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Economy

Graham Webster: The narrative of US jobs and China is evolving

In pointing to China and other competing economies as threats to domestic jobs, U.S. presidential candidates from Donald Trump to Bernie Sanders are reviving well-worn campaign rhetoric, promising to turn back the clock and restore manufacturing jobs seen as lost to workers abroad.

     As Chinese companies invest overseas, however, more and more U.S. workers are finding themselves working for China-linked companies. More than 6,000 workers at GE Appliances factories in Kentucky and elsewhere stand to start reporting to Qingdao Haier under a $5.4 billion deal awaiting regulatory clearance amid a surge in large U.S. acquisitions since the beginning of the year.

     The rhetoric from nontraditional candidates on both the Democratic and Republican sides recalls another era. Sanders, a vocal critic of corporate greed, told a Fox News audience on March 7 that U.S. corporations have been "creating jobs in China and Mexico." He regularly criticizes his rival, former Secretary of State Hillary Clinton, over a trade issue from the year 2000.

     "Permanent normal trade relations with China cost us millions of jobs," Sanders said at a debate in Flint, Michigan, referring to a move the Bill Clinton administration supported that opened the door to China's accession to the World Trade Organization.

     Trump, for his part, tells a story of China outmaneuvering the U.S. "China is just taking advantage of us," Trump said in a March 1 speech. "I have great respect for China, but their leaders are too smart for our leaders." He pledged "to bring jobs back. I'm going to get Apple to start making their computers and their iPhones on our land, not in China."

     Ultimately, both candidates are appealing to the narrative that U.S. policies have allowed well-paying manufacturing jobs to move overseas, where workers are paid less. It is a storyline that at one time made sense with regard to China, although economists differ on how many of the manufacturing jobs lost in the U.S. can be attributed to competition from China, compared with other factors such as automation.

NEW NARRATIVE   The story of China and U.S. jobs today, however, is different. Just as the U.S. campaign season has revived these familiar lines about the threat of Chinese competition, the headlines about China's economy have shifted to the possibility that an announced transition to more consumption- and services-driven growth might falter, potentially destabilizing the global economy. In U.S. political discourse today, China is both a strong competitor and a teetering colossus.

     At the same time, the number of U.S. workers employed by China-related companies has increased rapidly. In 2009, less than 15,000 U.S. full-time workers worked for China-linked employers. In 2014, that number reached more than 80,000, according to a report last May by research consultancy Rhodium Group and the National Committee on U.S.-China Relations.

     That is still a tiny proportion of the U.S. workforce, which the World Bank puts at around 160 million. But based on analysis of Chinese outbound investment trends, the report's authors forecast 200,000 to 400,000 U.S. workers will be employed full time by companies owned by or affiliated with China in 2020.

     Thousands of U.S. workers, many employed by formerly U.S.-owned companies like Smithfield Foods, the pork producer acquired by China's Shuanghui International in 2013, now at least in part depend on Chinese decision-makers for a job. Chinese managers, meanwhile, face the challenge of adapting to a workforce and workplace norms very different from those at home.

HISTORICAL PRECEDENT   As China's outbound investment surges, many have drawn parallels with another rapid rise in East Asian investment in the U.S. -- from Japan in the 1980s. It is hard to avoid the comparison. In 2014, a Chinese insurance company bought the Waldorf Astoria hotel in New York for almost $2 billion. Twenty-five years earlier, Japan's Mitsubishi bought the iconic Rockefeller Center complex in the city for a similarly eye-catching sum. New factories and acquired ones alike are now operating under Chinese management, as they did with Japanese bosses.

     Views of Chinese management today and Japanese management three decades ago differ, however. In the 1980s, U.S. observers generally revered Japanese management and manufacturing techniques for their innovation and efficiency. Today, the dominant concern is not that Chinese factory management will disrupt the competition, but that managers are ill-adapted to local labor conditions.

     As one New Yorker magazine writer put it, "The shortcomings of Chinese factories are most apparent in the relationship between managers and employees, which is based on an anachronistic top-down view of a factory as a place where the authority of supervisors is paramount, and workers are expected to take directions, perform tasks, do their work and go home."

     Japan's bosses, however, were not always as revered by their employees in the U.S. as they were by scholars of manufacturing efficiency. By the late 1980s, white-collar workers in Japanese companies complained of preferences for Japanese staff over Americans and for men over women. Some workers who had fought in the Pacific War were still in the workforce and held genuine anti-Japanese sentiments that are hard to imagine these days.

     Like China's experience today, Japanese companies faced obstacles to smooth operation in the U.S. To meet those challenges, they adapted to U.S. labor practices and workplace norms, in some cases carefully transplanting Japanese factory practices and in others adopting U.S. methods.

     A series of studies from the 1990s of Japanese factories in the U.S. found that auto plants adapted to the labor market but generally implemented Japanese manufacturing methods, whereas electronics plants adopted more U.S. practices and sometimes diverged from Japanese norms, such as the wearing of uniforms.

     Today, U.S. officials praise Japanese foreign direct investment. Commerce Secretary Penny Pritzker said last year it was "good for American workers," adding that "Japanese FDI supports more than 718,000 good-paying U.S. jobs." Years after talk of "Japan as number one" gave way to accounts of a "lost decade," anti-Japanese sentiments are hard to find, but the employment remains. Japanese companies have, meanwhile, adapted to differing local conditions as their global operations gained decades of experience.

     When former U.S. Commerce Secretary Gary Locke was ambassador to China, from 2011 to 2014, attracting Chinese investment that would benefit the U.S. economy was a major theme of his work. Already, the groundwork is being laid for a storyline of mutually beneficial economic ties in U.S.-China relations. What should Americans and Chinese learn from the Japanese experience in the U.S.?

     First, just because Japan's economy was once strong and then weak does not mean China will follow Japan's course. China's successes and challenges are its own. Second, as Chinese companies enter the U.S., Japanese experiences could be as much a model as a counterpoint. Adaptation over time is to be expected.

     Finally, healthy economic ties, even with significant competition remaining, have been part of the healing process between Japan and the U.S. since World War II. If U.S.-China business ventures that benefit both sides continue to expand, they can help underwrite stability in a bilateral relationship that has no trouble finding new difficulties.

     Whatever happens, the story of U.S. jobs and China is no longer simply one of counting factory work transferred abroad.

Graham Webster is a lecturer and senior fellow at the Paul Tsai China Center at Yale Law School.

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