employees in the US need to find new jobs producing something else. If there is no expectation that any production of goods will take place in the US rather it will take place in China (subsitute Mich. for US and Tenn. for China for the auto industry) all the supporting building and services that support those employees have to either move (possible in the US, not with regards to China) to the new production location, or they have to be retrained and hired by someone else who can meet some new, undefined demand (see Google). The cost of losing production facilities and the switching costs are expensive and depend on finding some new demand (assuming everything else is in equilibrium) or some people have to accept lower purchasing power. Sorry, this somehow got lost in the pile of comments i get to comment on. Let me know if I've missed others. "That implies that "at full employment" everyone is producing something that some other person wants to buy." Some are producing public goods and services and paid by govt. so they are not being sold in the market place. The rest are producing private goods and services that are being sold to willing buyers. "I know cars are a bad example, but useful. There is a finite demand for cars at a certain price. OK If the demand is filled by China, then all those employees in the US need to find new jobs producing something else. OK If there