Jobs Data Show U.S. Is Outsourcing Its Future

Conservative pundits are
incautiously hailing the

277,000 private sector jobs
created by the economy
in March as the long awaited “jobs turnaround.”
[For VDARE.COM`s take, see


"More Jobs, But Only New Immigrants Need Apply,"
by


Edwin S. Rubenstein
]. Alas, the BLS
payroll survey indicates a continuation of the jobs
malaise.

A look at the composition of the
277,000 jobs reveals that job growth occurred in sectors
that do not generate export earnings or face import
competition.

Construction
accounted for 71,000 of the new jobs;
retail 47,000;

health care
and

social assistance
39,000;

restaurants
and bars 27,000; professional and
technical services 27,000; administrative and waste
services 17,000, repair, maintenance and laundry
services 12,000; wholesale 11,000; warehousing and
storage 7,000; logging and mining 7,000; financial
activities 6,000;

air transportation
3,000.

In goods production other than
domestic construction, the economy remains dead in the
water: manufacturing jobs, zero; semiconductors and
electronic components, zero; communications equipment,
zero; computer and peripheral equipment, zero; textile
mills, zero; paper, zero; chemicals, zero; primary
metals, -1,000; transportation equipment, -1,000;
electrical equipment and appliances, -2,000.

This is not a profile of a
high-tech knowledge-based economy. It is not even the
profile of a low-tech developing economy.

It is the profile of an economy in
serious trouble. Where are the jobs for skilled workers
or jobs for university graduates in

engineering
or jobs in

R&D
for scientists? Where are the jobs in

export and import-competitive sectors
to close the
massive US trade deficit?

On April 2, the day the March jobs
report was released, research economist

Charles W. McMillion
reported in Manufacturing &
Technology News
that

the superiority the United States has held in
technology trade has suddenly vanished.”

For the first time on record,
during the last half of 2003 the US ran a trade deficit
in advanced technology products and services! As
recently as 1997 the US had a $60 billion trade surplus
in technology goods and services.

The new millennium brought an
acceleration in the

outsourcing of technology jobs
. Dr. McMillion
reports that the US has had a deficit in advanced
technology products with China since 1995 and an overall
deficit in technology goods and services trade with
China since 1999. The US technology deficit with China
is almost five times larger than the US technology
deficit with Japan.

These facts do not reconcile with
the reassurances from pundits that the US has nothing to
fear from China, allegedly a low-tech producer of
textiles and shoes.

Recently, the American public has
been deceived by a spate of “studies” sponsored
by offshore platforms and by interest groups that
benefit from outsourcing. These propaganda exercises
purport to show that Americans benefit from outsourcing.

Where is the benefit for Americans
when the US economy cannot create jobs in export and
import-competitive industries in order to close the
massive trade deficit?

Where is the benefit for Americans
when

dollar devaluation
drives up energy prices?

Where is the benefit for Americans
of losing the lead in advanced technology products?

Where is the benefit for Americans
of declining US enrollments in electrical engineering
and computer science?

Where is the benefit for Americans
of having their human capital destroyed when they are
replaced by cheap foreign labor?

Economists who are not up-to-date
trade specialists are far behind the latest knowledge
when they proclaim that all these developments must be
good for America, because they are the results of free
trade. In the latest work in

trade theory
,

Ralph E. Gomory
and

William J. Baumol
build on earlier research
and

demonstrate
that a country`s gains in productive
capability can worsen the positions of its trading
partners.

Their work has definite
implications for trade policy. Not only can a country
with a successful trade policy capture industries from a
free trade country, but also a country that transfers
its high-tech occupations and production abroad in order
to lower the cost of producing for its domestic markets
is reducing its own capability while increasing that of
a competitor.

The notion that the US can base
production offshore and still come out ahead flies in
the face of everything we know about economic
development.

Some pundits have the mistaken
impression that foreign direct investment in the US
renders offshoring concerns pointless. With so much
foreign capital pouring into the US, how could the US
economy be any but the best?

The answer is that 95% of foreign
direct investment during 1999-2002 (the last four years
for which data are currently available) was used to
acquire existing US assets and their future income
streams.

We are paying for our dependence on
imported goods by turning over the ownership of our
economy to foreigners.

COPYRIGHT CREATORS
SYNDICATE, INC.

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
.