Nafta and Mobile Factors of Production

NAFTA reality checkHowever, when Ricardo said that free trade would produce shared gains for all nations, he assumed that the resources used to produce goods — what he called the “factors of production” — would not be easily moved over international borders. Comparative advantage is undermined if the factors of production can relocate to wherever they are most productive: in today’s case, to a relatively few countries with abundant cheap labor. In this situation, there are no longer shared gains — some countries win and others lose. [ “(extlink)Prometheus6.org”:http://www.prometheus6.org ]

I think that the single biggest reason that companies are not creating “good jobs” is that the US as a country has not solved how we will provide healthcare. When providing benefits ads a significant cost to producing jobs, is it any wonder that companies try to downsize their way to profits and minimize their head-count? While I think any American company would prefer to hire in the US, increasing the fixed costs of hiring new workers is not helping.

bq. When Ricardo proposed his theory in the early 1800’s, major factors of production — soil, climate, geography and even most workers — could not be moved to other countries. But today’s vital factors of production — capital, technology and ideas — can be moved around the world at the push of a button. They are as easy to export as cars.

I don’t think that things have changed as drastically as some people fear. While some tech jobs are being re-located to India, as often as not it’s a matter of Indian workers being MORE qualified than their American counterparts. In fact, many times they’re qualified enough to overcome their relatively poor English, currency uncertainty, difficulty in managing worldwide teams, etc. That compatibility combined with the fact that it’s just simpler to run a 24-hour operation when your people are global, eliminating the “night shift.”

bq. In the past, we have supported free trade policies. But if the case for free trade is undermined by changes in the global economy, our policies should reflect the new realities. While some economists and elected officials suggest that all we need is a robust retraining effort for laid-off workers, we do not believe retraining alone is an answer, because almost the entire range of “knowledge jobs” can be done overseas. Likewise, we do not believe that offering tax incentives to companies that keep American jobs at home can compensate for the enormous wage differentials driving jobs offshore.

It seems hard to argue that an increasing shift towards knowledge production in English, which most of the world does not speak as a native tongue will disadvantage American workers. If anything, it would seem to give us a greater advantage compared to cheap labor in other countries who have to cover a language barrier as well as education ones.