The View | Trump has a point when he says US lost out in China trade deals

Here’s an unsettling thought: what if Tim Cook is a liar, and Donald Trump a truth-teller.

Cook, the chief executive of Apple, recently told a popular American television news programme that labour costs had nothing to do with why the iPhone is manufactured in China. “It’s skill,” he explained to 60 Minutes’ Charlie Rose. “You can take every tool and die maker in the United States and probably put them in a room that we’re currently sitting in. In China, you would have to have multiple football fields ... it’s a focus of their educational system.”

At the very least, this is disingenuous. With a population of 1.3 billion, there are more Chinese in almost any category, not just tool and die makers. Apple’s key supplier, Foxconn, is the biggest employer of factory workers in the world. Scale helps push down costs. While vocational training has expanded in China, many factories still take in rural high-school dropouts and train them on the job.

China’s huge population was its chief comparative advantage when it first opened to the world. In the three decades that followed, the wages of US low-end workers stagnated, then fell in real terms. Common sense would indicate there might be a connection. Yet most economists and policymakers found only a peripheral effect, citing technological change as the main factor for rising income inequality in the West.

Now, however, a new paper with an alternative thesis is getting a lot of attention. The China Shock: Learning from Labour Market Adjustment to Large Changes in Trade, by economists David Autor, David Dorn and Gordon Hanson, was described by prominent US economist Tyler Cowen as among “the most important work done by economists in the last 20 years”.

The paper effectively makes the same point that controversial US presidential candidate Donald Trump does: that China got the better of the US on trade deals. Moreover, the authors point fingers at the many establishment figures who failed to recognise that the China labour shock was a game-changer.