"But believing that offshore outsourcing causes unemployment is the economic equivalent that the sun revolves around the earth: intuitively compelling but clearly wrong" Drezner (2004, Foreign Affairs) Supporting this viewpoint is straightforward. Consider, for example, the analysis by Bertrand (2011, What goes around, comes around: Effects of offshore outsourcing on the export performance of firms, Journal of International Business Studies, Vol. 42, pp334-344): We examine the effect of offshore outsourcing on the export performance of firms. Building on the theories of international business, the resource-based view and transaction cost economics, we argue that offshore outsourcing helps firms - directly or indirectly - to export more. It may reduce their production costs and enhance their flexibility. It may also provide them with new resources and market knowledge. However, the impact of offshore outsourcing depends on the resources and capabilities of firms to manage a network of foreign suppliers, and to absorb foreign knowledge. Using a database of around 2000 manufacturing MNEs in France in 1999, we find that offshore outsourcing increases export performance, the effects being stronger in the export markets where firms import intermediate goods. We also show that the firm size, the organization of intra-firm imports and the export experience moderate the effects of offshore outsourcing positively. This is supported elsewhere. For example, Giustiniano and Clarioni (2013, The Impact of Outsourcing on Business Performance: An Empirical Analysis, Journal of Modern Accounting and Auditing) find that, rather than just reflecting cost reduction, outsourcing is linked to a 'growth-oriented corporate strategy'. So why is the comment "we're exporting jobs" so common, particularly in the US which actually has relatively low import rates? I've enquired before but I've never received a satisfactory answer. Is it just about finding a convenient scapegoat that can be used to hide from consideration of more 'difficult' internal structural deficiencies?
I think you answered your own question. It's about politics and protectionism, and a complete disregard for economic reality.
The interesting aspect is how the myth unites the left and the right. Its one of the few soundbites that can be used by any flag waving politician
Not flag waving politician, just a politician that use fear to get votes. Many of "good manufacturing jobs" were lost to automation, and lower cost imports (not from outsourcers). But, that is left out of the stump speeches. Another thing left out of the stump speeches - Illegal aliens don't take jobs "Americans won't do", they take jobs at below minimum wage, with no benefits. Making illegals legal, won't change that, the new legals will be replace by new illegals. That's a lot of politicians chatter about, but take no action to, fix immigration (the Democrats could have easily fixed immigration between 2009 and 2011 - yet they didn't....).
Mercantilism is more easily rejected. There is a key difference though. When neo-mercantilism is used its typically focused on big bad foreigners (e.g. "we can't compete because of the lack of regulations over there"). The outsourcing angle is typically more insular, focusing on the 'evils of corporations' and how they destroy to increase profit.
Reiver is a continuous proponent of this expressed nonsense. An explicit response to Reiver’s logically faulty belief of nations’ annual trade deficits being beneficial to their economies is found within the excerpt from Wikipedia’s article entitled “Balances of trade” that’s included within this post. Nations’ annual trade deficits are ALWAYS detrimental upon their nation’s numbers of jobs and median wage (which are reflected within the nations’ GDPs). Those detriments are immediate and their drag upon their nations’ entire economies exceeds the amounts of the trade deficits themselves, those deficits can to some extent be mitigated to the extent of importing components or materials that are themselves vital for the production of domestic final goods or service products. This is not generally the case for USA’s imports. Wikipedia’s article entitled “Import Certificates” describes a proposal for reducing USA’s annual trade deficits, increasing our median wage and our GDP. Respectfully Supposn ////////////////////////////////////////////////////////////////////////////////// Excerpted from Wikipedia’s article entitled “Balances of trade”: … “Trade Balances' effects upon their nation’s GDP Annual trade surpluses are immediate and direct additions to their nations’ GDPs. To some extent exports’ induce additional increases to the GDPs that are not reflected within the export products’ prices; thus trade surpluses contributions to their GDP are generally understated. Products’ prices generally reflect their producers’ production supporting expenditures. Producers often benefit from some production supporting goods and services at lesser or no cost to the producers. For example, governments may deliberately locate or increase the capacity of their infrastructure, or provide other additional considerations to retain or attract producers within their own jurisdictions. The curriculum of a nation's schools and colleges may provide job applicants specifically suited to the producer’s needs, or provide specialized research and development. All national factors of production, including education, contribute to GDP, and unless globally traded products fully reflect those goods and services, these other export supporting contributions are not entirely identified and attributed to their nations’ global trade. Annual trade deficits are immediate and indirect reducers of their nations’ GDPs. Trade deficits make no net contribution to their nations’ GDPs but the importing nations indirectly deny themselves of the benefits earned by producing nations; (refer to “Annual trade surpluses are immediate and direct additions to their nations’ GDPs”. Among what’s being denied is familiarity with methods, practices, the manipulation of tools, materials and fabrication processes. The economic differences between domestic and imported goods occur prior to the goods entry within the final purchasers' nations. After domestic goods have reached their producers shipping dock or imported goods have been unloaded on to the importing nation’s cargo vessel or entry port’s dock, similar goods have similar economic attributes. Although supporting products not reflected within the prices of specific items are all captured within the producing nation’s GDP, those supporting but not reflected within prices of globally traded goods are not attributed to nations' global trade. Trade surpluses' contributions and trade deficits' detriments to their nation's GDPs are understated. The entire benefits of production are earned by the exporting nations and denied to the importing nation.
I'm merely referring to basic economics There is no valid source that says "annual trade deficits are ALWAYS detrimental". Its a mercantilist comment that is ignorant. There is no way from getting away from that.
