Burke Perpetuates the Corporate Myth that Outsourcing is a Necessary Evil

Last week, yet another Department of Labor "Trade Adjustment Assistance" (TAA) certification was issued, following an application by laid-off Trek workers who said that "production has been shifted to China."  This follows an unmistakable trend for Trek:   between 1998 and 2011, Trek went from making 80% of their bikes in the United States to making less than one percent here.

In response to the TAA certification, Mary Burke's campaign spokesperson Joe Zapecki repeated the campaign's assertion that Trek's outsourcing was based purely on necessity, saying that U.S. trade policy needed to be changed to "level the playing field between the U.S. and its trading partners so that more family supporting manufacturing jobs are created right here in Wisconsin."  

Zapecki's comments come a few days after Burke said on the "Devil's Advocates" that Trek does "as much manufacturing as it can here, unfortunately the bike business is a bit like TVs-- go try and find a television made here in the U.S."

While it is true that bad trade deals have forced some U.S. corporations into outsourcing because their competitors were using outsourcing to sell products for less than it costs to produce in the United States, there is no evidence that this occurred at Trek. 

In fact, between 1998 and 2011, Trek's sales tripled and they became the world's second largest manufacturer of bicycles and the dominant leader in the so-called "bike shop" sector.  However, during the same time, Trek’s bike prices remained approximately the same. In other words, there wasn't the "price pressure" to outsource as there is in some sectors.  




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Trek is far from alone:  Most of America's corporations have embraced outsourcing in one form or another during the last couple of decades.  And, like Trek, most corporations outsource not out of necessity, but to boost their profit margins:  The New York Times reported recently that "conservative and liberal economists agree" that "Corporate America’s push to outsource jobs — whether call-center jobs to India or factory jobs to China — has fattened corporate earnings, while holding down wages at home." 

The correlation between outsourcing and ballooning U.S. corporate profits is striking, as the chart to the left demonstrates. (Chart created using data from Federal Reserve Bank of St. Louis and Global Economic Intersection.) 

Dr. Paul Craig Roberts, Assistant Secretary of the Treasury under Ronald Reagan, sees the present corporate profits as being fueled largely by outsourcing, but warns that it is "fools gold for companies," saying, "Corporate America’s short-term mentality, stemming from bonuses tied to quarterly results, is causing US companies to lose not only their best employees-their human capital-but also the consumers who buy their products. Employees displaced by foreigners and left unemployed or in lower paid work have a reduced presence in the consumer market."

In other words, if you're an American bicycle maker and outsource all your labor, fewer and fewer people will be able to buy your bikes. 

 

 

 

 

Published

November 19, 2013 - 3:44pm

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