In April of this year, Secretary of the Treasury, Janet Yellen, visited China on an economic tour to head off another ‘China Shock.’

China Shock 2.0

In prepared remarks, Ms. Yellen outlined U.S. and China’s improving relations. “It is undeniable that the U.S.-China relationship is on stronger footing today than this time last year.” The secretary also highlighted U.S. concerns about China’s overcapacity. In recent years, China’s underconsumption has led to fears the country will dump excess product on the rest of the world’s economies and undercut the prices of domestic producers.  “I am particularly worried about how China’s enduring macroeconomic imbalances will lead to significant risk to workers and businesses in the United States and the rest of the world,” Yellen said.

Yellen and other economists are worried that China’s overcapacity will mirror what happened a decade ago, when China’s cheap foreign goods, according to Yellen, “flooded the global market and decimated industries across the world and in the United States.”

What Was China Shock 1.0

According to Scott Lincicome, the vice president of general economics at the libertarian Cato Institute, “the ‘China Shock’ refers to both a 12‐​year surge of Chinese imports into the United States and the first series of academic papers that analyzed it.”

This shock also refers to the 2000 law granting China permanent normal trade relations with the U.S (PNTR) and China’s ascension into the World Trade Organization. At the time, the State Department argued that increased trade with China will be a net benefit to American workers, “by slashing industrial and agricultural tariffs and opening up sectors across the board to foreign competition.”

Critics of the U.S.-China trade think that logic was misguided. In a paper from the National Bureau of Economic Research, economists argued that “that import growth from China between 1999 and 2011 led to an employment reduction of 2.4 million workers.”

Lincicome disagrees. “Common claims that the China Shock destroyed 2 million or more American manufacturing jobs are—by even the authors’ most extreme estimates—just plain wrong.” In an article published in The Dispatch, Lincicome said increased Chinese imports were an “economic benefit” for America. Even though there were manufacturing job losses, those were “fully offset by gains in service jobs in other regions.” In Lincicome’s view, concerns of a China Shock 2.0 are misguided; any overcapacity-driven imports China sends to the U.S. will be nothing like the first China Shock.

Catholic View

In 2000, the USCCB (then the USCC) urged congress to vote against PNTR due to several concerns about China’s oppressive government. Instead, the bishops argued trade liberalization should be tied to human rights and religious freedom improvements. The Church proposes several guiding principles for trade including, but not limited to labor protections, respect for indigenous people, the right to migrate, and intellectual property rights. Perhaps future trade negotiations will include principles that uphold the dignity of all the workers involved.