In the 2004 US Presidential campaign, outsourcing was a contentious issue. Even though it doesn't dominate the news as much today, economists debate its likely effects in the future. In this piece Richard Baldwin gives a useful perspective on outsourcing that recognizes two different perspectives on trade that we encounter in Chapter 4 and 5. If trade in identical products is determined by factor endowments, then the US faces the potential to outsource more service jobs as telecommunications capabilities increase. From that perspective, maybe labor market adjustment problems will get worse, a position suggested by Princeton Economist Alan Blinder. Baldwin suggests a contrary interpretation, based on trade in differentiated services. The US may import more of some services, but at the same time is likely to export more of other services. From this perspective, the opportunity for more outsourcing and more insourcing may simply continue the trends observed thus far.
Source: Author’s manipulation of data from Amiti and Wei (2005), originally from IMF sources on trade in services.