And so it begins. . .the war over jobs

We've been having some discussion, both on and off the blog, about the short-sighted notion of trying to "save" jobs for locals by discriminating against foreigners. Senators Grassley, Durbin, and Sanders put the toxic H-1B visa restriction in the TARP renewal, and now we're starting to see the fruits of this bad policy.

• Protests and wildcat strikes in Britain and Ireland over the employment of foreign workers in the construction and energy sectors.
• Bank of America has withdrawn formal job offers made to MBAs in the United States
• The government of South Korea is cutting work permits for foreigners by 66%.
• Mexico retaliates on trucking restrictions with tariffs.
  

I'm fairly confident that protectionist moves like this make the nativists happy. But the thing to remember is that the United States has much more to lose from a trade (or jobs) war that most other countries. Our firms are much more global than those of virtually any other country (with the exceptions of the U.K. and the Netherlands). Most large firms (Fortune 500) earn at least a third or their revenues in international markets. For many, the figure is more than two-thirds.

If India restricts U.S. presence (sales by firms, employment of US citizens), we have much more to lose than most trading partners. This is a classic prisoners' dilemma. It's tempting to think one country can impose restrictions in the interest of "fairness" or some other excuse. But other countries retaliate. And the downward spiral begins.

While the details differ, this is all reminiscent of the Smoot-HawleyAct -- which led to plunging global trade in the 1930s and made the Great Depression much much worse.

I hope we can pull back in time. But I'm starting to doubt it. If and when unemployment goes to 11 - 12% because large, global firms are slammed in foreign markets, I hope the nativists look back and realize what they've wrought. But I doubt they will. They'll just identify and mobilize against another convenient scapegoat.