Why oh why doesn't J. criticize Kerry?

J. writes,

...in the post-World War II world, it seems clear that the U.S. has gained much more than it has lost from the economic development of its trading partners. The U.S. as a whole benefits enormously from the fact that Japan is a rich industrial economy rather than something like Indonesia. The producer and consumer surplus the U.S. gains from trade with rich western Europe far exceeds what it gains from trade with poor eastern Europe. The way to bet seems to be that examples like the growth of other producers to compete with the cotton south are the exception, and win-win benefits are the rule.

If this is not to be the case in the future, there needs to be an argument made as to why the normal post-World War II pattern will be broken. And I haven't heard anybody make such an argument yet.

Moreover, it is important to distinguish between situations in which foreign countries do not acquire the capabilities to produce goods traditionally made in the U.S., and situations in which the U.S. imposes tariffs and quotas to protect domestic industries. The first may leave America better off: we sell them good stuff at expensive near-monopoly prices. The second does not: we can't make them buy our (now overpriced) exports, and trade barriers simply cut off the benefits from mutual specialization in areas of comparative advantage that David Ricardo identified long ago.

This leaves the question of what is the appropriate public policy response to successful high-tech "outsourcing": Imposing tariffs and quotas to protect domestic demand is surely a bad idea, for standard Ricardian reasons. Attempting to slow the rate at which modern technologies are transferred to other countries is surely a bad idea too: there is no surer way to store up huge amounts of economic and political trouble for the future than for the United States to embark on a policy of trying to slow economic growth in India, China, and elsewhere.

I think that the correct policy response is the one outlined by Robert Reich in his Work of Nations of a decade and a half ago: First, get our people out of industry segments where we are about to lose comparative advantage and where wages are about to take a big dive--this is the reason we Democrats like various forms of Trade Adjustment Assistance, for those who work in such industries are about to get shafted and have done nothing to deserve it (and have the ability to impose enormous costs on the rest of us through trade barriers if the political dice roll their way). Second, make sure the public investments in basic research are there to spark applied research and development to create new industries and new forms of high-tech in which our labor and our capital can be very productive (NIH, NSF, DARPA anyone?). Third, remember that the principal determinants of our prosperity and our productivity come from within: get public investment in infrastructure right, private savings and investment high, and investment in education high as well.

Remember: few would be worried about "outsourcing" if the U.S. unemployment rate were still close to four percent, rather than at the above six percent level that it is. To the extent that a structural cure is being proposed for what is really a macroeconomic problem, do not expect it to end well. And remember: a network-design job artificially kept in Sacramento when it could be done more cheaply in Singapore produces extra income for a network engineer in Sacramento, but has costs as well: in a diminished capital inflow that reduces construction and the earnings of construction workers, in higher costs for businesses installing their networks that shows up in lower salaries they pay their workers, in lower earnings and stock prices for HP. Given the all-thumbs hand the U.S. government has to try to guide industrial development through tools other than maintaining the infrastructure of a market society and the provision of basic research and other public goods, it is hard to imagine that the costs to the country as a whole will not greatly outweigh the benefits.

I'm skeptical about the help the gov't can provide to those who lose their jobs, but certainly Kerry could use this argument instead of whipping up anti-trade sentiment. Or maybe he can't win without it. Sigh.