Dan, the fact that this poll data made your jaw drop suggests you have been spending too much time discussing trade with people you know will agree with you.

Not all the reasons opinion on trade issues has changed relate directly to the issues themselves -- information spreads faster now than it used to; people who think they might be adversely affected by economic changes haven't saved as earlier generations might have and feel insecure for that reason; high incomes resulting from the 1990s' boom were by their nature unsustainable, globalization or not, and not all the people earning those incomes have accepted that. But of the fact that support for trade liberalization has fallen among better educated, higher incomes there can be no question, and there hasn't been for years.

It doesn't help that free trade has so few articulate defenders. Maybe a better way of putting that is that many of its defenders spend so much time talking to one another they've convinced themselves that they are much more articulate than they are.

Declining support for free trade among wealthier Americans is probably associated with Paul Krugman's assertion today in the Times that we need to think more about how to balance the overall benefits of free trade with a stronger social safety to make sure that the "losers" can survive to fight another day.

Ignoring this problem will lead to continued decay in support for free trade and put us (society as a whole) in danger of missing out on the benefits that free trade provides.

All the free trade rhetoric in the world, and assertions that each person makes their own way in the world will not overcome the fact that people will vote their self-interest, and if they are afraid of losing their job, and having their life disrupted they are much less likely to support free trade. We can address those concerns, but have to be thoughtful with policy rather than just running to orthodoxies on either side.

I am not in the least bit surprised to learn that a high number of well educated people are now protectionists. Previously, they thought their jobs were safe. Only those possessing a mere high school diploma or less were at risk. What should we tell these folks? Let’s make it short and sweet: “The world doesn’t owe you a thing. Who said that you needn’t compete in the world economy? The rest of the citizens of the United States shouldn’t be made to suffer because you are unwilling to get your act together. Suck it up and act like an adult.”

The cost of protectionism is hideous. Paul Krugman in his most recent column correctly says “Furthermore, if the United States were to turn protectionist, other countries would follow. The result would be a less hopeful, more dangerous world.”

http://www.nytimes.com/2004/02/27/opinion/27KRUG.html?hp

I have some disagreements with the rest of Krugman’s article, but at least he’s got that part right. The Princeton economist is obviously deluding himself if he thinks the labor union bosses are willing to go along with him. A few slaps at the Bush administration will do little to alleviate their anger. Paul Krugman and Brad DeLong are still heretics.

“It doesn't help that free trade has so few articulate defenders.”

Baloney. There are more than enough “articulate defenders.” The real reason is that one is limited to minimally sugar coating the truth. Regrettably, one is eventually forced to be honest and candidly admit that there will be losers. Even with a decent safety net, some folks will still never again earn the money they have grown accustomed to.

Dan, I'd be interested in your reactions to the article in yesterday's WSJ about GE's big turbine order in China. Basically, the Chinese government required GE (as is apparently China's standard practice) to provide them with much of the intellectual property on which the design and manufacturing of these advanced turbines is based. They were looking for complete drawings, blade metallurgy, computer code for the gas flow modelling, etc etc. They didn't get all of it, but they got an awful lot of it.

Is it truly "free trade" and "open economy" when a sovereign government imposes requirements such as this on behalf of their own industries?

Why should any of this surprise anyone? It is becoming increasingly clear that the current international system, falsely called "free trade", benefits a small handful in the U.S. at the price of the decimation of the U.S. middle class. David Thomson thinks it is acceptable to tell the losers to stuff it. That doesn't work when they're a sizable plurality of the voting population. Why should we all lose our jobs so that a handful of executives can get bigger bonuses and a handful of large investors can get larger returns? Oh, but you say, think of the poor people in India. Sorry to tell you, but that won't play in Peoria. We elect American politicians to support America's interests, not India's.

Does the current trade system increase GDP on both sides? Possibly. But if the majority of people would be better off under a more restricted trade regime, then why should it be surprising that they would find their own well-being more important than meaningless numbers?

Firebug...I don't see how demonizing "a handful of executives" and "a handful of big investors" helps this situation. There are actually real, complicated issues that need to be analyzed and discussed. For example: if the U.S. put large tariffs on imported Chinese goods, what would happen to our prospects of getting large export orders? (like the GE turbine order I referred to above.) Wouldn't the Chinese just give the order to Siemens or Hitachi? What would happen to the people in Schenectady whose jobs depend on selling these turbines to China? Don't they count, too?

