Friday, July 13, 2012

Outsourcing: A Blast from the Past

Michael Kinsley offers a Clinton-era defense of outsourcing:
Obama decries Romney's practice of outsourcing as if he thinks that all outsourcing is wrong, even if it can't or shouldn't be made illegal. Obama proposes a heavy dinner of grants, subsidies and tax credits to discourage outsourcing and encourage "insourcing" — bringing jobs from abroad back to America — all of which are bad ideas. Among other reasons, one nation's insourcing is another nation's outsourcing, and retaliation can quickly lead to a trade war in which everybody loses.
Who said this — "I don't want the next generation of manufacturing jobs taking root in countries like China or Germany" —Romney or Obama? Early in the Republican primary campaign, China was the one subject Romney seemed genuinely agitated about. Imposing tariffs on Chinese goods was on the long list of things Romney said he was going to do on Day 1 of his presidency. Maybe he still is, but he doesn't play it up the way he used to.
Meanwhile, if Romney is a free trader at heart, faking a bit of protectionism, Obama seems to be a protectionist at heart, faking a belief in free trade. That quote in the previous paragraph is from Obama, and it shows a fundamental misunderstanding of how markets work. Trade is not a zero-sum game. There isn't a certain number of manufacturing jobs that will either go to China or Germany, or come to us. We want China and Germany to have lots of manufacturing jobs. The more they have, the richer they are, the better off we will be as well. Beggar-thy-neighbor policies don't work.
There's an element of truth to what Kinsley says, but he seems to miss an important context: many US trading partners often have a trace of beggar-thy-neighbor policies themselves.  We don't exactly have a "free trade" situation at the moment, with many countries discriminating against US products.

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