Why trade agreements should include restricting tradeable services (insurance, capitalism, 2014)

[talentlost]

All service jobs that don’t require a physical presence to perform are called tradeable. All service jobs that require a physical presence to perform are non-tradeable. The tradeable occupation groups are responsible for the excessive unemployment and under employment for a large segment of the population, especially the 50+ age group and the entry level professional group
Most of our labor force is in service related professions, according to J. Bradford Jensen and Lori G. Kletzer in their paper title Measuring Tradable Services and the Task Content of Offshorable Services Jobs “the occupational groups with large shares of employment in the highest potentially tradeable group include:



Business and Financial Operations (74.7 percent of total employment)


Computer and Mathematical Occupations (93.4 percent of total employment)


Architecture and Engineering (80.8 percent of total employment)


Life, Physical, and Social Sciences (75.9 percent of total employment)


Office and Administrative support (64.3 percent of total employment)"


Can America afford to maintain its political, economic strength and sovereignty while having only 6.6% of its computer and mathematical occupation labor force performed domestically and the other 93.4% offshore?


Having only 25.3% of business and financial operations performed domestically and 74.7% performed offshore?


Having only 6.6% of Computer and Mathematical Occupations performed domestically and 93.4% performed offshore?


Having only 19.2% of Architecture and Engineering occupations performed domestically and 80.8% offshore?


Having only 24.1% of Life, Physical, and Social Sciences occupations performed domestically and 75.9% offshore?


Office and administrative has many entry level and semi-professional labor force, can American afford to only have 35.7% of that category performed by domestic labor?


Our economic crisis is a result of unrestricted tradeable services. Look at the implications. IBM moves a support center to Canada, moving 5,000 jobs across the border. That is 5,000 health insurance policies gone, no Social Security contributions and payroll taxes. The amount of high paying jobs that include health insurance is not replaced. It is no wonder President Obama wants to have a national health law forcing 20+ million people to enroll. That is probably equal to the amount of jobs and health insurance policies lost from trade agreements.

Easy fix to the problem. When IBM Canada Support Center exports the service back to America they should pay a duty and/or restrict servicing using tariff quotas, the amount of service importing that can be performed. In the above case wages may be the same so duty to equalize wage rates won’t matter however you need to have tariff’s in that situation.


However, when the same business model happens in countries that have reduced wages a duty charge to equalize wage rates between countries should be implemented. This doesn't stop companies from expanding to new markets, it stops companies using other markets to service the US.



We no longer have a majority of our labor force in manufacturing. We now have most of our labor force in service related industries. I am not talking about protectionism but equilibrium of wage rates.


Tradeable services are the most important economic issue facing any advanced industrialized nation. It is not the fault of the domestic labor force but the incompetence of our government to manage our economy.


Regards,

PS In Canada health care costs are not part of the business financial statements, moving into any country that does not require health care cost or has a national health care policy will always create a disadvantage to the US market.

[Supposn]

TalentLost, I believe almost all international services require absolutely no physical proximity to the purchaser or the purchaser’s sites; they may be accomplished by passing data over international borders. Such transmissions do not require physical shipments of goods.
There are some services that require a state licensed practitioner at very least sign off and accept complete legal and financial responsibility for creditability of the service’s quality.
What global trade of services is your post referring to?
The values and volumes of data and intellectual property transmitted or being otherwise handled are extremely difficult to verify or quantify.

I’m among the proponents for USA adopting an Import Certificate trade policy. It is a unilateral global trade proposal that does not affect and is not affected by global trade of services.
Refer to Wikipedia’s article entitled Import Certificates
or to the discussion thread
//www.city-data.com/forum/econo...-median-5.html

Respectfully, Supposn

[Major Barbara]

The percentage of "We Should..." threads that make any sense at all continues to decline.

[rruff]

Originally Posted by talentlost

Easy fix to the problem. When IBM Canada Support Center exports the service back to America they should pay a duty and/or restrict servicing using tariff quotas, the amount of service importing that can be performed. In the above case wages may be the same so duty to equalize wage rates won’t matter however you need to have tariff’s in that situation.

I have a better idea. We practice free trade as much as possible and require our trading partners to do the same. Then we let the exchange values of currency adjust to balance trade over the long term. Easy and simple.

[SportyandMisty]

Originally Posted by talentlost

... Easy fix to the problem. When IBM Canada Support Center exports the service back to America they should pay a duty and/or restrict servicing using tariff quotas, the amount of service importing that can be performed. In the above case wages may be the same so duty to equalize wage rates won’t matter however you need to have tariff’s in that situation.


However, when the same business model happens in countries that have reduced wages a duty charge to equalize wage rates between countries should be implemented. This doesn't stop companies from expanding to new markets, it stops companies using other markets to service the US.

It is an interesting inquiry. This is something I will think about. Your fix for the problem is to focus on a change to the result. Wouldn't it be better for the US is to change the underlying policies that encourage IBM to offshore to Canada in the first place? (using your example)

[rruff]

Originally Posted by SportyandMisty

Wouldn't it be better for the US is to change the underlying policies that encourage IBM to offshore to Canada in the first place? (using your example)

That would be the exchange rate and what they expect the exchange rate to do in the future. There might be some other advantages as well regarding tax laws and benefits.

[talentlost]

SportyandMisty and rruff you are so correct. It is not IBM's fault they move to another country to reduce cost. The US federal, state and local governments need to decide how to reduce costs so business don't need to seek reduced labor cost. It is not the wage earners fault they just need a wage to support their standard of living. Again it is the Federal, State and local governments fault.