I would argue that it's protectionism itself which is unsustaainable. Joyner over at OTB links to a Thomas Freidman article that I found of interest and right down the throat of the arguments being made here:

http://www.outsidethebeltway.com/archives/005220.html

Well, he answered patiently, “look around this office.” All the computers are from Compaq. The basic software is from Microsoft. The phones are from Lucent. The air-conditioning is by Carrier, and even the bottled water is by Coke, because when it comes to drinking water in India, people want a trusted brand. On top of all this, says Mr. Nagarajan, 90 percent of the shares in 24/7 are owned by U.S. investors. This explains why, although the U.S. has lost some service jobs to India, total exports from U.S. companies to India have grown from $2.5 billion in 1990 to $4.1 billion in 2002. What goes around comes around, and also benefits Americans.

The question becomes, 'do we try to protect the unsustainable jobs, or do we adjust to the reality of the world market?

The problem is that politicians have to create a utopian scenario to sell anything like NAFTA. A realistic picture--i.e., there will be winners and losers, but overall we will be better off--will never sell.

Another problem is that the US (both Dems and Repubs really) are so unwilling to use government to help reduce the dislocations from free trade. If people thought that they wouldn't simply be left to twist in the wind, they would probably be more willing to accept the potential downsides of free trade.

This relates to what one of the previous posters mentioned--that people are primarily concerned about their own interests. Of course they are, especially when society as a whole doesn't seem to care. People always talk about retraining, etc. to counteract the effects of globalization, but I don't see much real interest in actually spending more to develop these kinds of programs. So who wants to be the one to sacrifice for the rest of us?

One of the spokesman for free trade, Alan Greenspan, certainly did nothing to sell it when he said that in the long term it will create new jobs and that these jobs will require training. Shortly after he admits that we don't know what those jobs will be so we don't know what training wil be required. So the displaced workers see they must wait for mythical jobs that they don't even know how to prepare for. This is why free trade support is on the rise.

This is why free trade support is on the decline.
my mistake

Eh. The last time a PIPA survey came to my attention, they had both thumbs and a pinkie on the scales. In that case, the questions were loaded just this side of push-polling.

In my experience, support for free trade is shallow, conditional and tentative even in the best of times. A slightly unbalanced list of questions would do nicely if you were looking to either a) scare free-traders or b) push a protectionist agenda.

“Why should we all lose our jobs so that a handful of executives can get bigger bonuses and a handful of large investors can get larger returns?”

You are conveniently overlooking that everyone benefits when prices fall on goods and services. I would bet that everyone participating in this discussion owns their own car, has more than ample food to eat (and some of you might even be bit overweight), and have enough clothes to fill a closet. Every single job that is protected means that the rest of us must endure higher prices.

“A realistic picture--i.e., there will be winners and losers, but overall we will be better off--will never sell.”

It won’t? In that case all progress must immediately cease. Perhaps you prefer to live in the utopian paradise of the former Soviet Union. Lenin and Stalin had no hesitation in lying to people like you. We could always choose a static economy if you think the masses should live in abysmal poverty.

“So who wants to be the one to sacrifice for the rest of us?”

Nobody is sacrificing for anyone else. It’s called competition and some people will inevitably be winners and losers. A baseball player who lack sufficient talent isn’t sacrificing themselves for the team when they are cut. Fortunately, An American “loser” is far better off than 99% of those human beings who ever inhabited this planet.

What should we tell these folks? Let’s make it short and sweet: “The world doesn’t owe you a thing. Who said that you needn’t compete in the world economy? The rest of the citizens of the United States shouldn’t be made to suffer because you are unwilling to get your act together. Suck it up and act like an adult.”

{chuckle}

Dear Mr. Thomson, I gather you are not a "people person", it is very doubtful that this line would "increase" support for free trade. Unless that is not your goal ?

“Dear Mr. Thomson, I gather you are not a "people person", it is very doubtful that this line would "increase" support for free trade. Unless that is not your goal ?”

I just told you the truth. It’s your problem if you can’t handle it. But I’m sure that John Kerry and John Edwards will spout the bovine excrement which you might prefer to hear.

Bithead...re the Friedman quote. He waved his arms at a roomful of products with American brand names. Where are the products actually made? I spent 5 minutes with Google & found that Carrier (a UTC division) has 10 joint ventures in China and various other operations around the Far East, so it's very unlikely these air conditioners were made in America. Ditto for the Coke bottled water, and probably for the Lucent phone gear as well.

