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Wednesday, August 24, 2011

Bhagwati: The Outsourcing Bogeyman

Jagdish Bhagwati says outsourcing myths are standing in the way of free trade initiatives ("If free trade is to regain the support of statesmen who now hesitate over liberalizing trade with developing countries, the myths that turn outsourcing into an epithet must be countered"). He says we shouldn't worry about outsourcing jobs because we can always use protectionism to save them:

there are manmade restrictions to outsourcing particular types of expertise: professional organizations often intervene to kill outsourcing simply by requiring credentials that only they can provide. Thus, foreign radiologists need US certification before they are allowed to read the x-rays sent from the US. Until recently, only two foreign firms qualified.

So no need to worry. If assembly line work is threatened by outsourcing, simple, just require US certification for the workers who produce these goods.

Don't get me wrong, I think free trade is almost always the best answer. But in supporting it, we shouldn't hide from the short-run distributional consequences that fall on some segments of the population. Acknowledging that the costs exist, and then addressing them is a much better route to preserving free trade inititatives.

    Posted by on Wednesday, August 24, 2011 at 03:24 AM in China, Economics, Productivity, Technology | Permalink  Comments (85)


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