Little Red Wagon Outsourced

Outsourcing - the trend of businesses cutting costs by shipping U.S. jobs overseas - continues to be a red hot issue in Campaign 2004. As Treasury Secretary John Snow outlined his views in a Tuesday newspaper interview on creating jobs in the U.S., word spread that Radio Flyers will soon be made in China.

Radio Flyer Inc., maker of the little red wagon that has been symbolic of childhood for generations of American children, said it will keep its headquarters and distribution business in Chicago but decided the Chicago plant where the metal wagons are built is too expensive to maintain. With the plant closing later this year, Radio Flyer will lay off nearly half its 90 employees.

Radio Flyer's tricycles, scooters and most of its other products are already made in China. A Wisconsin company makes its plastic wagons and will continue to do so.

Chief executive Robert Pasin says he doesn't believe the latest shift to China will damage customer loyalty.

"We're still a Chicago company," said Pasin, whose grandfather founded the 87-year-old company. "We're still a Chicago brand."

The announcement came Tuesday as President Bush, in Wisconsin, and Democratic presidential candidate Sen. John Kerry, in California, outlined their separate visions for the economy and Mr. Bush's Treasury Secretary promoted the administration's view on free trade and the creation of jobs in the U.S.

Outsourcing, said Snow, is an integral part of the global trading system.

Over 3 million manufacturing jobs have been lost in the U.S. since the middle of the year 2000.

Asked in an interview with The Cincinnati Enquirer whether he thought outsourcing of jobs to other countries made the U.S. economy strong, Snow replied, "It's one aspect of trade and there can't be any doubt about the fact that trade makes... America strong."

"If we can keep the American economy strong and growing and expanding, we'll create lots of jobs. We always have," said Snow, seeking to address fears that many lost manufacturing jobs will never come back.

Snow's remarks are similar to remarks N. Gregory Mankiw, the president's chief economist, made earlier this year in which he said the outsourcing of jobs would probably be a long-term benefit for the United States. Mankiw later apologized for comments he said were misinterpreted and made him appear to be insensitive to the issue of job losses.

Both Mr. Bush and Snow insist that the administration's policy of pushing for free trade agreements as a way to tear down barriers to American goods around the world is the best approach to the problem.

However, they are having to make that argument at a time when worries about outsourcing have grown along with the country's trade deficit, which last year hit an all-time high of $541.8 billion amid continued plant closing announcements.

Some economists, who as a group are big supporters of free trade, say the administration appears to be bungling the politics of trade in a period when many jobs have been lost and there are now worries that high-paid white-collar workers could be vulnerable to having their jobs sent abroad as well.

"There is no difference from an economic standpoint from outsourcing manufacturing jobs, which we have been doing for 20 years, and outsourcing white collar service jobs except college-educated workers whine louder when they lose their jobs," says David Wyss, chief economist at Standard & Poor's in New York.

The Bush administration got some support on its point of view Tuesday in a report issued by the Information Technology Association of America. The trade group said that while nearly three percent of tech jobs in the U.S. have migrated overseas, the trend will ultimately lower inflation, create jobs and boost productivity in the United States.

A recent Associated Press poll showed that the economy is the most important issue to voters and 53 percent of those surveyed think Kerry is best suited to create jobs.

Kerry last week proposed a major change in corporate tax policy that would eliminate a $12 billion annual benefit that U.S. companies receive by being able to defer taxes on income earned from their overseas operations. He referred to "Benedict Arnold" companies that get tax breaks for moving jobs overseas.

Kerry said he wants Congress to halt the tax deferral option for companies producing for sales back into the U.S. market and use the savings to lower the corporate income tax rate from 35 percent to 33.25 percent.

Critics have questioned how much impact Kerry's proposal would have in halting job losses, given that other factors including large wage discrepancies between the United States and many other countries play a role in decisions to move production abroad.