Posted on 03/25/2004 10:26:46 AM PST by Willie Green
For education and discussion only. Not for commercial use.
My colleague, USBIC President Kevin Kearns, hit it right on the head in a conversation last week: They've turned the great fog machine on.
As the public's mounting trade and job-loss worries keep bedeviling the Bush administration, the White House and other globalization cheerleaders have fashioned an all-too-predictable response: blanketing the press and public with ever larger clouds of misinformation about the impact of current globalization policies on the U.S. economy.
One of the most revealing recent examples is a letter to the President in mid-March from his own Export Council The letter, whose origins and fate are pretty foggy themselves, purported to rebut definitively critics of NAFTA-style job-exporting trade deals and the growing outsourcing flood they ve helped trigger. It was posted on the Commerce Department's website as of mid-day, March 18. This posted version, however, warned that it was still not yet approved by the entire Council, was yanked from the site later that afternoon, and seems to be stuck in limbo.
Yet whatever its destiny, this Letter on Worldwide Sourcing, as best as one can tell from its skimpy documentation, is based entirely on claptrap that is marred the globalization debate for a decade, and that hasn't improved with age.
For example, the Export Council boasts that the United States is most competitive in services and runs the world's biggest trade surplus in this sector. That s true, but the authors omit the fact that this surplus is shrinking fast -- by nearly 14 percent from 2001 to 2003, according to the official Census Bureau figures.
The letter claims that the ratio of U.S. employment to foreign hires by U.S. multinational companies remains at three-to-one, just as it has for the last 27 years, [implying] that for each job created abroad, U.S. firms are creating three in the United States.
Just two enormous problems with this claim: First, total domestic employment by these same multinational companies has been falling, not rising, over that 27-year period (when the figures began to be kept). So no net new jobs have been created by these firms at all.
Second, over the past decade, multinationals have steadily shifted their overseas work from foreign factories they own to independent foreign companies. So the numbers of workers on their payrolls have less and less to do each year with the numbers of workers globally that are supported by the manufacturing demand they generate.
None of this, by the way, should be any secret to the Export Council. At least one of its members, Michael Dell of Dell Computer, comes from an industry that has pioneered the use of independent foreign subcontractors, mainly in Taiwan and China.
The Export Council letter also plays it fast and loose with the impact of current globalization policies on U.S. employment and wage levels. Do jobs created by exports really pay 13 to 18 percent more on average than non-export jobs? Technically, perhaps. But the studies that have so far made this claim also found that up to two-thirds of this wage premium has nothing to do with exporting, but with other characteristics of the companies generating these jobs, e.g., their size and their technological intensiveness.
Just as important, the letter fails to make the most relevant comparison if gauging globalization's true impact is the goal, not between export and non-export jobs, but between export jobs and the jobs destroyed by imports. The only research done to date on this subject, by the Economic Policy Institute, shows that jobs in industries created by imports have been much better paying than jobs in industries featuring robust exports.
Again, many members of the Export Council have this information at their fingertips since they are CEOs of outsourcing multinationals themselves. If they are interested in telling the president and the American people the whole story, why don't they just open up their books?
Similar problems undercut the Export Council's contention that, over the last decade, "exports accounted for about one-quarter of U.S. economic growth." Yet to calculate the real impact of trade and globalization on growth also requires studying the impact of imports as well. And the government's method of measuring growth considers trade deficits, which are exports minus imports and which have been negative numbers for many years now, as contractionary by definition.
It's true that this view of the effect of trade balances on growth is only a static, not a dynamic measure. But it defies all reason and logic to believe that running trade deficits as big as America's have been for as long as America has run them has in and of itself strengthened the economy.
One of the draft letter's most misleading assertions stems from its effort to defuse outsourcing concerns by citing projections of future job quality in the United States from the U.S. Bureau of Labor Statistics. In the Council's view, the BLS studies show, "Many of the U.S. service sectors creating jobs abroad are expected...to have huge increases in U.S. employment between now and 2010 (in areas such as computer software engineering and desktop publishing), suggesting that American workers will step into higher-value, better-paying jobs as lower-value positions are shifted elsewhere.
Yet the latest BLS projections show nothing of the kind. Computer and high tech-type jobs will indeed multiply rapidly but from very small bases. And the pay levels look awfully unimpressive. According to the BLS, a worker with "high" earnings gets paid $27,500 to $41,780 annually. Anyone over $41,780 gets very high pay.
In addition, the BLS figures reveal that at least half of the 21.3 million jobs expected to be created between 2002 and 2012 will require less than a four-year college degree, and some 40 percent will not require any significant training at all (which stands to reason when the main responsibility involves asking, May I take your order? or Cash or charge?).
A final irony worth mentioning: Of the nearly 6.5 million jobs the BLS expects to be created in the impressive-sounding professional and related field, some 60 percent will emerge either in areas largely run by the government (like education) or heavily subsidized by the government (like health care). That's hardly a triumph of outsourcing, insourcing, or anything having to do with globalization.
Documents like the Export Council letter are preferable to the name-calling to which the president and his leading aides have recently sunk. But they're no more honest or honorable. And for an administration already suffering big credibility problems, they're increasingly becoming part of the problem, not the solution.
Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
Unless the Chi-coms are brought down by massive unemployment and other internal problems we will most definitely be at war with them before long. Unless, our "free" traders prevail and we simply submit. IMO.
Job numbers or not, stop giving away technology for a promise of access to China's domestic market!
When posting boasts of how much our corporations benefit from selling to domestic markets in India and China please include sources. Be the first in your "free" trade neighborhood to prove what you feeeeeeeeel! Anecdotal tales don't count, sorry.
Reminds me of the dotbomb strategy where profits didn't matter as long as you were gaining name recognition by giving stuff away. Of course that strategy is routinely denounced here in hindsight, but for some reason the same logic fails to bridge the gap when talking about trade, no pun intended.
As I recall some companies also got in because they did not want to be left behind, or similar reasoning.
Well here is from a study, "Technology Transfer to China, U.S. Commercial Technology Transfers to the People's Republic of China," by the Dept. of Commerce. Dated the late 1990s I believe.
Most US and other foreign investors in China thus far seem willing to pay the price of technology transfers - even "state-of-the-art technologies - in order to "gain a foothold" or to "establish a beachhead" in China with the expectation that the country's enormous market potential eventually will be realized. A primary motivation for investing in China at this time and despite the difficulties and risks involved, is in order to beat foreign and domestic competitors to the China market. [end excerpt]
The study also reported
Despite several years of high-level investment in China, however, survey data and press reports indicate that relatively few US companies are realizing profits or even a return on their investments in China. [end excerpt]
Lenin would have to invent a new term to describe these clowns. "Useful idiots" is an understatement.
'Course now that China is in the WTO everything is hunky dory and we're living happy ever after.
Just two enormous problems with this claim: First, total domestic employment by these same multinational companies has been falling, not rising, over that 27-year period (when the figures began to be kept). So no net new jobs have been created by these firms at all."
Washington economists are schooled in the same propaganda style as 'Private Lynch is Rambo', 'NAFTA will increase jobs', and 'mushroom clouds'.
"There are three kinds of lies: lies, damned lies and statistics." -- Benjamin Disraeli
Or in the vernacular: "Figures don't lie but liars figure."
Regards
J.R.
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