My point in posting this is not to argue for "protecting unsustainable jobs" but to suggest that if people like Friedman are going to write about economics and business, they need to get beyond the superficial level. I don't see many who are doing this.

"But I’m sure that John Kerry and John Edwards will spout the bovine excrement which you might prefer to hear. "

David,

I doubt that ch2 wants to hear bs or he wouldn't be reading this thread, or any thread at this site, all of which are very thought provoking. In fact, he might even be trying to show you a more persuasive method of argument exists by mimicing your own.

Hi all,

First of all, there is no credible market theory that says you can have a structural trade deficit and still come out ahead. Economists from Mankiw to Kaldor have all admitted that such a trade deficit must be corrected. Others who have suggested that a current account balance is sustainable if the dollars come back in the form of capital investments are wrong. If another country subsidizes its goods, sells them to the US market, and uses the surplus to purchase US equities and debt then essentially they've converted their subsidization money into capital ownership and this represents a long-term form of capital flight.

This does not mean that the oldman is against trade, but he hardly sees how losing a nickel on every dime and trying to make it up on volume means one is somehow getting ahead on the deal. The benefits from trade come from the specialization of production and not from the lowering of costs, a common and completely fallacious mistake of those who confuse absolute advantage and comparative advantage.

Kelli has noted quite concisely that if the articles such as Postrel and our genial but clearly out-of-touch host Dan here are the best that "free trade" proponents have to offer then the political viability of this political practice is over. People don't want to shut off trade, but if they're being forced to choose between protectionism and an out-of-touch glib free trade argument that ignores their needs - they will choose protectionism. Or as Kelli said so much more sweetly, that free trade will not survive the coming storm.

This is what Kelli, others, and me have been warning about. Free trade proponents have been taking the political status quo for granted. Even Bush is running around screaming job protection now. We are not in the beginning of such a problem, but at the twilight of the previous free trade regime. That's how far Dan and others are out of touch. Not only are they not out ahead of the story, it's pretty much a done deal already.

That's how serious this is. If the best that free trade proponents can come up with is completely callous ranting like Dave Thomson, then we might as well get used to protectionism because that's what's right around the corner.

“callous ranting like Dave Thomson”

Since when is the call for people to act like adults considered “callous ranting?” These people do not have the right to behave like immature children. Also, why would one think they have the right to steal from the rest of us? Someone using the political process to protect their job is no better than a thief burglarizing one’s house in the early morning hours. It is exactly the same thing from a moral perspective.

Dan has already heard, several times, the suggestion made that his surprise at the magnitude of the decline in support for trade liberalization says more about him than it does about the people surveyed. As for the Edwards vote in Wisconsin, he might consider that outside the upper-income groups in that state are mostly natives of that state. Edwards having staked so much of his identity on being a Southerner was probably not a plus with those people, even those who could make out what he was saying through that accent.

Leave it to a Chicagoan to miss something obvious like that.

"Someone using the political process to protect their job is no better than a thief burglarizing one’s house in the early morning hours."

David

Do you really mean this? If so, what is the proper use of the political process?

Bithead...re the Friedman quote. He waved his arms at a roomful of products with American brand names. Where are the products actually made? I spent 5 minutes with Google & found that Carrier (a UTC division) has 10 joint ventures in China and various other operations around the Far East, so it's very unlikely these air conditioners were made in America. Ditto for the Coke bottled water, and probably for the Lucent phone gear as well.

My point in posting this is not to argue for "protecting unsustainable jobs"...

Oh, really?

Clearly, your point is to suggest that those manufacturing jobs, for the products mentioned, are not domestic, and that they should be... by whatever means, and to indirectly complain that they're not, and that the interviewee's statements are therefore incorrect.

Such an argument seems to of itself imply that under those conditions, they *are* sustainable.(Why try to hang on to something that isn't sustainable?)

That argument aside...

...but to suggest that if people like Friedman are going to write about economics and business, they need to get beyond the superficial level. I don't see many who are doing this.

I can't argue that much. But as Dan will tell you (Perhaps needlessly) you have to program to your audience. Further, even assuming that the items as were mentioned are all not US products..(I have my doubts) where do the PROFITS go?

Bithead, my main point is that we need to look at real data and to understand what is going on rather than dealing with every situation with prefabricated ideological conclusions. I think there is far too much of this on both sides of the aisle in this debate.

The profits go to the shareholders, of course, either in the form of dividends or of retained earnings. To the extent that they are retained earnings, they may be reinvested by the company either in the U.S. or abroad.

