Of aerospace offshoring and "free" trade

A recent report about India's plan to repeat its offshoring success in the aerospace industry raises some thorny questions about governments and "free" trade.

According to Reuters, India's state-run aerospace industry "aims to take a page out of the IT sector's book by promoting itself as a potential offshoring base for foreign companies." State-owned Hindustan Aeronautics already makes aircraft doors for Airbus, part of Europe's EADS, and has signed a technical agreement with Lockheed Martin to share data on Lockheed's P-3 Orion surveillance aircraft, the story said. India is considering buying F-16 fighter jets from Lockheed Martin, according to Reuters.

Although Lockheed employees in the United States may benefit from that deal, it seems clear that the U.S. aerospace industry could be hit with more layoffs if offshoring becomes commonplace. This week, Indian outsourcer HCL Technologies said it signed a software development agreement with Boeing for the jet maker's 787 Dreamliner program.

The U.S. government under President Bush has taken a fairly hands-off stance about trade. Some other countries involved in the offshoring trend, though, have more active economic-development policies, such as generous tax breaks. China and other countries also have been accused of managing their currency to make exports cheaper.

What's more, Nobel prize-winning economist Paul Samuelson has argued that that free trade isn't always peachy for all.

With the U.S. federal government largely sticking with a laissez-fair philosophy, some states are taking a different tack. California voters, for example, approved a measure last year to sell $3 billion worth of bonds for a stem cell research initiative. And now, Michigan Gov. Jennifer Granholm plans to ask voters to approve a $2 billion bond issue for turning the state into a high-tech center.

Government interventions in the economy don't always make sense. But if these latest state efforts pay off in the form of healthier tech industries, good jobs and improvements to daily life, it would indicate that the U.S. public sector has an important role to play in the realm of global trade--which already is far from "free."