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Trump should blame technology, not trade, for factory job losses

Brace yourself for a deluge of anti-trade rhetoric as Donald Trump and Hillary Clinton prepare to square off in the U.S. presidential race.

Most of it isn't even true.

The biggest whopper of them all is Mr. Trump's contention that Americans "don't make things any more."

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Second on the list is the contention that trade is to blame for a massive decline in U.S. manufacturing jobs.

Tapping into a deep well of voter anxiety, Mr. Trump and Ms. Clinton both talk about bringing manufacturing jobs back to the United States from places such as Mexico and China. Mr. Trump, in particular, blames China and the North American free-trade agreement for shipping jobs offshore.

The reality is quite different.

Yes, it's true that fewer Americans work in manufacturing. The number of Americans doing factory work has fallen 9 per cent since the recession in 2008-09, and 31 per cent since 1990. Since peaking in the late 1970s, the country has lost roughly 7.5 million manufacturing jobs.

But the bigger story here is that manufacturing output has continued to increase, thanks mainly to productivity growth. As Ball State University economist Michael Hicks pointed out in a recent blog post, "the typical American worker makes twice as much stuff in an hour as he or she did in 1977."

Americans are making more things than ever.

Technology and automation have been the great destroyer of factory jobs, not trade. Manufacturing output has risen an average of 4 per cent per year since the 2008-09 recession, continuing the steady upward momentum of previous decades. Manufacturers have invested massively in automation, eliminating many routine and lower-skilled jobs. Only two in five U.S. factory workers are now directly engaged in production.

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Looking overseas for lost jobs is futile because most of them were never offshored. Mr. Hicks estimates that since the 1970s fewer than a million U.S. manufacturing jobs have been lost because of trade – a period in which millions of new jobs have been created elsewhere in the economy.

Even some of the jobs that have moved offshore may no longer be there to repatriate. Foxconn, which builds electronic devices for companies such as Apple, Samsung and Microsoft, recently replaced 60,000 of 110,000 workers with robots at one of its factories in China, according to a report in the South China Morning Post.

Mr. Trump likes to dwell on the theme of U.S. economic decline. And yet the United States is actually holding up well in the face of China's economic rise versus most other developed countries. Canada, for example, has suffered much sharper declines in manufacturing jobs and global export market share.

The United States lost its position as the world's leading manufacturing country to China in 2010. But it is firmly in the No. 2 spot, accounting for more than 17 per cent of global value-added in manufacturing in 2014, according to United Nations figures. The United States produced more than the next three countries combined – Japan, Germany and Mexico.

Labour productivity has also increased much more rapidly in the United States than in Canada and the large European economies, and nearly as much as Japan from 2002 to 2014, according to a 2015 U.S. Conference Board report.

So where are the new jobs? One place is the business service sector, which is now three times larger than manufacturing and growing rapidly. While fewer Americans are working in factories, many more are working in relatively high-paying business service jobs, according to a recent policy paper by the Washington-based Peterson Institute for International Economics. Over the past decade, employment in the sector is up 20 per cent, while manufacturing jobs have declined 20 per cent.

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Part of the problem is that manufacturing-job losses have been concentrated in a clutch of industries and regions, increasing the sense of unease among distinct groups of Americans. The hulking relics of abandoned factories are a powerful reminder of what has been lost.

The benefits of increased global trade are less visible. They are often spread broadly throughout the economy in the form of lower input costs for businesses and improved living standards for everyone.

Mr. Trump has cleverly manufactured a political foe, and a convenient solution: protectionism.

But the real villain is technology.

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