In the case of a company like Carrier, of course, there are probably U.S.-based engineering and SG&A costs (and associated jobs) that are being supported by the business in India, even if most of the manufacturing is done outside the U.S. But this is a very different thing from the image Friedman generates of "made in America" products.

Dave Thompson,

You ought to read this story by Amy Chua at the Guardian. Frankly, Dave my family is an elitist family of educated and financially successful persons. It has been so for generations. I've turned away from two fortunes myself to do something more idealistic, and now am in the process of making my third one.

I am for capitalism and trade and getting not just rich but obscenely filthy rich. Rah. Rah. Rah. In fact, most of my life I've been considered a smartass intellectual snob.

Now having said that, your comments like:
"Since when is the call for people to act like adults considered “callous ranting?” These people do not have the right to behave like immature children. Also, why would one think they have the right to steal from the rest of us? Someone using the political process to protect their job is no better than a thief burglarizing one’s house in the early morning hours. It is exactly the same thing from a moral perspective."

... are completely idiotic.

If I were to desire to imagine a person who put before a crowd and provoke them into a lynching, protectionist, looting, asset nationalizing mob then I could imagine no finer a provacateur than you Dave.

You take for granted the social legitimacy of wealth accumulation. However history shows you dead wrong. What history shows is two things. The first is that for economic progress to occur a large amount of capital has to be concentrated in the hands of a relatively few persons who can best use it to create wealth. The second thing that history shows is that if these actors fail to use this wealth to bring general social welfare or fail to be percieved to bring general social welfare, then the result inevitably is revolution, nationalization of assets, and protectionism.

Yes this also brings misery and poverty. However, torch-wielding mobs don't think that far in advance. For elites to continue being elite, there must be several conditions. 1) Class mobility 2) Egalatarianism - being an elite doesn't give undue exceptions to general rule of law 3)General social welfare - there must be a rising tide that lifts most boats, and it had better cut them in on more than a trivial portion of the pie. 4) Equal opportunity - or as close to it as possible based upon merit.

The middle class, the burgoise, are always always the best friend of the elites. Disenfranchising them, roiling them, being seen to be callous to their needs, is the quickest ticket to the Guillotine.

So as a person who is used to being an elitist superior snob, please for heaven's sake shut the hell up! Yes, using government to seize the assets of others is like burglarizing their houses. That is why one must bend over backwards to be fair, give opportunity for success, and help those who have something a chance not to lose it. Because if we don't, burglarizing the house is going to be the least of what happens. Idiots like you who believe that wealth concentration can happen without social unrest are just as moronic as those who believe that wealth redistribution can create equality. So wake up. We're not that far from being like Indonesia as people might think. Personally I would rather be an elite and a snob with a slightly higher tax rate than have to suffer through a revolution!!!

We've heard Greenspan say 'free trade is good in the long run'

We've heard Mankiw say 'outsourcing is good in the long run'

Can someone please quantify 'long run'? LOL

No wonder people are anxious about their jobs!

is it a timeframe?
and based upon what exactly?

I wouldn't even believe this administration with all the back-pedaling they've been doing on Nos. lately ;)

“David

Do you really mean this? If so, what is the proper use of the political process?”

The political process should never be used to steal from your fellow citizens. This includes those who want government to protect their jobs or wealthy arm manufacturers encouraging the US military to purchase weapons of little practical value.

Let’s get something straight: the present unemployment rate is under 6 percent! We also have a national economy growing at a brisk 4.1%. There are no massive job losses or people being forced to eat out of garbage cans. The phenomenon that Dan is highlighting concerns spoiled Yuppies who often earn over $100,000 annually. They now must accept a job paying far less, but still far ahead of 99% of those who ever existed on this planet. These selfish and disgusting folks simply won’t be able to purchase a Lexus. They will have to settle for a Ford Taurus---like I drive. Oh my, the horror. We should all feel so sorry for these pampered slime balls. They have been brought in households where they were taught that the world owes them a lavish living.

A growing economy must be allowed to create and destroy jobs. This is an economic dogma that must not be ignored. We cannot allow these thieves to impoverish our nation. Do you really wish to help the poor? If so, why do you want them to pay more for their goods and services?

