Globalization and other economic issues are much on the mind these days. Sunday's newspaper alerts us that CAFTA negotiators are due here in Houston to hammer out a hemispheric trade deal. Houston is a major port and international trade city, so it's easy to see the potential for wider commerce with our neighbors to the south.
Of course, the immediate question is whether or not the anti-globalization protesters planning to show up will get naked like they did in Cancun and elsewhere. (I do suggest they should not step in front of Houston pickup drivers, clothed or not.)
Nearly six weeks after global trade talks collapsed in Cancun, negotiators from the United States and five Central American countries -- along with hundreds of protesters -- will gather in Houston this week to wrestle over a trade deal covering everything from sugar to cell phones.Working against a self-imposed January deadline to reach an agreement after a year of negotiations, the five-day talks here over the Central American Free Trade Agreement, or CAFTA, may well determine the success or failure of the accord.
If successful, this would be the first regional free trade deal signed by the United States since the North American Free Trade Agreement, or NAFTA, was adopted more than a decade ago. That trade deal included Canada and Mexico.
But this week's meeting could also prove to be just as confrontational as the World Trade Organization talks in Cancun because some of the same issues are on the table. That meeting pitted rich countries against poor countries over agriculture subsidies and other issues.
Developing nations say that if they eliminate trade protections for farmers, they'll be run over by U.S. growers backed by billions of dollars in government aid. U.S. farmers respond that many of them are struggling, in part because they are shut out of many international markets.
The importance of this gathering isn't lost on protesters. Several hundred demonstrators are expected to hit the streets near the negotiating sessions at the Westin Oaks Galleria hotel.
via the Houston Chronicle
Looking at another aspect of the economic scene, the forecast for employment growth is still uncertain, despite an uptick in September statistics. Already a major issue in the 2004 presidential campaign, employment is a muddle -- both manufacturing and service sectors are experiencing wrenching change in how they get work done, and new domestic jobs are still scarce.
The political implications by next November are unclear, but Leftist demogoguery is a certainty. To be honest, it's hard to see how much a political leader can do to solve outright industrial overcapacity.
Much of the public outcry over America's failure to generate jobs has focused lately on a surge in the outsourcing of work to China and India. But another dynamic closer to home is weighing on job creation the slow process of working through a glut of boom-era investment that continues to litter the economy with underused factories."As long as there is extra capacity available in manufacturing, there is going to be room to move work around among companies without having to add workers," said Thomas A. Kochan, a labor and management expert at the Sloan School of Management of the Massachusetts Institute of Technology.
That is true with a vengeance today. Not since the severe recession of the early 1980's has capacity use in manufacturing stayed so low for so long, government data show. Production as a percentage of total capacity fell precipitously in the aftermath of the last recession, which ended in 2001, and 23 months into the recovery, the upturn has still not come. On average, manufacturers are using less than 73 percent of their capacity.
Struggling to get rid of this costly glut, many companies continue to shut plants and lay off the workers.
New York Times article via The Ledger (Florida)
Government statisticians can't even measure how many jobs are going overseas, but it's plenty.
The Labor Department, in its numerous surveys of employers and employees, has never tried to calculate this trade-off. But the "offshoring" of work has become so noticeable lately that experts in the private sector are now trying to quantify it.By these initial estimates, at least 15 percent of the 2.81 million jobs lost in America since the decline began have reappeared overseas. Productivity improvements at home — sustaining output with fewer workers — account for the great bulk of the job loss. But the estimates being made suggest that the work sent overseas has been enough to raise the unemployment rate by four-tenths of a percentage point or more, to the present 6.1 percent.
That leakage fuels the political debate.
While most of the lost jobs are in manufacturing or in telephone call centers, lately the work sent abroad has climbed way up the skills ladder to include workers like aeronautical engineers, software designers and stock analysts as China, Russia and India, with big stocks of educated workers, merge rapidly into the global labor market.
New York Times story via The Ledger (Florida)
And now comes a new story about the concerns of white-collar workers facing the "offshoring" of their careers, and their attempts to respond through political action. (I'm not a fan of "nouning" things, but "offshoring" may stick, often with an "anti-" in front of it.)
