More Drez on Outsourcing
Classic Drez, summed up succinctly for a brief TNR cameo ...
More importantly, however, even before the last recession, Americans did not have warm and fuzzy feelings about trade. Kenneth Scheve and Matthew Slaughter catalogued hostility to free trade policies in Globalization and the Perceptions of American Workers. Throughout the late 1990s, majorities of Americans repeatedly affirmed their belief in two things: that the costs from more imports always outweighed the benefits of more imports; and that the costs from more imports exceeded the benefits from more exports. Go back to the early 1950s--when the U.S. was running a massive trade surplus--and a plurality of Americans still supported import restrictions over import expansion. Americans are mercantilists in the sense that they support trade liberalization only when they believe it will improve export opportunities with no threat of increasing imports.Given the widespread support among economists for trade liberalization, are Americans just stupid? Not really--they're merely responding to how politicians talk about the topic. Both advocates and opponents of freer trade talk about the issue using the language of how policy change will affect the trade deficit--even though there's no correlation between the balance of trade and income. Even politicians who advocate trade liberalization do so by focusing on increasing American exports and downplaying imports. This ignores the fact that trade is not a zero-sum game; the gains of other economies can also benefit our own. For instance, imports help to lower consumer prices and increase consumer variety. Former Treasury Secretary Robert Rubin observed in his memoirs that when he mentioned this fact in Congressional testimony, a representative told him that he was the first government official to praise the virtues of imports in public.
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But there is one silver lining to this phenomenon, which is that Americans are massive hypocrites. People may believe in mercantilism, but they don't act on those beliefs in large numbers. Consumer lender E-loan conducted an interesting experiment this spring--it gave customers a choice between having their loan paperwork processed in ten days overseas or twelve days in the United States. In the first three months of the experiment, more than 85 percent of customers chose the overseas option. This corresponds with the May AP poll showing that while a majority of Americans think that offshoring is bad for the economy, a plurality of Americans do not bother checking the label to see if a product is made in this country. As citizens, Americans think of economic policy in mercantilist terms. But as consumers, they are quite content with free trade.
Not entirely sold on the "they're merely responding to how politicians talk about the topic" angle, although I suspect its something akin to the age-old chicken/egg conundrum. Why are polticians talking about trade in the manner they do? Likely because there's some resonance with it to the extent that it slants towards protectionist rhetoric. Also not sure Drez's conclusion supports his contention that the voter acceptance of it is a function of political opinion leaders. If there's a logical explanation for the self-interest motive, then that would seem to be the basis of both voter acceptance of it as well as political discourse on it. Supporting docs can be found on Drez's blog, as is always appreciated.