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Policy Brief 08-1

"Fear" and Offshoring: The Scope and Potential Impact of Imports and Exports of Services

by J. Bradford Jensen, Peterson Institute for International Economics
and Lori G. Kletzer, Peterson Institute for International Economics

January 2008


Commentators, including Princeton University’s Alan Blinder, estimate 40 million jobs could be at risk of being offshored over the next 20 years and suggest American workers should specialize in services that can be delivered face-to-face. In contrast, Jensen and Kletzer expect the process of globalization in services will proceed much as it has in manufacturing: They estimate only 15–20 million jobs are at risk of being offshored to low-wage, labor-abundant countries; approximately 40 percent of these jobs will be in the manufacturing sector, long considered “at risk.”

They expect these losses to be offset by job gains in high-wage activities from services exporting. The United States will retain its comparative advantage in high-skill, high-wage production and increase these activities in tradable service industries as trade barriers diminish. While the loss of low-wage activities that are offshored and the gain from high-wage service exports will cause dislocation, the globalization of services production is likely to have productivity-enhancing effects similar to the impact of globalization in the manufacturing sector, offering significant potential to improve living standards in the United States and around the world.

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RELATED LINKS

Book: Global Trade in Services: Fear, Facts, and Offshoring September 2011

Policy Brief 12-10: Framework for the International Services Agreement April 2012

Book: Accelerating the Globalization of America: The Role for Information Technology June 2006

Working Paper 05-9: Tradable Services: Understanding the Scope and Impact of Services Outsourcing September 2005

Paper: This is Bangalore Calling: Hang Up or Speed Dial? What Technology-Enable International Trade in Services Means for the US Economy January 15, 2005

Paper: Outsourcing--Stains on the White Collar? February 2004

Policy Brief 03-11: Globalization of IT Services and White Collar Jobs: The Next Wave of Productivity Growth December 2003