Is offshoring a big deal, requiring us to significantly enhance safety nets, rethink the future of education, and move upscale in the ladder of comparative advantage, as Blinder thinks? Or is there nothing new under the sun, as Bhagwati believes? The two held a debate this afternoon at Harvard, along with a supporting cast of four others (Richard Freeman, Doug Irwin, Lori Kletzer, and Robert Lawrence).
I thought Blinder made a good case, although I would have liked to see more on the distributional consequences of offshoring. The optimistic scenario is that offshoring will turn out to be similar to the intra-industry trade of the past (in manufacturing, and among rich countries), where we had a huge explosion of trade without sharp distributional changes. The tasks being traded were too similar. Maybe it will be no different with offshoring based on IT.
As for Bhagwati, once you stripped away his anecdotes and witticisms, what you were left with was--well, honestly, I am not sure what you had left . Bhagwati's main worry seems to be that Blinder's concerns will empower protectionists. As Richard Freeman put it in his comments, he is fighting the last war, which doesn't exactly move us forward. Lawrence (and to some extent Irwin) made the counter-arguments much more effectively. They both argued that the adjustments will be slower and less momentous.
But the most important point, I felt, was made by Lori Kletzer. She argued powerfully that we had to get real about doing something about the distributional and adjustment costs of trade regardless of whether IT-based offshoring is as big a deal as Blinder claims. Globalization is in trouble as it is. And as she also put it, if you are thinking like this, it does not necessarily mean that you are anti-trade.