Friday, October 10, 2003

Corporate Labor Arbitrage

Steven Roach up to his usual best:

Steven Roach

....Yet my real fear is that this blame game is only beginning. The trade deficit and the China factor are today’s lightening rods. If Washington stays fixated on these problems, the risks of trade frictions and protectionism can only grow. But if the angst of America’s jobless recovery persists -- something I fully expect -- there is a good chance that the politics of protectionism could morph into something else. Next on my list of likely culprits is Corporate America -- namely, US multinationals who have turned to offshore outsourcing as a means of competitive survival. Here, as well, I believe the case against this key aspect of globalization is a weak one. Low-cost sourcing expands domestic purchasing power. But in doing so, it poses a serious challenge to high-wage workforces of high-cost US producers -- not just in manufacturing industries but increasingly in the once sacrosanct services sector (see my October 6 dispatch, “The Global Labor Arbitrage”). And that could fan the political flames even more. After all, US Commerce Department data show that nonbank American multinationals employed some 9.6 million workers in offshore subsidiaries in 2000 (latest official data point) -- up nearly 50% from 1990. My concern is that US politicians could begin to turn their attention to this aspect of the job drain, holding US multinational corporations responsible for shifting product and work offshore. For a Washington power structure that refuses to accept responsibility for its role in causing America’s massive trade deficits, another such twist in the blame game would not be surprising. ...{article continued}

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