The problem is that anyone can argue that anything is good in the long run. Good for who and how do you define and measure good? By that definition, the complete destruction of the United States of America could be argued good in the "long run" because it would benefit China and since China has more people then the utilitarian principle - the greatest good for the greatest number. Some might argue that the destruction of the United States doesn't benefit China. But since we are speaking of an open-ended benefit, one could always argue that 250 years out it will be good for China.

Good compared to what? Free trade proponents tend to argue that the present trade system is better than complete cessation of trade. That is a false dichotomy however. They also argue that in the long run the entire economy will benefit. I'd like to see their argument about how and when and what these benefits are.

In order to make any sort of planning, one has to compare not present and future, and not past and future, but different futures. One also has to determine the benefit and who receives it. One also has to show evidence of causation. In the long run, Israel is better off than it was in 70 AD. However, arguing that the Roman Diaspora was the long term cause of Israel's present success is a flawed argument. No one could have known that the Roman Diaspora would result in a powerful technologically advanced nation of Jews 2000 years later. And even if they did know, would they have made that choice if the alternative was to turn out something like Italy or Greece instead?

As Keynes pointed out, in the long run we're all dead. Benefits must accrue either to one's self or to the legacy that one leaves behind in art, culture, generations following, etc. to appeal to enlightened self-interest.

The drop in upper-middle-class support for free trade is quite predictable. A lot of these people were libertarians, and therefore motivated by greed. Now that their jobs are going, they are ditching their intellectual framework of support for greed in favor of the more basic underlying emotion.

Because let's face it, no job in which anyone makes six figures is sustainable. No one is brilliant enough so that you couldn't replace them with cheaper, just as equally trained workers from India or elsewhere. Jobs making seven figures will still be there, because they all rely on one form or another of political connections. People currently making six are all going to drop to five.

I support redistribution to cushion losses from free trade, but clearly redistribution isn't going to go to anyone making high five figures, or do much for them if it did. So the only choice these people have, in they want to maintain their current social position, is to support protectionism.

What surprises me is that they admit it. It's always seemed to me that everyone claims to be in favor of free trade and almost noone actually is. To be really in favor of free trade you have to oppose all of the following: trade or employment quotas or subsidies, embargos, licenses, patents, copyrights, bank regulations, pure food and drug laws, immigration restrictions. Does anyone really oppose all of these things? On the contrary, people identify what benefits them, demonstrate overwhelming social benefit, and call it free trade.

"First of all, there is no credible market theory that says you can have a structural trade deficit and still come out ahead. Economists from Mankiw to Kaldor have all admitted that such a trade deficit must be corrected. "

Most credible market theories don't take real position on a trade surplus or defict because each has a number of benefits and detriments. Economic theories do not generally make judgement calls on whether a country should ahev one or the other. They simply try to predict the effects of each. Running a large trade surplus is not a preferable situation either.

I have not read everything that Mankiw or anybody else has said, but they have probably said that the trade deficit WILL correct ITSELF, not that some purposeful government action MUST be taken explicitly to change that one number. There's a huge difference.

"....completely fallacious mistake of those who confuse absolute advantage and comparative advantage."

There is no economic concept called "absolute advantage". The only "absolute advantage" possible would be if a country owned everything all goods and services. Then there could be no trade because nobody would have anything of value to trade. Anything less than that extreme case is would lead to specialization and comparative advantage would exist.

As long as the productive capacity of the United States exceeds our consumptive capacity, trade is essential to prosperity. Protectionism hurts everybody! In both the short and long term. By exporting factories/ jobs we are creating markets, consumers. It is in our interest for the rest of the world to be increasingly wealthy-- how else can they buy our excess goods?

If California decided to erect protectionist barriers against other states (to prevent jobs from flowing to AZ, Nev and to prevent competitive goods from entering), other states would retaliate with similar measures. How wealthy would Intel be if it could only sell its chips in CA?? Trade=wealth.

Oldman?

You turned down a family fortune to do something more idealistic?

I thought you said you were a Physicist.

"I hate to break it to your ignorant ass but allot of Economics took its modeling directly from physics. Physicists like myself have worked in many different fields - like economics, organizational analysis, industrial manufacturing analysis, and historical evaluation - all of which I've done for pay at one time or another because it's easy to go from physics to one of the above.

So what did you know? Nothing. Not much at all. The term path dependence in these fields is closely related to the same concept in the mathematics of physical sciences.

Except it's easier, cause as another physicist working in economics pointed out to me "it's mostly simple curves or straight lines." Yeah it is. Like your rather narrow minded interpretation."

