Total employment in the U.S. has grown dramatically as globalization has proceeded. And we need to remember that while some U.S. companies have moved jobs abroad, foreign firms have set up shop in the U.S. and hired American workers. The costs of globalization come from the fact that it is costly to shift resources from one use to another and to retrain workers as the mix of jobs changes. In the process of shifting resources, some production facilities are abandoned and some workers suffer unemployment. They do not share the gains, at least not immediately.
Globalization also increases the U.S. economy's exposure to foreign shocks.
And greater international financial linkages mean that the U.S. financial sector is more exposed to foreign financial shocks than used to be the case. Recent financial problems in Asia provide a good example. This is an important task, but it should not be an excuse for protecting particular industries in the U.S. from foreign competition. Another challenge is to ensure that workers displaced by the more intense competition that globalization allows are able to acquire new skills, to move into new industries, and sometimes even to move to new locations. Policymakers need to consider foreign as well as domestic economic conditions as they make macroeconomic policy decisions, and they also need to consider international ramifications of domestic policy decisions.