Black Eye for Beijing

A black eye for Beijing, as it denied two of our ships a port in a storm, and sailors and their families a Thanksgiving reunion in Hong Kong. This is unprecedented. Supposedly they are angry at the president welcoming the Dalai Lama, or perhaps our upgrading Taiwan's ability to defend itself, since it does not want to share the fate of Hong Kong.

But much as China might wish to have its own way, and much as protectionist demagogues here might like to think, the Middle Kingdom is not the epicenter of the world economy. As it happens, David Brooks is nearby on a jaunt to Beijing, choosing the occasion to laud the fundamental strength of the American economy, with this key point:

Third, not every economic dislocation has been caused by trade and the Chinese. Between 1991 and 2007, the U.S. trade deficit exploded to $818 billion from $31 billion. Yet as Robert Samuelson has pointed out, during that time the U.S. created 28 million jobs and the unemployment rate dipped to 4.6 percent from 6.8 percent.

That’s because, as Robert Lawrence of Harvard and Martin Baily of McKinsey have calculated, 90 percent of manufacturing job losses are due to domestic forces. As companies become more technologically advanced, they shed workers (the Chinese shed 25 million manufacturing jobs between 1994 and 2004).

Meanwhile, the number of jobs actually lost to outsourcing is small, and recent reports suggest the outsourcing trend is slowing down. They are swamped by the general churn of creative destruction. Every quarter the U.S. loses somewhere around seven million jobs, and creates a bit more than seven million more. That double-edged process is the essence of a dynamic economy.

China is an important trade partner, yes, but is basic courtesy too much to expect? The Beijing Olympics are fast approaching, and the world will be watching. We expect more openness from China.