Foreign Outsourcing: Economic Implications and Policy Responses [Updated June 21, 2005]   [open pdf - 129KB]

"Foreign outsourcing--the importing of some intermediate product […] that was once produced domestically--is not a new phenomenon, nor is it one that is economically distinct from other types of imports in terms of its basic economic consequences. A steadily rising level of trade in intermediate products is one of the salient characteristics of U.S. trade and world trade for the last 30 years. It has been estimated that as much as a third of the growth of world trade since 1970 has been the result of such outsourcing worldwide. While foreign outsourcing may seem different from traditional notions of trade in that it involves exchange of a productive resource (capital or labor) rather than an exchange of a final good and service, the ultimate economic outcome is exactly the same: a net increase in economic efficiency through the elimination of economic inefficiencies that occur when countries use only the productive resources found within their borders. […] The destructive aspects of foreign outsourcing are costly and distressing to those whose jobs are lost to increased imports. Therefore, matters of efficiency and equity are intertwined and one of the principal challenges for policymakers in the face of foreign outsourcing (and trade in general) is to find ways to ameliorate the associated harm, without sacrificing the economy-wide gains that such trade generates. Compensation for loss and adjustment assistance is thought by economists to offer the best chance for securing higher economic efficiency along with distributional equity. This report will be updated as events warrant."

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CRS Report for Congress, RL32484
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