In light of the political debate, a discussion topic.
A few myths have surfaced regarding "outsourcing" and international trade's responsibility for it. Here are a couple of interesting statistics that tend to establish that outsourcing has a much more diverse and complicated source and effect on the overall US economy.
--the manufacturing sector's share of US GDP has been steadily falling, between 1970 and 2002 it fell from 24% to 14%, however, the manufactured goods trade deficit only rose about 4%--there seems to be an unaccounted for 6%.
--the effect of cheap foriegn labour has been exagerated, ad nausem, whereas a chinese manufacturing worker earns $730 a year, thye only add $2900 of value, however, the average US manufacturing sector worker earns $29000, and adds over $81000 worth of value. This is due to better capital, management, and education in the US manufacturing sector. True the chinese will fix these problems--but then the salaries rise, offsetting the problem.
--The real costs of manufacturing goods has dropped more in the past decade than in anytime in history--meaning that more goods are avaiable at lower prices to the general public. In plain english, that $25 DVD player would be about 10X that in a domestic protectionist economy.
--Trade lifts more people out of poverty than it lowers the economic status of others--meaning that overall international trade has proven to be pareto-superior economically in the US. In plain english, more people are helped than are hurt by trade.
--A good example of non-trade economics are the health and education sector. These sectors in the US economy have increased well above the inflation rate for the past 20 years--why? One reasoin is becuase they are non-fungable services, unable to be traded amonst a community of providers. In plain english, without the ability to outsource these services, the industries are non-responsive to global cost pressures--meaning your college and doctor can charge whatever they want without fear of real and direct competition. All that a less globalised economy will do in the US will create the same non-reponsive prices in manufacturing and other fungable goods, made artificialy non-fungable by politically motivated trade barriers.
Just be on the look out for those who want to "protect" manufacturing jobs. What they are really doing is setting the US economy up to become non-responsive. Protecting a manufacturing sector that requires less employees to produce more goods will only create unecessary costs (namely redundant workers), that will in the end erode the one advantage we do have--namely efficency and adaptability, which will lead to greater problems in the future. One need only look at the US automotive sector of the 70s and 80s to see what protectionism does.
Sources upon request.
