Weekly column: A defense of free trade and offshoring

[Declan McCullagh <declan () well com>]

http://news.com.com/2010-1028-5162847.html

The truth about offshoring
February 23, 2004, 4:00 AM PT 
By Declan McCullagh 

Economic reality frequently makes for poor politics. 

That's what N. Gregory Mankiw, chairman of President Bush's Council of
Economic Advisers, recently found out when he inadvisably spoke the
truth: Free trade is good for America.

Outsourcing gains "that take place over the Internet or telephone
lines are no different than the gains from trade in physical goods
transported by ship or plane," Mankiw, who is on leave from his job at
Harvard University, told Congress. "When a good or service is produced
at lower cost in another country, it makes sense to import it rather
than to produce it domestically."

Mankiw was restating for the 21st century the economic law of
comparative advantage, which essentially says that nations should play
to their strengths. No serious economist would disagree. But Mankiw
soon learned a lesson: Better to cloak what you say in fuddy-duddy
academic argot than to be clear and controversial. [...]

Just as candlemakers and farriers lost their jobs a century ago, free
trade results in temporary disruptions. But in the long run, free
trade is vital to a society's overall health. In the 1990s, developing
countries hostile to foreign trade experienced average growth rates of
negative 1.1 percent per year, while developing countries that
embraced freer trade enjoyed growth of positive 5 percent annually.

And let's not forget that U.S. workers in the information technology
industry often benefit from outsourcing. The German company Siemens,
which makes electronic and electrical products, employs 65,000 people
in this country. Sony Electronics employs 2,000 people in just New
Jersey, while Belgium's Agfa-Gevaert Group, one of the world's leading
imaging companies, writes paychecks to over 5,000 people in the United
States. Spain's Terra Lycos employs 418 people in the United States to
run Web sites such as Lycos.com, Hotbot.com, Gamesville.com,
Tripod.com, RagingBull.com and Wired.com.

[...remainder snipped...]
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