I digress.
Recently, a collection of research papers from Simon Evenett of the Centre for Economic Policy Research (CEPR) on The US-Sino Currency Dispute: New Insights from Economics, Politics, and Law caught my attention via this Reuters article:
Extensive outsourcing by U.S. industry means that a revaluation of the Chinese yuan sought by many U.S. politicians would destroy U.S. jobs, a study by independent economists and other experts said on Thursday. The CEPR study, comprising 28 analyses of the issue, concludes that a yuan revaluation of only 5 percent would eliminate China's trade surplus with the world. But it would only cut the U.S. trade deficit with China by $61 billion, according to the study, edited by trade economist Simon Evenett. A 10 percent revaluation of the yuan would improve the U.S. deficit by $111.5 billion -- not enough to eliminate the U.S. shortfall with China [of -$226.8B in 2009].Trade Diversion points us in the direction of the entire downloadable version from VoxEU. The work was released on 15 April to coincide with the US Treasury's biannual report on the currency practices of American trade partners. While that report's release has been delayed, we have the following to chew on. Evenett summarizes the findings of Joseph Francois mentioned by Reuters here:
Because so many U.S. exporters buy parts and components from China, the revaluation would raise their costs, resulting in a hit to U.S. exports that would cost 424,000 U.S. jobs, it said. If the U.S. imposed a 10 percent tariff across the board on Chinese imports and China responded in kind with a similar 10 percent duty on U.S. exports, 947,000 U.S. jobs would be lost. "Recent U.S. proposals remind me of the adage: 'Be careful what you wish for'," Evenett said.
Interesting stuff. I wonder what Krugman makes of it. In the meantime, I'll read Francois' contribution a bit more closely. These computable general equilibrium (CGE) models' results can change greatly depending on the parameters used.