- The Washington Times - Thursday, March 11, 2004

In the heat of a presidential campaign, the chairman of the White House Council of Economic Advisers (CEA) praised the consequences of the ongoing, technology-based transformational economic revolution occurring worldwide. Citing the “dramatic decline in the costs of information and communication, combined with increased globalization,” the president’s top economist declared that the resulting “new technologies are sharply reducing these interaction costs, allowing productivity increases and co-ordination of activities throughout a value chain spread around the world.” In such an economic environment, the White House’s chief economist noted that “even companies that have … large market shares in technology sectors may find an advantage in outsourcing their R&D; and innovation activities.”

Was President Bush’s CEA chairman, Gregory Mankiw, offering additional insight following his common-sense remarks last month about how the “growing phenomenon” of outsourcing was “just another way of doing international trade”? Well, no. Actually, the comments in the previous paragraph were made by Clinton CEA Chairman Martin Baily in an Oct. 11, 2000, essay titled “Innovation in the new economy: The end-user industries of the old economy are spurring the new.”

Indeed, as Alan Murray noted in a Wall Street Journal column this week, Mr. Baily has favorably observed that the trend in white-collar outsourcing began in the 1990s, a development that actually contributed to extraordinary growth and rapid wage gains. So, among presidential economic advisers, that makes it bipartisan.

Add to this bipartisan mix Federal Reserve Chairman Alan Greenspan, who was first appointed by President Reagan and whom President Clinton re-appointed twice. Yesterday, Mr. Greenspan described “a new round of protectionist steps” being proposed by Sen. John Kerry and other Democrats as “alleged cures [that] would make matters worse rather than better. They would do little to create jobs; and if foreigners were to retaliate, we would surely lose jobs.” And these lost jobs need not be confined to America’s export sector, whose average pay, by the way, is 13 percent to 18 percent higher than other jobs, as U.S. Trade Representative Robert Zoellick reminded the Senate Finance Committee this week. In addition to jeopardizing those jobs, if the United States were to become more isolationist economically, the nation would become a less attractive investment opportunity for foreign firms, which employ about 6.5 million American workers. Those 6.5 million jobs represent the flip side of outsourcing and could appropriately be characterized as insourcing.

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