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Outsourcing Games



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Today’s Washington Post, perhaps as recompense for their largely deceptive story about Mitt Romney as a “pioneer” of outsourcing and offshoring, has a story about U.S. economic trends on those issues under the Obama administration. It explains, fairly, the various trade policies the Obama administration has pushed or enacted, and the successes and criticisms they’ve gained for them. It features some prominent attacks on the president from the left:

From 2008 to 2010, U.S. trade with China alone cost about 450,000 American jobs because of the growth of Chinese exports, said Robert E. Scott, a pro-labor advocate at the liberal Economic Policy Institute. That figure was less than in previous years, but the decrease was probably tied to the U.S. economic slowdown, which crimped demand for imports.

“I think he has walked away from the campaign commitments,” said Scott, the institute’s director of trade and manufacturing policy research. “He has done far too little to improve U.S. trade.”

Of course, that’s one take. There are more objective numbers:

According to a study by the U.S. Bureau of Economic Analysis, large American companies in 2010 barely added any workers in the United States, increasing their numbers by 0.1 percent, while they expanded their foreign workforce by 1.5 percent. That was business as usual — between 2004 and 2010, the bureau reported, foreign affiliates hired 2 million workers while 600,000 were added by the companies at home.

There is no particularly obvious reason why trade with China would have “cost” U.S. industries jobs — the fact that employment by U.S. corporations overseas has grown is an indication that American corporations are doing well, and weak employment growth here is due not least to a weak U.S. consumer market, labor-market mismatches, etc. Trade and employment, no one should have to be reminded, are not zero-sum games. But there are ways to tease out the indirect benefits, and costs, of trade policy, as the Post explains:

While the dynamic hurts groups of workers, it can lead to less-expensive goods and services for American consumers and can produce more-advanced American industries to replace old ones.

His aides say Obama has enforced U.S. trade laws far more aggressively than his predecessor, President George W. Bush, and sought to erect tariffs to protect American workers in the tire industry and force China to stop hoarding raw material used in high-tech manufacturing. Administration officials also say Obama has used his bully pulpit, pressuring U.S. employers to keep jobs in the country.

Unfortunately, the Obama administration has picked a pretty poor example for the Obama administration’s trade-policy success, as this policy was actually a disaster. #more#In the wake of the Bain outsourcing story, adviser David Axelrod also proudly proffered it as “a case we won” by standing up to China, and criticized Romney for “denouncing [the Chinese tires case] as protectionism.” And Romney was exactly right: The Obama administration’s proud trade-policy example did save several thousand jobs, appeasing labor interests, but it was in no way worth it: The intervention cost American consumers about $1 billion in higher prices, or $900,000 for each job saved.

The Romney campaign’s most aggressive line of attack against the Obama campaign on this issue is the administration’s reluctance to label China a “currency manipulator,” which Romney has pledged to do. The WaPo story explains:

Administration officials say Obama has avoided labeling China a currency manipulator because that would prompt a trade conflict with the country. Such a clash could lead to retaliation by China that would hurt American companies and workers. Officials say quiet and persistent pressure on China is more effective — and over the past few years, the value of the renminbi has noticeably gained against the dollar, though the increase has slowed lately.

The Obama campaign has released a document refuting the broad contours of the story, available here. They proudly cite the president’s support for foreign-operations tax reform to encourage American job growth, which the Post explains the president has had no luck getting Congress to take up. As I explained on NRO back in May, his proposals for international tax policies are either protectionist and inefficient or just downright impractical.

The Obama-campaign defense does have a few solid points: They have won a few useful battles against Chinese trade manipulation, and the administration, after satiating its labor allies, finally did sign three new free-trade agreements, with South Korea, Panama, and Colombia. (However, these three agreements actually represent a notably weaker effort than that of most of our trading partners, who have pursued and secured far more similar agreements over the same period.) Those furtive efforts toward a free-trade philosophy, however, have been assailed by some of his liberal critics, who have criticized his choice of trade advisers. These include Diana Farrell, a former Obama economic adviser, who authored a report called “Offshoring: Is It a Win-Win Game?” when she was at the McKinsey Global Research Institute (hint: yes); and Jeffrey Immelt, CEO of General Electric, an infamous global outsourcer.

The Post also reports on the various green-energy investments, such as the car company Fisker, where U.S.-government support has gone to jobs overseas, and, as Kate noted below, Romney has already seized on that argument to label Obama himself “outsourcer-in-chief.”

If such a label as “outsourcer-in-chief” makes any sense at all, it seems the arguments for applying it to President Obama might be relatively weak (though, of course, not any less weak than they are when applied to Romney). He has pursued some protectionist policies, and some free-trade policies, suggesting it is legitimate for critics on both sides to praise him for having done some things, and not having done enough. The Post demonstrates how absurd this game can get by suggesting that Obama can be blamed for the outsourcing of skilled engineering jobs because he hasn’t pushed for an expansion of the H-1B visa program for skilled workers. At this point, it seems, all meaning of the label has been lost.

UPDATE: The headline of the Times’s new story about the outsourcing duel seems to get it right: “Obama and Romney Trade Shots, a Few Possibly Accurate, on Outsourcing.”



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