A new anti-free-trade movement is emerging in the United States, comprising highly skilled workers who once figured they would be big winners in the globalized economy but now see their white-collar jobs moving overseas in growing numbers.The new opponents to lowering trade barriers are especially vocal, and their complaints already are getting the attention of Congress and the White House.
The new free-trade opponents include design engineers, skilled machinists, information-technology experts, and chief executives of specialized manufacturing concerns, among others. They long believed they were largely protected from foreign competition because of their advanced degrees, English language skills and the supposed necessity of dealing face-to-face with customers. But now they worry their jobs are at risk.
At the focus of their ire are big U.S. companies that have shifted business to China and India, which are becoming increasingly successful at nabbing service, information technology and high-end manufacturing work that until recently have been the preserve of U.S. firms. Companies seeking to lower their costs have either moved operations abroad or have contracted with foreign companies to supply essential services.
via the Contra Costa Times
A recent study, commissioned by the Indian information technology business association NASSCOM and completed by a U.S. research firm, says offshoring is both a net benefit to the U.S. economy and necessary because of the "graying" of the American workforce. (Indian IT firms would sure like to make that part of their business case.)
Evalueserve Inc., a full-service business research firm, interviewed worldwide economists and offshoring experts to produce the 80-page report. Additional information was gathered from statistics and forecasts available with the US Congressional Budget Office (CBO) and the US Bureau of Labor Statistics."Frankly, the results are compelling," says Marc Vollenweider, CEO, Evalueserve. "The study clearly shows the necessity of offshore activity to support the growth of the US Economy. The report also found that offshoring keeps US businesses competitive, creates new markets for US goods and services, and fills the shortfall in services labor that the US is expected to face in the next seven years."
Over the next decade, the US economy will mirror the growth of the 1990s leading to an increased demand for labor. There will be a domestic labor shortfall of approx. 5.6 million workers by 2010 due to slow population growth and an aging population.
If the labor shortfall is not met, the US economy will lose out on growth opportunities resulting in an estimated cumulative loss of $2 trillion by 2010. Global sourcing in the form of immigration, temporary workers and offshoring can overcome this shortfall.
via NASSCOM
Global consultancy McKinsey & Co. has conducted its own study and also concludes that offshoring is a net gain for the U.S.
Many businesses have turned to offshoring as a way to boost profits while many politicians see the gain only at the unacceptable cost of American jobs. MGI's latest research and analysis offer a new perspective: offshoring is as beneficial to the U.S. as it is to the destination country, probably more so.The most obvious benefits of offshoring accrue to businesses and English-speaking destination countries. Lower wages in foreign countries translate into significant savings and, often, improved quality. A software developer in the U.S., for example, costs $60 an hour whereas one in India only costs $6 an hour. This and other benefits could translate to a net impact of a 50 percent increase in profits for American businesses.
Destination countries see increased investment and job creation through offshoring. India, for example, gains in net benefit at least 33 cents for every dollar of spend offshored to its country.
While Forrester, a technology research and trend analysis firm, predicts the loss of some 3.3 million jobs to offshoring in the U.S. by 2015, MGI's analysis shows that America has much more to gain.
Offshoring will allow America to capture economic value through multiple channels:
Reduced costs - savings from reduced costs means more savings, which can be passed to consumers or to investors to reinvest.New revenues - Offshoring creates demand in destination countries for U.S. products, especially for high tech items.
Repatriated earnings - Several providers serving the U.S. market are incorporated in America, which means they repatriate their earnings back into the U.S.
Redeployed labor - U.S. workers who lose their jobs to offshoring will take up other jobs, which will in turn generate additional value for the economy.
Of the $1.45 - $1.47 of value MGI estimates is created globally from every dollar spend a domestic company chooses to divert abroad, the U.S. captures $1.12 - $1.14 while the receiving country captures on average 33 cents. In other words, the U.S. captures 78 percent of the total value.
All I know is that pervasive technological innovation is changing the world of work in dramatic, even radical, ways. Late sci-fi author John Brunner, who was not optimistic, called it "the Shockwave" and we're going to have to find a way to ride it.
"For all the claims one hears about the liberating impact of the data-net, the truth is that it's wished on most of us a brand-new reason for paranoia." --John Brunner, "The Shockwave Rider", 1975.Posted by Alan at October 20, 2003 12:24 PM