Moving Our Economy Offshore
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The dollar keeps going down, and the trade deficit keeps going up.

Economists and reporters explain this in terms of American appetite for foreign goods outstripping overseas demand for U.S. goods.

There is another explanation, one perhaps closer to the truth. Americans are buying the same goods as in the past made by the same U.S. multinational corporations—only the goods are no longer made in the United States. Their production has been outsourced or offshored to Asia. The same goods now count as imports, because they are produced offshore.

A country cannot close its trade deficit if its economy is being moved offshore.

Offshore production hits the trade deficit from both ends: goods once produced domestically become imports, and as production moves offshore the ability to export declines. When a U.S. business moves a factory to China, that factory's products cease to be potential exports and become imports.

Stephen Roach at Morgan Stanley estimates that more than half of our whopping trade deficit with China results from offshore production.

Economists claim that outsourcing of U.S. production helps our economy by creating incomes for the Chinese to buy our products. However, increased Chinese incomes are more likely to be spent in China buying products from the U.S. multinationals that have moved their production to China. Outsourcing and offshore production cause the Chinese—not the U.S.—economy to grow.

Offshore production is a new development. It is not your father's traditional foreign trade. Goods are not being traded. Offshore production is not a case of the United States making good X and trading it to China for good Y. It is a case of the United States ceasing to make good X in the United States and making it in China instead.

What is happening is that foreign labor is substituted for U.S. labor in the production of the goods and services that Americans consume. Americans lose the incomes and employment associated with the production of the goods that they consume.

The Bureau of Labor Statistics offers no evidence to support economists' claims that outsourcing production to Asia creates new and better jobs in the United States. On Feb. 11, the BLS released its 10-year projections of U.S. job growth by industry and occupation. Missing in the BLS lineup are the high-tech and knowledge jobs that economists have been falsely promising us are our rewards for losing our manufacturing jobs.

Are you ready for this? The BLS says that the bulk of U.S. job growth over the next decade will be in low-paid nontradable services that do not require a college education.

Here is America's job future for the next 10 years:

  • waiters and waitresses;

  • food preparation;

  • nursing aides, orderlies and attendants;

  • cashiers

  • customer service representatives;

  • retail salespersons;

  • general and operational managers;

Of these 10 areas of greatest job growth, RNs require an associate degree, managers a bachelor's degree, and postsecondary teachers a graduate degree. The BLS says the qualifications for the other seven are met by on-the-job-training.

The BLS has another list: the 10 fastest growing occupations. An occupation can be growing rapidly without providing many jobs. For example, the BLS estimates that employment for physician assistants will grow by 31,000 over the decade or by 3,100 jobs per year, enough to produce a 49 percent growth rate.

Seven of the 10 fastest growing occupations are in medical services: medical assistants, physician assistants, social and human service assistants, home health aides, physical therapist aides, physical therapist assistants, and medical records and health information technicians.

The only knowledge jobs about which the BLS is hopeful are network systems and data communications analysts, and computer software engineers. Considering the number of unemployed software engineers and the rate at which these jobs are being outsourced, not many of these jobs are likely to end up in American hands.

With employment growth concentrated in nontradable services, how will the United States pay for its growing dependence on imported manufactured goods? The BLS projection of employment by major occupational group shows production occupations with the lowest growth rate.

If the BLS projections are correct, the United States won't long remain a high-tech, high-wage economy.

When the dollar collapses, Americans won't be able to afford those "cheap foreign imports" for which we are giving up our good jobs.


Paul Craig Roberts was Associate Editor of the WSJ editorial page, 1978-80, and columnist for "Political Economy." During 1981-82 he was Assistant Secretary of the Treasury for Economic Policy. He is the author of Supply-Side Revolution: An Insider's Account of Policymaking in Washington.

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