Readthe case study “Shipping Jobs Overseas? Offshoring and Unemployment in the United States” on p. 197 in Chapter 8 of International Economics Theory and Practice.Critics of cross-border trade and investment activities often referred to as globalization in the United States, labor unions in particular, have forcefully argued that it leads to the outsourcing of well-paid manufacturing jobs overseas, creating unemployment at home that undermines economic growth and improved standards of living as the case purports. Proponents have countered by saying that globalization opens new markets for US companies akin to the Product Life Cycle theory among others.Argue in a minimum of 1,050 words, using this case study as the basis, either as an opponent or proponent of cross-border trade and investment activities.Cite a minimum of 3 peer-reviewed references from the University Library.Formatassignment consistent with APA guidelines.Click the Assignment Files tab to submit your assignment.CASE STUDY: Shipping Jobs Overseas? Offshoring and Unemployment in the United States âWe design them here, but the labor is cheaper in Hell. â When a company offshores part of its production chain abroad, it is then importing an intermediategood or service. For example, a company may import a part, component, or even an entire assembledproduct; or it may import business services by using accountants and/or call centers located abroad. Aswe discuss in the next section, the overall effects of trade in such intermediates are very similar to thetrade in final goods that we have focused on up to now. Yet, when it comes to the effects of offshoringon employment, there is one additional dimension: the lower price of the imported intermediates notonly benefits a firmâs owners and their consumers, it also benefits the firmâs remaining workersâbecause the lower price induces firms to increase their purchases of intermediates, which improves theproductivity of the remaining workers.28This productivity effect also induces the offshoring firm to hire additional workers dedicated to theremaining parts of the production process. In many cases, the overall employment effect for theoffshoring firm is positive: Several studies of U.S. multinationals have found that when they expand theiroverseas employment, they concurrently also expand their U.S. employment.2928This additional dimension of offshoring, and its effects for low-skilled workers, is emphasized in aninfluential new paper. See Gene M. Grossman and Esteban Rossi-Hansberg. âThe Rise of Offshoring: ItâsNot Wine for Cloth Anymore.â The New Economic Geography: Effects and Policy Implications, 2006, pp.59â102. 29See Mihir Desai, C. Fritz Foley, and James R Hines. âDomestic Effects of the Foreign Activities of USMultinationals.â American Economic Journal: Economic Policy, (January 2009).What about foreign outsourcers who no longer maintain ownership of their foreign suppliers? A recentstudy covering the entire U.S. manufacturing sector found that overall, increases in offshoring from 2001â2007 did have a negative impact on U.S. manufacturing employment.30 However, those lossesconnected to offshoring accounted for only a tiny fraction (2.3%) of the total employment losses duringthat period. Those total employment losses were indeed substantial: The decrease in U.S. manufacturingemployment totaled 2 million (manufacturing employment has been steadily decreasing over the past30 years); but offshoring played a very minor role in this trend.This study also found that the productivity effect for the remaining workers played a very important role:The cost benefits from offshoring lead firms to substantially expand their U.S. operations and hireadditional workers. Non-production workers benefited most from this increased employment becausethey were much less likely to directly suffer from the displacement effect of offshoring in the first place.However, production workers also benefited from this expansion effect tied to offshoring: The initialdisplacement unemployment for those production workers was cut in half by this increased employmentresponse.Another channel mitigating the worker displacement effects of offshoring is thatâjust as with trade infinal goodsâintermediate goods and services are traded in both directions. In the United States, thepopular press and many politicians single-out the employment losses associated with offshoring.31 Ofparticular concern are the losses of service jobs to offshoring, given the recent technological trends thathave vastly expanded the scope of âoffshorableââ business services (see the discussion in Chapter 2). Thishas lead to headlines such as âMore U.S. service jobs go overseas; Offshoring is expected to growâ in theUSA Today.32 Yet, offshoring in one country is inshoring in another country: That is, for every importtransaction of an intermediate good or service, there is a corresponding export transaction for thecountry hosting the offshored part of the production process. And it turns out that for the United States,this inshoring of service jobs (exports of intermediate services) is growing even faster than the offshoringof service jobs out of the United States (imports of intermediate services), leading to a surplus; and onethat has been growing over time. Figure 8-11 plots all U.S. cross-border trade over time in servicecategories related to offshoring (financial, insurance, telecommunications, and business services; that is,all traded services other than tourism, transportation, and royalties).33 Clearly, there is nothing ominousin the time trend of trade in business services for overall U.S. employment.30See Greg C. Wright, âRevisiting the Employment Impact of Offshoring.â University of Essex, mimeo,2013.31Public Citizen reported a sharp increase in political ads condemning offshoring in the 2012congressional elections (it tracked 90 ads condemning offshoring in campaigns spanning 30 states).32USA Today, December 7, 2012. 33Those trade flows also include transactions by multinationals withtheir affiliates abroad. The net balance of exports over imports is positive for the United States, bothamong multinational transactions, as well as for transactions between unaffiliated parties.Given all these facts on the impact of offshoring for U.S. employment, the view that offshoring simplyamounts to âshipping jobs overseasâ is misleading. True, when a firm based in the United States moves acall center to India, or moves the assembly of its product to China, then some specific jobs that used tobe performed in the United States are now performed in India or China. However, the evidence showsthat in terms of overall employment, those jobs are replaced by other ones in the United States: somerelated to the expansion effect at the offshoring firms and others by firms providing intermediate goodsand services to firms located abroad (inshoring). FIGURE 8-11 U.S. International Trade in Business Services (all traded services excluding tourism,transportation, and royalties and license fees), 1986â2011 U.S. service offshoring is captured by U.S. imports of business services. Although service offshoring hasdramatically increased over the past decade, U.S. inshoring (exports of business services) has growneven faster. The net balance is positive and has also substantially increased over the past decade. Source:U.S. Bureau of Economic Analysis.Yet, just as with other forms of trade, trade in intermediates has substantial consequences for thedistribution of income. Those call center or manufacturing workers displaced by offshoring are often notthe ones who are hired by the expanding firms. Their plight is not made any easier by the gains thataccrue to other workers. We discuss these overall welfare consequences in the next section.