Nov 06, 2009 (Basil and Spice - McClatchy-Tribune Information Services via COMTEX News Network) --

Voter thinking this Tuesday focused on jobs and the economy, and sent a clear message of dissatisfaction with economic progress to-date. Reinvigorating Main Street America's employment picture, however, will not be easy. Problems have been building for years, long before the sub-prime crisis. Some believe automation is the major source of recent job losses. However, it is difficult to look at the constant parade of long trains carrying shipping containers inland, or the millions of illegals turning up all across America, and conclude that this is the case.

Substantial improvement on Main Street will primarily require drastically limiting 'Free Trade.' Free Trade supporters repeatedly cite the imposition of Smoot-Hawley tariffs as substantially deepening and prolonging the Great Depression, and conclude that we must not turn protectionist. Reality, however, is that prior to Smoot-Hawley, the 1929 Trade Surplus was an insignificant 0.38% of our GDP, and could not possibly have had significant impact even if lost entirely. True, international trade plays a much bigger role than in 1930 -- however, the fact that we've run large and increasing trade deficits for decades is prima-facie evidence that no trade whatsoever would at least stop the bleeding.

As for Adam Smith's famous Free Trade support, that occurred 200+ years ago -- before across-the-board very large and low-cost competitors like China, India, Japan, Korea, Taiwan, and Vietnam, the Internet, jet planes, and massive cargo ships made a much large proportion of economies vulnerable to offshoring than ever before. We need to also remember that protectionism is what allowed the U.S. and its new Asian competitors to achieve their original economic strength. (Smith himself warned against taking Free Trade too far -- such that a nation's security was endangered.)

Free Trade defenders might assert that manufacturing and IT have borne the brunt of offshoring to date, and their future offshoring is not likely to increase. Recent trends and data, however, suggest service jobs will increasingly also become affected. American firms are already establishing R&D facilities in China; Asian competitors not only have a cost advantage competing for engineering work, they also have the advantage of greater experience in production gained through producing our manufactures.

Unfortunately, this also provides them with a natural lead-in to new areas -- eg. offshored CRT-tube manufacturing experience helped Asians in new areas of plasma, LCD, photovoltaic, solar, and LED screen development and manufacturing, and this trend probably will extend into nanotubes as well. Data reported in Business Week's 11/09/2009 issue confirms the shift -- over the past year, U.S. employment of scientists and engineers has fallen by 6.3%, while overall employment has fallen only 4.1%.

 Continued...