Emphasising that protectionism would not solve the problem of loss of US manufacturing jobs, a new market analysis has said the solution lay in stimulating domestic demand, cutting budget deficit and pushing countries with artificially low currencies against the dollar to appreciate their currencies. "The take-away protectionism won't address the causes of the loss of US manufacturing jobs in recent years," according to a report in the latest issue of McKinsey Quarterly."Research shows that only 11% of job losses in manufacturing could be attributed to trade, and even in this instance the real culprit was falling exports, not rising imports," it said. Offshoring in the services sector destroyed even fewer jobs. The real causes were weak domestic demand, rapid productivity growth, and the dollar's strength, it added.The enormous US trade deficit has caused many observers to conclude that international trade, particularly a massive flood of imported goods from China and of services from India, was to blame for the loss of jobs in 2000. Figures suggest that the number of jobs transferred to India was tiny relative to employment in the US service sector. "One powerful indicator of this reality is the relative health of employment in computer services during recent years given the weakness of domestic US demand for technology services," the report said. Total employment in computer-related service occupations dropped only modestly from 1999 to 2003. Moreover, it followed a huge technology boom in the late 1990s culminating in the surge of employment and investment needed to resolve the Y2K problem.
