Columbia International Affairs Online
CIAO DATE: 4/5/2008
"Fear"and Offshoring: The Scope and Potential Impact of Imports and Exports of Services
January 2008
Abstract
While the uproar over offshoring has largely subsided since the 2004 presidential campaign, there continues to be concern and anxiety regarding the potential impact of offshoring in general and services offshoring in particular. With the economy softening and potentially headed for a recession in the midst of the current presidential campaign, worries about jobs and globalization seem likely to reemerge.
The purpose of this policy brief is to provide estimates of the scope and potential impact of imports and exports of services. The lack of detailed data covering the service sector in general and trade in services in particular makes providing an informed estimate of the potential impact difficult. A number of commentators have provided forecasts of the potential impact of services offshoring. Perhaps the most notable forecast comes from Alan Blinder in an interview that appeared on the front page of the Wall Street Journal. Blinder suggests that as many as 40 million jobs could be at risk of being offshored over the next two decades. He advances the view that American workers should specialize in activities that are “personal” services (i.e., activities delivered faceto- face), because the United States is likely to lose many of the jobs that are “impersonal” (i.e., activities delivered at a distance) (Blinder 2006).
While we agree with Blinder and other commentators that the number of activities that can be provided at a distance, and are thus tradable, is large, we will argue that these other commentators miss two important pieces of the story:
1. Comparative advantage suggests about one-third of tradable service activities are at risk of being offshored to low-wage, labor-abundant countries like India and China.
2. The United States is currently a net exporter of services and likely to gain relatively high-wage, high-skill jobs through increased exports of services.
By omitting these considerations, the discussion becomes unduly alarmist, with the policy advice (e.g., specialize in “personal” services) potentially misguided.