Posted by Oldman at November 6, 2003 09:15 PM

Hmmm. Man this malarky just makes my heart beat so ...

1. The reason why free trade is viewed poorly.

I'd suggest it's because there's so little fact and a great deal of fiction involved in the pro-free trade argument. I've debated this nonsense for the past couple weeks on any number of blogs and messageboards. Invariably I'd get quotes from economists two centuries dead, when I don't trust any economist's theories, even living ones. I'd get cute homilies like "it'll get better in the long-run" or "the pain is only short-term" or even the inevitable "this is just a natural cycle. it'll pass".

Yet when you ask for anything, literally ANYTHING, definite you get a change in subject.

Fact is that proponents of free trade have not a single clue about what is going on or what is going to happen. They do not know what they're talking about and they are generally speaking out their aft aperture.

They seem to not understand that China has pegged it's currency to the dollar, so that it'll devalue right along with it, in order to maintain the trade imbalance along with the massive outflow of industries and jobs. They don't seem to have a clue that a Computer Science or Engineering degree in India is heavily subsidized to the point where a four year degree costs the student only $1700 USD. Which at least is an improvement. Pre-1991 it only cost $40 USD. How on earth is it possible for ANY highly educated American to compete when we're saddled with such high educational debt? There's not a chance that an American with a decent four or six year degree could work for $12k a year.

And yet these free trade advocates think that this is actually possible.

Frankly, from having read this debate, I haven't seen anything new yet either. The same old, same old. Regurgitated pap.

Seriously. Of what benefit to Americans is having higher profits for an American company? One where all the work is done in China or India and whose shareholders are Europeans? Is this company really American? And in what way? Does America or any Americans actually benefit from this relationship? And even if the shareholders are Americans, what good does that do? Unless you've got a stock portfolio that allows you to live comfortably without working, it doesn't do a thing for you.

Then there's the whole "retrain" nonsense. For WHAT job? Is there any guarantee that any job that people retrain for won't be outsourced to another country? And if there isn't any guarantee at all, then why bother going to college? Isn't the basis of this country's wealth it's commitment to higher education? Yet why bother if that education is worthless? If the 'new' economy is one where being a janitor or automechanic is better deal than a white collar worker, what's the point then? Where will America end up?

I actually was in a debate with a pro-free trader who made the ridiculous statement that many people who lost their jobs were now starting their own companies and having a better life. It amazed me because the general statistic is that only one out of twenty such startups actually will survive three years. And only one out of forty will last more than five years. So I can just imagine all those people getting a second mortgage to start up their own company only to face bankruptcy and ruin in only a year's time.

For *this* we're to be joyful?

Then there's the nonsense of the "alternative economy". Supposedly there's a few success stories of people taking up professional massage. Yeah. I can just see 2+ million displaced knowledge workers taking up massage as a successful career. Yeah. That'll work.

Frankly I could go on, but the fact is simply this. Pro-free traders are simply talking out their ass.

They do not know what will happen. They have no idea whatsoever. What is going on is that they are **hoping** that past trends will continue and that the jobs situation will get better in some undefined way. But they are wilfully blind to the situation as it exists versus the fantasy world that they wish for.

In this world any job that doesn't require a personal presence can be outsourced to another country. Any job that can be outsourced to another country eventually WILL BE outsourced to another country. It's inevitable as a consequence of cutting costs. Along with this massive shift is the shifting of capital. You cannot have jobs without capital. With capital you have jobs. Where there are jobs there is capital. There is a massive outflow of jobs from America, along with that outflow is the flow of capital.

If it's more cost effective to build a factory in China, then it makes no sense to build one in Maryland. If it costs less to have an office with staff in New Delhi, then it makes no sense to have one in NYC. This is a simple fact that is supported by the same words that these advocates use. What they don't want to see is the eventual endpoint where these words end up. What they also don't acknowledge is that even failures will encourage further attempts at outsourcing. Each failure enables another attempt to succeed. At some point, in the very very near future, the level of success will be such that outsourcing will be the *first* option, not the second.

So what are we to do then? What jobs will be available to Americans when these higher wage and higher education required jobs are no longer available? Well there's tourism, where you wear stupid costumes. There's fixing cars, wher eyou don't have to worry about getting a degree. And there's always porn.

Yeah. What a great option. I could always tell my neices that there's always a career as a lapdancer or porn.

Joy.

So to the free traders: Why should anyone create jobs in America? Do we have to wait until 2.5 billion people in India and China have the same lifestyle as America with it's 300 million? Hmm? Got any answers at all? Anything other than baseless theory and unsupportable speculation?

