The Custom-House

Inshoring and Offshore Outsourcing

Runjuan Liu and Daniel Trefler estimate the impact of U.S. offshore outsourcing with the Chinese and Indians, and U.S. service inshoring (U.S. sales of services abroad) to them, on U.S. labor markets (Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India). Overall, "We precisely estimate small positive effects of inshoring and smaller negative effects of offshore outsourcing. The net effect is positive." However, the effects tend to be negative for the less educated or less skilled.  

But, we're talking about small impacts.  From the abstract:

To illustrate how small the effects are, suppose that over the next nine years all of inshoring and offshore outsourcing grew at rates experienced during 1996-2005 in business, professional and technical services i.e., in segments where China and India have been particularly strong. Then workers in occupations that are exposed to inshoring and offshore outsourcing (1) would switch 4-digit occupations 2 percent less often, (2) would spend 0.1 percent less time unemployed, and (3) would earn 1.5 percent more. These are not annual changes – they are changes over nine years – and are thus best described as small positive effects.

Make the World Go Away

Doug Palmer reports that the stimulus bill passed by the House today includes "Buy America" provisions for government purchases of steel (and purchases of cloth for TSA uniforms): House approves "Buy America" steel measure.  Anthony Faiola reports that the 'Buy American' Rider Sparks Trade Debate.

Both Palmer and Faiola report that efforts will be made in the Senate to expand the provision to cover more goods.

This action expands "Buy America" provisions already in U.S. government procurement law.  As the Chamber of Commerce (and other organizations) noted in a recent letter:

U.S. law already imposes significant Buy American mandates on products purchased by the Federal government, as well as additional mandates for federally funded highway projects. These provisions generally require the use of American products except in specifically defined circumstances...

But this is still a bad idea.  The Chamber pointed out several problems.  The bill will:

"Beyond 'Fortress America' "

The Fortress of Ticonderoga in Upstate New York: it no longer contributes to national security.  Source: Vintage Views of New York.

During the Cold War the United States developed a suite of export control and visa requirements to limit the spread of sensitive technologies to hostile powers. 

But, the National Research Council says, that was then and this is now: Beyond "Fortress America" National Security Controls on Science and Technology in a Globalized World.  It's time for reform.  You can read the report online; here are key extracts from the executive summary:

How do people form their opinions about trade policy?

Bruce Blonigen of the University of Oregon has some New Evidence on the Formation of Trade Policy Preferences (free - and somewhat different - October 2008 version here).

There are several conclusions: