Phil Hauck's TEC Blog

Saturday, July 2, 2011

Outsourcing/Global Trade: To Be Embraced

Congress keeps getting askew from the understanding that trade and outsourcing is fairly critical to income growth. Perhaps not enough people truly understand why.

Two points: First, we can not easily increase the net worth of an area (say, Brown County, Northeast Wisconsin or Wisconsin) by selling to our fellow citizens within it. We best increase net worth by adding value to our products here and selling them to people outside our area (the U.S. or globally), and bringing that value added payment back to us. It can then be spent to increase our quality of life, or be reinvested in the form of higher wages and more jobs. So, it is imperative that we sell globally. Today, 8% of Wisconsin's jobs are due to global business (16% of manufacturing jobs). That's why we need free trade agreements with other countries.
Second, reflect back to the Law of Comparative Advantage that you learned in economics. Other countries now have greater skills and lower costs than we do in producing some types of goods needed globally. That's how and why they are growing and creating jobs. We are berated for "outsourcing" these jobs. They have a "comparative advantage" which "logic requires" that the work be done by them. Our charge is to develop skill and cost levels that "logically require" "in-sourcing" into Brown County, Northeast Wisconsin and Wisconsin. That's why NWTC and job training tax credits/grants are so important. Arguing for protectionism is counter-productive; it creates retaliation and reduced value, which we see time and time again.
This is one area where government spending benefits society ... by re-training employees to be better able to compete in the next era.

1 comment:

  1. Phil, In this intertwined world we live in, everyone needs to realize that for every action, (such as higher tariffs), there will be at least one, and probably several negative reactions. Play smart to win! We can't lock up our marbles and refuse to play if we're going to improve our economy. Take Care, Big Daddy Dave