US R&D Sharing in China. Can the American Labor Force Benefit? A Public Choice View of Trade and Labor Policy Using Case Study

Little has been said by business and government, and little is known by the American workforce concerning U.S. R&D sharing in China, from which a situation of moral hazard, I argue, exists. Recent economic reports suggest that full employment cannot be reached much before 2020. US R&D Sharing in China is a rather new phenomenon in foreign trade, with the engine of job creation in MNCs shifted overseas. What impact may this have on America? R&D is the genesis of high-paying jobs in the product life-cycle view and in corporate strategic planning. If ideas and industry from American companies are germinated in China, can the payoff to America include a significant number of well-paying jobs? While the mission of a firm in a free market system is not to provide employment, but to attain profit, there is inherent paradox in R&D sharing with China. A significant number of U.S. MNCs sharing research and development are defense contractors who owe their existence to the American taxpayer. Yet at issue is not just the correctness of current trade policy, but the multiple risks that R&D sharing presents. Besides the risk of quality jobs being lost, R&D sharing transfers a vital production factor that China lacks to gain comparative advantage with the United States. This is daunting in the protracted low-growth period in which America currently finds itself. U.S. MNCs contribute disproportionally to America's R&D picture and to domestic economic input. U.S. R&D sharing with China cannot be reversed. The greater issue is whether U.S. MNCs will balance overseas R&D activity with similar domestic activity for significant job creation. Case study does not suggest this. Stakeholder Analysis indicates that government incentives toward MNCs are necessary for job creation. Spatial bargaining shows the possibility that some policy change could be successful. Without policy change, however, current laisser faire suggests multiple risks to the American labor force. Perhaps ironically, we can learn much from China, and greater openness and cooperation could lead to success.