Why Canada and Mexico are Different (It’s Not Just Toque versus Sombrero)

Canadians feel intuitively that trade restrictions between the US and Canada are different from those between the US and Mexico and other low-wage nations. It’s not just that Canadians want to protect their own interests, though of course we do. Perhaps this paper can expand the discussion.

From “International trade, offshoring, and US wages“, Avraham Ebenstein Ann Harrison Margaret McMillan Shannon Phillips, 31 August 2009

“…We then ask whether falling manufacturing employment and rising wage inequality are related to trends in offshoring activities and international trade. One measure of the increase in offshoring activities for US companies is the number of workers employed “offshore” by US multinationals (firms which account for most of US manufacturing employment). Figure 3 shows that the number of workers employed by US multinationals in low-income countries nearly doubled over the last 25 years, while such employment in high-income countries remained roughly constant. One implication is that any employment costs at home of offshoring activities abroad are likely to be concentrated in low-income countries (a result our research confirms)…”

“…Policies (such as those proposed by the Obama administration) designed to curb the negative effects of offshoring on US jobs need to distinguish between offshoring to rich and poor countries. Since the negative effects are restricted to lowincome destinations, any policies which discourage offshoring in high-income regions (such as Ireland or France) will have the unintended effect of hurting the very workers they are designed to protect…”

Comments (0) | |