Outsourcing
The Daily Brew
© February 14, 2004
In theory, free trade between nations allows increased specialization,
permitting all participants to focus on what they do best. This in turn
creates efficiency, thereby increasing overall output, and thus the
standard of living for all participants. Both the Republicans, and to a
lesser extent the Democrats, have more or less bought into the theory.
The bet they have placed, upon which our collective economic fate
rests, is that the citizens of the United States will ultimately
benefit from free trade because we will enjoy the cheap products made
in China and sold at Wallmart by outsourcing the low value niches,
while we continue to earn high incomes, by dominating the high value
niches. Who cares if India and China do all of our low skill
manufacturing and call center work? If Americans are doing all the high
value design and engineering work, everyone is better off, and America
still comes out on top.
There are a few problems with the theory. The obvious flaw is that in
some countries, the “competitive advantage” lies in the fact that they
are willing to allow their 7 and 8 year olds to work 12 hour shifts in
prison-like factories which spew toxins into the worker’s well water.
Politically, this flaw hasn’t provided enough resonance to move even a
majority of Democrats away from free trade, as Dick Gephardt’s
presidential run made clear. Another flaw is that it underestimates the
abilities of the Chinese and Indians. Anyone who has done any graduate
work in the hard sciences understands that America doesn’t hold a
monopoly on scientific talent, and isn’t surprised in the least about
the fact that thousands of American programming jobs are moving to
India and China. Our third world competitors aren’t stupid, and any
long term economic strategy premised on the idea that they are is going
to fail. The final flaw is that the high value work we are supposed to
dominate, the creative work and the highly technical work, is by far
the easiest to steal. The music, film, and software industries are the
most publicized victims of this fact, but they are by no means the only
ones. From counterfeit blue jeans to counterfeit drugs, it is always
cheaper and easier to steal someone else’s technology, designs or
trademarks than to come up with them on your own. If you can get away
with it.
This last vulnerability produces a delicious irony. At the same time
that Microsoft is bitching about the Chinese making illegal copies of
its operating system, it is hiring the Chinese to program the next
version of the software. And within that irony may lie a policy
solution that could level the playing field somewhat for beleaguered
American workers who are watching their jobs run off to distant lands.
With Lou Dobbs flogging the issue every night on CNN, an enterprising
Democratic politician might consider floating the idea, since the lame
proposal they are now pushing requiring companies to give “15 days
notice before your paycheck goes to China” ain’t cutting the mustard.
The idea is simple. Instead of threatening our trading "partners" with
tariffs and sanctions, threaten the multinational corporations who are
setting up shop in countries that allow the wholesale theft of American
intellectual property. If IBM wants to move a million programming jobs
to India, that’s fine. But if India doesn’t respect the intellectual
property rights of our imports, then why should the US respect the
intellectual property rights of companies who use Indian labor to
produce goods for export? You want to program your software in India?
Fine. The price for doing so is that your copyrights, patents, and
trademarks become unenforceable in the US. Anything IBM makes in India
can be copied for free, and if IBM doesn’t like it, they can damn well
program the code somewhere else. If China wants to turn a blind eye to
manufactures who produce counterfeit goods, so be it. But if Levi
Strauss wants to set up a blue jeans factory there, then the Levi
trademark falls into the public domain. Were this to become US policy,
the outsourcing of US jobs to nations that steal US intellectual
property would dry up faster than you can say “Most Favored Nation
Status.”
Of course, none of this will come to pass. The big multinationals who
are outsourcing our jobs also control our media, and in turn our
political system. But the issue is definitely hot right now, and is
destined to stay that way through the fall’s elections. So if someone
is running for Congress somewhere where a bunch of good paying jobs
have gotten up and walked away, they might want to think about getting
some play with it.
I admit I haven’t thought it all the way through, but at first blush it
does seem to me that it is pretty immune from criticism. It isn’t
protectionist in the traditional sense. Nobody is paying fines or
tarriffs or having their goods embargoed. It also vilifies China and
India where they don’t have a ready response. They can hardly claim a
right to steal. And since the punishment isn’t being applied to a
nation or its governemt, but rather to US based multinationals, they
aren’t in a very good position to squeak about issues of national
sovereignty. The multinationals are also put in a box. They can’t
really complain that they have a right to all of the benefits of free
trade but none of the responsibilities. But like I said, most of this
is just me thinking out loud. If any of you have any thoughts, or see
any weaknesses I am missing, I would be interested in hearing from you,
either on the comment board or over the email.
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