Globalization? International Trade and Outsourcing

Democrats could not have asked for a more exquisite irony. On March 11, the Bush administration's choice for the unfilled post of manufacturing "czar" withdrew his name even before it was submitted to Congress, after he was accused of firing U.S. workers in 2002 at the same time his company was opening a factory in China. Tony Raimondo, chief executive officer of Behlen Manufacturing Co. in Columbus, Neb., was to have been tapped to head a new Commerce Department agency announced by President Bush last Labor Day to promote U.S. manufacturing in the face of global competition.

Democratic presidential candidate John Kerry pounced, spreading word that Behlen, a 68-year-old builder of metal-framed buildings, had opened a factory in China and four months later let 75 U.S. employees go. Never mind that Raimondo's company was trying to preserve market share in China by building a factory there with U.S.-made equipment. It looked enough like "outsourcing" of U.S. jobs to other countries that Democratic critics of Bush's economic policies were beside themselves with glee.

Outsourcing has become the emotional touchstone for a curious fact of the U.S. economy's two-year-old recovery from recession. There are no new jobs. Actually, there are 700,000 fewer positions at U.S. companies and on government payrolls today than there were in November 2001, the month the recession was declared to be over.

Worries over the exporting of jobs — rather than U.S.-made products — do not just affect manufacturing. Increasing numbers of service workers, from the people who provide telephone assistance to software buyers to the technicians who read X-rays, have found that their jobs were outsourced to India, Russia and the Philippines, among other countries.

Baucus is one of several lawmakers, most of them Democrats, who have proposed legislation specifically aimed at outsourcing. Some of these bills seek to collect more statistics on companies that hire out work to other countries, or to shame companies into thinking twice by requiring them to publicly report their outsourcing plans. Other bills would cut off federal contracts and loans to companies that create jobs overseas while eliminating them in the United States. (Legislative proposals, p. 625)

Most congressional Republicans have been reluctant to join Democrats in denouncing a practice that many economists say is natural and, in fact, beneficial to long-term economic well-being.

Senate Republican Conference Chairman Rick Santorum of Pennsylvania says Democrats lack any ideas that are better for the economy than Bush's efforts to improve education and promote economic growth through low taxes, a lighter regulatory burden and limits on the sorts of civil lawsuits that critics say hamstring businesses that are seeking to expand.

But, while dismissing as "incoherent" Democratic legislative proposals to combat outsourcing, Santorum seemed to acknowledge that the issue may register with voter anxiety over the economy. (Republican economic arguments, p. 622)

"We understand this is an emotional issue for people," Santorum said. "But emotional responses rarely solve anything."

Analysis

Economists are just as puzzled as politicians are fretful about why there are so few new jobs more ...