Shaking Up Trade Theory, Business Week

[Robert Oak]

Article showing (finally) that the cracks in the free trade mantra
are showing so much now, many economists are questioning their radical
chant along corporate lines.

For decades economists have insisted that the U.S. wins from globalization. Now they're not so sure

advances in telecommunications such as broadband and the Internet have led to a new type of trade that doesn't fit neatly into the theory. Now that brainpower can zip around the world at low cost, a global labor market for skilled workers seems to be emerging for the first time -- and has the potential to upset traditional notions of national specialization.

http://www.businessweek.com/magazine/content/04_49/b3911408.htm

But alas, there are many "not in their club" economists who have been
pointing out the flaws in the free trade mantra for years...
some are listed on noslaves.com/trade.htm

[Ganja Ninja]

1. I suspect it's the corporations more than ...

economists are beginning to question free trade. It was OK when it was blue collar jobs going offshore but now that some white collar jobs are leaving free trade isn't looking so good.

[Robert Oak]

2. don't you mean the opposite?

It is the corporations lobbying and pushing for "free trade".

Citigroup and Goldman Sachs are at the top of the list.

Why you ask? Because they can playing international banking games
by seeding initial investment plus play currency manipulations...
they make HUGE HUGE bucks in China and are also behind the financing
of the much damned (by engineers) 3 gorges dam.

They also can take over 3rd world countries banking systems (Argentina..) note Citigroup was thrown out of the country by Japan.
http://www.riskmanagement.force9.co.uk/ariska804.htm

http://www.institutionalshareowner.com/news/article.cgi?sfArticleId=165

Corporations fund the cato institute and many other "think tanks" as well as economics research in universities to promote their "free trade"
theory.

It's pretty much hiring a series of philosopher kings by king Midas to
justify short term greed.

[Ganja Ninja]

3. Sure Bankers don't care they make money no matter what.

Manufacturing corporations and others that can't just make money over a wire are starting to see white collar jobs going offshore. It's funny, when you don't have plants in America you don't need managers or engineers or designers or other types of white collar employees.

[fedsron2us]

4. Free trade was great while the 'MAN' was in charge

but there are signs that the Chinese, Indians etc want to run the show themselves. The central banks in these countries are now building up substantial foreign currency reserves and are no longer a push over for foreign speculators. Their economies are also building a substantial industrial base. It is the western worlds financial system that is looking increasingly fragile. The old alliance of World Bank, IMF and commercial banks that has spent the last thirty years screwing the poor countries of the world no longer looks so invincible. Even former basket case countries such as Argentina are not prepared to dance to their tune. As the power slips from the 'MAN' he is going to get increasingly desperate. I expect many sacred economic cows to be despatched to the slaughterhouse in the next five years. Do not be surprised if trade barriers re-appear and a new Cold War breaks out.

[dannynyc]

5. Downsides of outsourcing

There is a lot of outsourcing - specifically offshoring - happening. There's no doubt about that. And, in general, it will continue. But, there are some cracks in the "isn't it great to cut costs" mentality of offshoring.

China and India, to name two countries, don't have the laws that exist in the US to protect intellectual capital. So, if some programmer wants to steal software code, it may be illegal in those countries, but, there's no method to enforce whatever laws exist.

The total cost of offshoring is not the difference in pay between the US and a foreign country. There are a large number of costs the US company incurs for issues such as coordination, lack of flexibility, training, etc. I was at a meeting about offshoring several months ago. One of the speakers mentioned India is starting to have the same issues that occured in the US - as work goes to India, people become trained, then begin to leave for better positions. This means the US company is faced with turnover and training costs in a country on the other side of the world.

In this same meeting a speaker mentioned a number of offshoring projects have been brought back to the US because the cost of the entire project increased rather than decreased. This is usually the result of poor planning. One example of bringing an outsourced service back to the US occurred at Dell. Dell brought its business Helpdesk people back to the US because of the many customer complaints. This is one example where loss of sales (or, potential loss of sales) offset the savings of offshoring.

The entire subject of moving functions to other countries is going to be an ongoing saga. If anything, it's not as simple as the news media reports (surprise!!) I do think the problems with offshoring would get more attention in the MSM. This may make some companies think twice about sending jobs to other countries.

[B0S0X87]

6. So what to do...

Outsourcing is troubling, but aside from telling companies they can't outsource jobs at all, I don't see any solution to the problem.

There was something in the article about how "the cure might be worse than the disease."

Any ideas?

[idlisambar]

9. It's a tough question to answer

There main thrust of any solution would be to arrange incentives for corporations such that it is not worth the cost and/or trouble to outsource. Some possibilities include....

1. Using privacy or national security as a reason to enforce an outright ban in some cases. This is not a general solution but could be effective in some cases. Since the beginning of the Cold War, "National Security" has been the classic American rational for protectionism in many high-tech areas.
2. In awarding federal contracts, give explicit preference to firms that do not outsource.
3. An outsourcing tax -- simply tax foreign labor at a higher rate

My personal view is that while outsourcing is a concern it is a only a harsh symptom of the more general problem of America's deindustrialization. Outsourcing of IT and the rest would sting less if Americans had many other industries to fall back on, but we don't. The suggestions above are only ad hoc measures, a more general industrial policy is what is really needed.

And the old "the cure might be worse than the disease" mantra is a favorite refrain of economists. The key word is "might".

[bemildred]

7. Today's "No Shit, Sherlock!" award.

[idlisambar]

8. I like your site. interesting information, provocatively presented.

If you are not familiar with it already you might want to check out/ provide a link to http://www.economyincrisis.com , it's another site that seeks suggestions on what to do about the erosion of our industrial base.

[Robert Oak]

10. who's site? noslaves.com?

Who is economyincrisis.com...

This site is well done. If it's you, you might submit it to DU.
They list "specialist" activists sites.

Feel free to post it in the noslaves.com forum...

I redoing the main site and could link it up on the main page.

[idlisambar]

11. The site isn't mine

I just thought you would be interested. I am not sure who is behind it exactly. :-)

and yes, I meant noslaves.com

[Robert Oak]

12. Thx. Anybody can post FYI. n/t