I can support my contention. Look at the news. In a recovering economy chugging along at 4.1% GDP growth rate, the number of inital jobless claims is *rising*. Companies are publically stating that they are NOT going to create new jobs in America. Do you have an answer for that?

(http://story.news.yahoo.com/news?tmpl=story&cid=569&ncid=738&e=4&u=/nm/20040227/tc_nm/tech_summit_offshore_dc)

Eh?

David Foster writes: "For example: if the U.S. put large tariffs on imported Chinese goods, what would happen to our prospects of getting large export orders? (like the GE turbine order I referred to above.) Wouldn't the Chinese just give the order to Siemens or Hitachi? "

Considering the terms they ask, maybe China's not a customer worth winning?

Why is China asking for all that technological information? So they can give it to their own firms, and get rid of GE in the long run. The result would be the same for Siemens or Hitachi.

GE's deal is clearly a senseless Faustian bargain, in an almost literal sense. They'll get short-term profit, at a long-term price that is too high.

David Thompson: "You are conveniently overlooking that everyone benefits when prices fall on goods and services"

Everyone except people who, due to a lost job or career, cannot afford the goods and services even at the lower price.

The problem for defenders of free trade is that they generally ignore the actual situation of the people affected. This makes their defense really simple to make. Though, if you're willing to cheat by removing humans from the equation, it's possible to justify anything. You can even make an excellent case for Communism if you ignore humans.

If you really want to defend free trade, you're going to have to do some actual thinking and try to come up with something that ALSO defends Americans.

If market fairytales are the best you can do, and you fail to come up with anything concrete or realistic to address peoples' concerns, you'll guarantee a protectionist response.

Bithead writes: "Further, even assuming that the items as were mentioned are all not US products..(I have my doubts) where do the PROFITS go?"

Into the CEO's pocket. But that's about it. So the rich get richer.

JohnH...GE's deal may or may not turn out to be a Faustian bargain. Consider the alternative: it would have been to let Siemens (for example) walk away with the deal. That would have almost certainly resulted in large numbers of layoffs in Schenectady, USA. It would have positioned Siemens (in the example) to take advantage of the huge growth in the market for power generation in China, and the enhanced scale would have also helped Siemens gain position in other markets. The end result could have been to seriously cripple GE in the turbine business, which wouldn't help anybody in America.

GE seems confident that by the time that China can build these turbines on their own, they (GE) will have developed a better version. Let's hope they're right.

It does seem unlikely to me that this is a reflection of short-term thinking; remember, Jeff Immelt is just at the start of his tenure as CEO and he's going to have to live with this at the same time.

..meant to say 'live with this a long time.'

Bithead, my main point is that we need to look at real data and to understand what is going on rather than dealing with every situation with prefabricated ideological conclusions. I think there is far too much of this on both sides of the aisle in this debate.

Agreed, and I saw that going in. Yet, I saw, or thought I saw, an underlying assumption attached to your comments. I found it particularly interesting given it was attached to a post whose main trust was, as you point out, too many peple on both sides operating with preconceived assumptions going in.

The profits go to the shareholders, of course, either in the form of dividends or of retained earnings. To the extent that they are retained earnings, they may be reinvested by the company either in the U.S. or abroad.

Correct. And there's the crux of the issue. Further, as you point out, correctly:

In the case of a company like Carrier, of course, there are probably U.S.-based engineering and SG&A costs (and associated jobs) that are being supported by the business in India, even if most of the manufacturing is done outside the U.S.

Bingo.

But this is a very different thing from the image Friedman generates of "made in America" products.

Is it? Tell me two things; Can you break down just how much of that equation is foreign?

Secondly, tell me; which benefits in terms of dollars, the US more... Domestic manufacting jobs, with foreign ownership... for example, Honda... or Domestic ownership, and investment, in foreign manufacturing, ala Pepsi in India for example?

Bithead,

I cant help but be amused. You've just given voice to your inner anti-outsourcing self.

"Secondly, tell me; which benefits in terms of dollars, the US more... Domestic manufacting jobs, with foreign ownership... for example, Honda... or Domestic ownership, and investment, in foreign manufacturing, ala Pepsi in India for example?"

"Everyone except people who, due to a lost job or career, cannot afford the goods and services even at the lower price."

This is a false choice.

Nobody needs lower prices more than people without jobs.

