Market incentives limit policy change

Imagine you own a firm that wants to reduce its labor costs so you’re considering relocating to a low-cost jurisdiction. You know that the Constitution limits ex post facto laws – that you can’t be punished individually after the fact. But you’re concerned that the legislature might pass a law that punish future offshoring decisions. When should you leave?

But every other similarly-positioned company is also considering their options. What happens if you all leave?

The legislature would then face the problem of having to punish all companies offshoring work – not just those that left after it announced it was considering this trade law. 

Take a moment next time you’re at the store and “Made in …” labels. And consider how many items are “Assembled in the US” from foreign-sourced parts. And that our membership in the WTO limits our options. 

Modern supply chain management and logistics were invented to make these types of networked production arrangements run smoothly. Most credible business schools know that these are key components of a modern MBA student’s education. Deloitte and other consulting firms employ specialists to perfect these systems. 

What’s the chance we can put this particular genie back in the bottle?