Using our domestic economy we see the implication. As an example the auto industry moves from Detroit to states that have no Unions and cheaper standard of living, one state benefits the other state is hurting. If you look at each state as there own country (for illustrative purposes) it is easy to see how cost structures affect economies. If you were a business in NYC metro area that needed Microsoft technology services and used a Microsoft certified engineer company from Oklahoma, it would probably be cheaper than using one locally. Every business wants to minimize their cost. There is no allegiance to the local economy, why should there be, I mean business 101 reduce your cost increase profit.

What happens is the money sent to Oklahoma for services rendered would stimulate their local economy, whereas the company that sent the money local economy would lose. Since everything is still contained within the country the Federal government doesn't care just the state and local governments have an issue.

If the standard of living and cost structures were somewhat compatible there would be no issues. However, it is very idealistic to believe cost can be uniform throughout the country. A million dollar home in Texas is a 5+ million dollar home in NY. Wages reflect those standards.

Change the discussion back to international trade and the money leaves the US. Having direct investments to balance the trade deficit is a joke. That is nothing more that a paper balance. It doesn't stimulate the economy the same way. When a data center is moved all those wages are lost. How those wages are circulated into the local economy cannot be offset by one huge infusion of cash. Like a Chinese company buying the Waldorf Astoria.

Supposn all services preformed in other countries are classified as tradeable because they don't need a physical presence. Because everything is done electronic it can be measured. If a data center in india is supporting the US market it is very easy to measure. Communication system can be monitored to measure the total calls or transmissions made to the US and a duty charge can be applied (as one example). I used to work for a 3PL logistics company that does Customs Brokerage Services, the amount of paperwork involved to clear a shipment along with the coordination between countries is a greater challenge than measuring communications. If 40% of all IBM support communication entered the US you can have a 7501 (custom duty) form entered with a new Harmonized Tariff Schedule code (HTS) for the different labor services performed.

A little background on the subject of capitalism. Industrialism has three different stages, primary , secondary and tertiary. When our country first started most of our labor force was in farming. As we advanced to the second stage of industrialism most of our labor force was in manufacturing. Then we entered the last stage of industrialism where most of our labor force is in services.

When our manufacturing when through a decline our labor force was able to move into services ( with serious growing pains) which is where most of our labor force is today. The problem is there is no where are labor force can move to, there isn't another stage. That is why the only thing left is tradeable and non tradeable services. The US labor market and also any other advanced industrialized nation is in the same predicament. If we maintain free tradeable services our economy will be shaken to the core, remember the percent of jobs that can be lost (original post).

The time it takes for our labor force to shift into non-tradeable services will be how long our recession/depression last.

That is why I call myself TalentLost, American business is experiencing a brain drain. Business has decided that professional services are a commodity, a programmer is a programmer, an analyst is an analyst. Our greatest asset as a country is our people. This off shoring is not only being done by huge companies, everyone is doing it. Look at the website odesk.com a small business can hire a web designer for $6 an hour along with hundreds of other services perform by people in developing countries.

While everyone has an opinion I will say "time tells no lies", we will see what happens in the next 5 years.

Regards,
Robert

[J.Thomas]

Bunch of whiners let this thing happen.

[Supposn]

Originally Posted by rruff

I have a better idea. We practice free trade as much as possible and require our trading partners to do the same. Then we let the exchange values of currency adjust to balance trade over the long term. Easy and simple.

RRuff, USA free trade policies have consistently provided us with an annual trade deficit of goods every year in excess of a half century. Annual trade deficits of goods are always detrimental to their nation’s numbers of jobs and thus to some extent the median wage is less than otherwise. Annual trade deficits are always an immediate detriment to their nations’ economies.

[Refer to the paragraphs entitled “Trade balances’ affects upon their nation’s GDP” excerpted from Wikipedia’s article entitled “Balance of trade “.
There is also a discussion thread //www.city-data.com/forum/econo...triment-3.html ].


Your post does not explicitly state but does imply we should expect global foreign currency exchange rates to eventually correct USA’s trade balance.

USA’s free trade policies have consistently provided us with an annual trade deficit of goods every year in excess of a half century.
If we continue to seek absolutely pure free trade our trade deficits of goods will continue to be a drag upon our economy until the purchasing power of USA’s median wage descends to wage parity with the remainder of our globe.

Respectfully, Supposn

[Supposn]

Originally Posted by talentlost

... Supposn all services preformed in other countries are classified as tradeable because they don't need a physical presence. Because everything is done electronic it can be measured. If a data center in india is supporting the US market it is very easy to measure. Communication system can be monitored to measure the total calls or transmissions made to the US and a duty charge can be applied (as one example). I used to work for a 3PL logistics company that does Customs Brokerage Services, the amount of paperwork involved to clear a shipment along with the coordination between countries is a greater challenge than measuring communications. If 40% of all IBM support communication entered the US you can have a 7501 (custom duty) form entered with a new Harmonized Tariff Schedule code (HTS) for the different labor services performed. ...

Regards, Robert

TalentLost, your concept of what you describe as (global) “tradable” services suffer from what I suppose is typographical errors.

Your suggestion that we can quantify the U.S. dollar value of electronic transmissions themselves is nonsense. You’re proposing tariffs upon the net exchange of international electronic transmissions?
Much of such transmissions are within a single global enterprise or global enterprises that are subsidiaries of what is effectively global association of enterprises. You expect them to assess the value of the services that resulted in the consequential electronic transmissions over national boundaries?

How many hours at what rate of pay is represented by a statistical analysis and consequential opinions that are transmitted electronically? You’re proposing the government become involved with assessing the monetary value of intellectual property?

I spent a good portion of my working years as a computer programmer analyst. The technology of data compression is beyond my work experience but I’m aware of its employment to reduce transmission times and costs.
Please take a day to reconsider before responding to this post. I prefer to assume you’re intelligent and simply have not fully thought this trough.

Respectfully, Supposn