Offshore politics


THERE'S ECONOMIC theory. There's politics. And being bounced around in between are an increasing number of American workers, whose livelihoods are threatened by accelerating global forces and who need more help, but not protectionism, from Washington.

President Bush's top economist, Gregory Mankiw, recently set off anger by explaining that when U.S. corporations move jobs offshore, the American economy is probably better off. Mr. Mankiw made the grave mistake of speaking as an economist to a complex trend that's causing a lot of pain across this country and particularly energizing the Democratic Party primaries.

But in theory, Mr. Mankiw spoke an economic truth. Exporting jobs can lead to improved competitiveness and profits for American companies and their shareholders, enlarging the U.S. economy. A recent study by consultants McKinsey & Co. found that every dollar of service work moved offshore returns $1.12 to the United States - if the displaced workers find new jobs.

That's small consolation to the Ohio toolmakers, North Carolina furniture-makers and California programmers watching their work flee to China, India and other low-wage but increasingly educated, technologically-able economies. It's also not very comforting to note that this lost work is simply the natural outcome of the verities of supply and demand, albeit on a vast scale.

Along with Mr. Bush's remarkably bad jobs record - 2.3 million jobs lost so far - this has provided handy fodder for the Democratic presidential candidates, particularly Sen. John Edwards, whose populism has flirted with outright protectionism that ultimately could cost more jobs. No question, strong steps are needed. Given the rapidly expanding ease with which American capital and technologies are now free to be effectively used by low-wage producers - often via the Internet - the dislocations at home are profound. China's making not just toys but computer chips. India's providing not just call centers for American companies but radiologists to read X-rays long-distance. More and more U.S. high-wage, high-skill workers are looking over their shoulders, wondering if they are next.

It may be tempting, but now is not the time to retreat from free trade. It's time to attend more closely to easing the short-term pain of this transition and spurring the only long-term solution, creating new U.S. jobs - fronts on which Mr. Bush has fallen short.

Federal extensions of state unemployment benefits, dropped by Congress, should be reinstated. Work-force training programs, cut by the administration, must be expanded. Tax-code changes - removing incentives to take jobs offshore and increasing them for domestic job creation - are needed. And does this nation yet have a set of effective policies to spark research and investment in new technologies - and jobs?

The world is changing so fast that the shift of many U.S. jobs abroad can't be avoided. That pain only can be healed by creating more advanced work at home - not by turning back the clock on free trade.

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