Winners vs. losers
McKinsey Quarterly has an interesting piece on the dynamics of offshoring service jobs (available via CNet). I'm not sure some of the numbers cited are correct (is the hourly wage of software developers in India 10% of the US wage? I've mostly heard higher numbers like 20-25%), but it does layout a case for the economic benefits of offshoring.
I agree with the basic thrust of the article that, in general, we benefit from free trade. However, the problem is that there are winners and losers and the gains and losses are not equally distributed. The many winners benefit just a little and the few losers stand to lose a lot. So, the losers have an incentive to stop trade. This is not a new thing - Adam Smith described this effect well in The Wealth of Nations over 200 years ago.
The way to counter that pressure, as the McKinsey article points out, is with training programs and severance packages so that the losers are compensated. However, this isn't happening. So, the pressure will build to reverse course on offshoring with the inevitable result that we all suffer. Will the Federal and state govenments get it right? I doubt it. If the job market doesn't improve, prepare for an extremely destructive round of trade restrictions.