Most important piece of the following post?
http://www.zompist.com/jacobs.htmlI'm not an economist, but I've gotten the impression from reading lots of articles like this, that it is net negative overall, as in, world wide. But I have never, ever seen a source claim that it is net negative on a national or local level outside of very, very narrowly defined parameters. I have, however, read academic papers that state the opposite.
Let's use NAFTA as an example as the canonical example. A corporation that makes tires moves to Mexico. As a result, tires for everyone in America are now half price, people who had no jobs in Mexico before now have jobs, which helps build out Mexican infrastructure, 20k people across the US no no longer have jobs; but the US economy is healthy, so those people will hopefully be okay and the US economy will likely not even notice such a slight change in labor demand.
Net result: 320 million people have cheaper tires in the US, Mexicans get better jobs, infrastructure and technology, 20k us lose jobs, the corporation saves money, and hopefully reinvests in something to stay competitive.
Using the above scenario, it is easy to see why any legislation against this behavior is seen as damaging and a net loss.
Lets further assume, that the US passes legislation that trailer hitch manufacturers have to pay an import tarriff from Mexico. Using the above scenario, an economist would say not only are you damaging what should be a net positive economic change, and artifically manipulating prices, but chances are Mexico will pass a law adding a tarrif to rubber imports, which will hurt your tire corporation in retaliation. And now the whole thing starts falling apart, with economic losses.
The counter arguments start with the following:
1) The above scenario assumes that those 20k people can find new jobs. If they can't, the math now becomes something along the lines of: 20000 people * 30000 $/year income >?2) Before NAFTA, let's say there were 6 tire making companies in the US, one in detroit, one in newark, etc. Then one of them moves to Mexico City, and helps build up the local technical knowledge and infrastructure needs to support that industry. When the next 5 companies choose to move to Mexico, they will have the choice between also moving to Mexico city, or spending the money to do that same work elsewhere. So you may very well end up with 6 companies operating out of mexico city. While these firms will now be competing against each other, what you've also done, now is replace all of the economies that used to support those industries across the US, with one centralized economy around Mexico City. That's going to be a massive decrease in competition, job growth, etc, overall. Read this for more information: http://www.zompist.com/jacobs.html