Obama’s outsourcing glass house

So President Obama is trying to paint Mitt Romney as a big outsourcer of jobs abroad. Well, he no doubt was during his time as CEO of Bain Capital, but those who live in glass houses shouldn’t throw stones. The Obama administration has certainly presided over the outsourcing of more jobs than Mitt Romney ever ...

Chip Somodevilla/Getty Images
Chip Somodevilla/Getty Images
Chip Somodevilla/Getty Images

So President Obama is trying to paint Mitt Romney as a big outsourcer of jobs abroad. Well, he no doubt was during his time as CEO of Bain Capital, but those who live in glass houses shouldn't throw stones.

The Obama administration has certainly presided over the outsourcing of more jobs than Mitt Romney ever did, just by dint of the fact that Romney was only doing it in the cases of some specific companies while Obama has been doing it across the entire economy.

So President Obama is trying to paint Mitt Romney as a big outsourcer of jobs abroad. Well, he no doubt was during his time as CEO of Bain Capital, but those who live in glass houses shouldn’t throw stones.

The Obama administration has certainly presided over the outsourcing of more jobs than Mitt Romney ever did, just by dint of the fact that Romney was only doing it in the cases of some specific companies while Obama has been doing it across the entire economy.

This is not to say that Obama did so as a conscious part of his strategy which is certainly what Romney did. Obama probably doesn’t realize the extent to which he has off-shored jobs because his off-shoring has come about as a natural result of his embrace of long standing orthodox American trade and foreign policy assumptions, theory, and practices that have been undermining the American wealth producing base for at least the past forty years if not longer. But remember that Obama said he was going to bring change we could believe in. Well, he hasn’t. It has been more of the same old stuff from pretty much the same old crowd. Let’s look at some examples.

During his first trip to China in 2009, the president held a joint press conference with Chinese President Hu Jintao in which he announced that America would assist China in the development of its own indigenous commercial jetliner. Of course, jetliners are one of the few things America can sell competitively to China and in which it has a trade surplus. So what possible logic was there in committing to help China develop a capability in which America clearly had a lead and a comparative advantage? The answer I got from the State Department was that we needed China to help us deal with North Korea and Iran and other foreign-policy issues and anyhow, what the Chinese were developing was only a small jetliner that would be technologically inferior to Boeing’s products. But that was the answer I used to get when the previous administrations neglected to take steps to counter the subsidies the EU was using to build up Airbus Industries, which has now surpassed Boeing as the world’s biggest producer of commercial jetliners. It was just kneejerk, standard, trade/foreign-policy tradeoffs, and clearly not change I could believe in.

Just to put the icing on the cake, last year, in the spirit of the president’s statement, GE CEO Jeff Immelt who also chairs the President’s Commission Jobs and Competitiveness, announced that GE will be merging its avionics division into a joint venture with China’s AVIC state owned aircraft developer. So that means a transfer of technology and jobs from GE’s U.S. division to this new joint venture. There was no cry of anguish from the White House when the announcement was made and Immelt continues to chair the Commission even as GE ships jobs abroad.

Take the recently concluded U.S.-Korea Free Trade Agreement. The president made a strong effort and succeeded in obtaining congressional approval and in putting the arrangement into force. He did this despite the finding of his own International Trade Commission that the overall result of the agreement would be to increase the U.S. trade deficit. Now that the agreement has been in force for about three months, we are already seeing a dramatic climb in South Korean exports to the United States and in the U.S. trade deficit with Korea, a deficit that definitely costs America jobs.

Again, why did he do this? Two reasons, I believe. First, his national security and foreign-policy team told him this deal would demonstrate America’s continuing firm commitment to South Korea and thereby reassure the Koreans that we would not abandon them to their enemies in North Korea. Why we have to continue making these demonstrations of commitment when we have had 30,000 American troops in Korea and the Seventh Fleet in the Pacific is beyond me, but we feel compelled. Second, the president’s top economists kept repeating the orthodox mantra that free trade is always and everywhere a win-win proposition.

Unfortunately, that is only true under very restrictive assumptions. If you have full employment, no costs involved in shutting down factories and opening new ones, no cross border flows of technology, people, or capital, fairly valued and unmanipulated exchange rates, and perfectly competitive markets (meaning no industries dominated by a few companies) then trade can be win-win.

But we do not have full employment, we do have enormous shut-down and start-up costs, markets in things like autos, semiconductors, and consumer electronics are not perfectly competitive, and South Korea along with many other Asian countries manipulates its exchange rate to keep its won undervalued versus the dollar. As a result, trade with South Korea is not necessarily a win-win proposition. Yet the president told the congress it was and further argued that the free trade deal with Korea would create thousands of new American jobs.

It won’t. And the president ought to know that by now and instead of throwing stones at Romney, tell us about a new trade policy that will, in fact, create net new American jobs.

Clyde Prestowitz is the founder and president of the Economic Strategy Institute, a former counselor to the secretary of commerce in the Reagan administration, and the author of The World Turned Upside Down: America, China, and the Struggle for Global Leadership. Twitter: @clydeprestowitz

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