Les Jones

Economics > More Bush Protectionism

Bush administration entertains protectionism, this time for the sock industry, which is getting creamed by Chinese imports.

Question: can the U.S. sock industry reform itself and compete against lower-cost Chinese imports? Probably not. It's likely China has a comparative advantage in sock-making that the U.S. can't overcome. That's why most clothing and textile production has moved overseas.

The link above explains comparative advantage, but here's an example that's stuck with me. Imagine a lawyer and her assistant. The lawyer knows how to answer the phone and type. In fact, she's better and more efficient at both than her assistant (in other words, she has an absolute advantage in both), but the difference in their typing skills isn't that huge. In contrast, she's much, much better at being a lawyer than her assistant, so her comparative advantage is in her legal skills, not her typing skills. By hiring someone else to answer phones and type she can take advantage of her legal skills to make more money.

The comparative advantage principle argues that an advanced economy like the U.S. should farm out low-skilled jobs to countries with cheap labor and re-direct its labor force to jobs that other countries can't do more efficiently. At some point our labor will be so well-apportioned that it won't make sense to let any more jobs go overseas, but it's doubtful we've reached that point yet.