This also make the false implication that higher prices and full employment can occur at the same time. History and basic economics says no.

"Nobody needs lower prices more than people without jobs."

If you have no money, the only price that's low enough is zero.

david foster writes: "GE seems confident that by the time that China can build these turbines on their own, they (GE) will have developed a better version. Let's hope they're right."

And China will pull the same trick again. At that point, GE will be bargaining from a much weaker position than they had for this negotiation.

Worst case, GE gets kicked to the curb, and China is making GE engines without GE getting paid. Then they start selling those engines to GE's customers, at a fraction of GE's price.

I've heard anecdotes about Western companies paying to build factories in China, where copycat factories went up down the street, based on stolen IP. Unfortunately, I don't have any citations.

"It does seem unlikely to me that this is a reflection of short-term thinking; remember, Jeff Immelt is just at the start of his tenure as CEO and he's going to have to live with this at the same time."

Yeah, but he's rich already, so it doesn't matter. He's set for life. If his reputation is smudged by crashing GE, he can drown his sorrows with dacquiris by his pool for the rest of his life. It's not like he'd ever have to work again.

JonH..come now...do you honestly believe this is how a guy like Immelt thinks? He could already be buying all the daquiris he wants..why did he go through the very bruising competition get get the job if kicking back is all he wanted to do?

I don't know if GE's decision on these turbines was right or not (and remember, not *all* of the design info was provided to China...some of the most sensitive was retained). I do think that people should be given credit for acting in good faith unless and until there is evidence otherwise.

I do think that a fair question would be: is it truly "free trade" when a government intervenes on behalf of its own industries in the way that the Chinese government is now doing re this kind of intellectual property?

david foster writes: "come now...do you honestly believe this is how a guy like Immelt thinks? He could already be buying all the daquiris he wants..why did he go through the very bruising competition get get the job if kicking back is all he wanted to do?"

Hey, he grabbed the brass ring. Can't really go any farther up than head of GE. He's done. If he makes a mistake, it's no skin off his back.

Dear TommyG,

I teach college physics at a university in Iowa. I make less than $40k a year before taxes and counting fringe benefits. One of the two opportunities I turned down to make a fortune were the internet. Several of the oldman's acquaintances and friends got rich. The other opportunity came from my previous work in industry. I'd been temping as an analyst, and steadily making more and more, when several customers of the company started offering me consultant work at quite high flying rates. This was understandable since the oldman once saved his corporation a million dollars in one day by approving one work order.

However, in the end rather than going the way of his family and becoming one of these rich consultants doing creative work that free trade proponents are arguing about, he decided to take an offer to teach introductory physics at a quite modest compensation.

Actually, most of my family is mad at me now for "wasting my talents". Eventually, I've come to agree with them, which is why I'm launching my third attempt at a fortune.

Currently I am working on a method with two Ph.D. types with using statistical analysis in order to generate and test hypothesis of real human decision making. We hope for publication this summer. It will have applications from baseball team management, creating better microeconomic and macroeconomic models, and identifying real learning gains and causal factors in education. Heady stuff.

In addition, the oldman is working on a new circuitry etching model that utilizes quantum interference effects from small scales for silicon integrated circuitry chips, and also a direct photon capture theory for solar energy generation as opposed to photovoltaic technology. These also hopefully will be published in the next 1-2 years(?). It's mostly logistics and application. It's already clear mathematically and empirically that these work, due to past efforts and research.

Money has never been particularly important to the oldman, but this time around he intends to close the deal and make his fortune. A patent on one of the above should do nicely. After that, who knows ... maybe aerospace?

Anyway I really do approve of being an obscenely and filthy rich capitalist that can create jobs to employ others. I hope to be one myself in a few years with the requisite shag carpet personal jet, harem of admiring ladies, and expensive suits. I haven't decided to go British hand tailored or Armani yet. Maybe both to be safe. A little island in the south pacific would be nice too for vacations. If I must sacrifice my ideals for "filthy lucre" I suppose I'll go all the way.

I also don't mind competition, foreign or otherwise. However, this free trade thing is nuts the way it's set up. As far as I can tell, there's no real way to make money at it the way it's currently set up. And I'm all for trade.

So ... your answer is that I've always been an eccentric inventor type rather than a strictly academic physicist.

I cant help but be amused. You've just given voice to your inner anti-outsourcing self.

Nonsense.
I'm simply asking the protectionist crowd to back itself with something they generally shy away from: Fact.