South-Western College Publishing - Economics  
Two Sides To Everything
Subject Outsourcing and Insourcing
Topic International Trade
Key Words

Outsourcing, Insourcing, Free Trade, and Employment

News Story

At a time when the American economy seems starved for jobs, new foreign investment is being looked on with favor. Recent investment by companies such as Samsung are showing the other side of the outsourcing debate. While the news is filled with stories about American jobs going overseas, Samsung has announced a $500 million expansion of its plant in Austin, Texas. The expansion is expected to create an additional 300 jobs in the seven-year-old plant.

This same phenomena is being experienced throughout the United States. From high-tech industries in central Texas to automobile plants in the Deep South and pharmaceutical laboratories in New Jersey and Massachusetts, foreign companies have been spending billions of dollars on business investment. Foreign companies are either building or expanding existing plants and creating hundreds of jobs in the process. The spending is resurrecting otherwise sluggish local economies and offsetting some of the loss of American jobs that have gone overseas.

Free trade proponents underscore the 6.4 million Americans who worked for foreign companies as of 2001, the last year for which reliable figures were available. Recognizing that more jobs are being outsourced then insourced, they point out that the number of new workers employed by foreign companies more than doubled during the 15-year period which ended in 2001. During this same fifteen year period, 10 million American jobs moved offshore. These 10 million jobs represented a 56 percent increase in outsourcing, while the number of Americans working for foreign companies has increased by over 100 percent since 1986.

"The opponents of outsourcing take insourcing for granted," said Nancy McLernon, deputy director of the Organization for International Investment, a group representing foreign companies in the United States. "In discussion on global trade, the spotlight usually is focused on those that are harmed by it, not those that benefit." If the present trend continues, the naysayers will certainly have to reevaluate their position on free trade.


(Updated June, 2004)

Questions
1.

Discuss the political implications of the insourcing debate?

2. Use your own words to develop an economic definition of "insourcing".
3. Write a paragraph explaining your own position on free trade and how you believe it will affect your own future economic well-being.
Source Ken Belson, "Outsourcing, Turned Inside Out", New York Times Online, April 11, 2004.

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