Chinese Steel: Good For American Jobs?

A recent Wall Street Journal article, “Chinese Slowdown Takes Toll on Appalachian Coal Mines” exposes an example of adjustment to trade with China that, at least temporarily, benefited blue-collar American workers. Over the past eight years, Chinese reliance on American coal in steel production has fueled the Appalachian economy. However, the decline of this demand signals that volatility may be a painful consequence for American workers recently exposed to international markets.

The Appalachian region remains rich in metallurgical coal, which is used to produce steel. Kris Maher’s article explains how Chinese demand for steel energized the Appalachian coal industry in recent years, leading to skyrocketing prices as well as well-paying middle-class jobs. From 2004 through 2011, Chinese industrialization fueled demand for American metallurgical coal, largely protecting the industry. This came at an important time for American coalminers, as demand for the product as a domestic energy source has recently fallen.

Many West Virginia workers benefited from this foreign demand for metallurgical coal. One miner cited in the article revealed bringing home a six-figure income in 2011, far more than he will make as he attempts to become a physical education teacher after returning to college. Today, Chinese demand for metallurgical coal seems to be on the decline after a 2012 peak. With declining demand for thermal coal (used as a domestic energy source), the author unsurprisingly predicts difficult economic times for the region moving forward.

In this case, both capital and labor experienced gains from trade. As Rogowski would predict, China’s willingness to buy coal was an easy sell to both coal companies and their employees. Chinese industrialization provided new demand for American coal, just as domestic demand for the product reached a new low. However, the representativeness of this scenario for the benefits of free trade should not be exaggerated. Many of those coalminers who benefited from Chinese demand for coal are now looking for jobs. New susceptibility to increases and decreases in international demand has made it more difficult to predict industry downturns.