This is the Cato Daily Podcast for Monday, January 9, 2012. I'm Caleb Brown.

The president hopes to focus some attention on what he calls insourcing but that term is as fraught with

poor understanding as the ever popular bad guy known as outsourcing. Dan

Iconson is associate director of the Cato Institute's Center for Trade Policy Studies, he comments.

First of all, it looks like the administration is using the term insourcing to refer exclusively to US companies that have seen the light and are bringing jobs back into the

United States, repatriating jobs as you say.

The term insourcing has been used by organizations around Washington and economists really to mean foreign direct

investment in the United States. So investment here that adds value and could

also create jobs in the United States. The problem with the term is

that it sort of reinforces the misconception that outsourcing is such a bad thing.

Outsourcing is really not a bad thing. Outsourcing is really not a bad thing. Outsourcing is companies avail themselves of the opportunity, particularly U.S. multinationals, to serve markets abroad through outsourcing. It's easier to serve foreign markets by selling goods and services abroad by setting up affiliates abroad than it is to export.

So outsourcing has been associated with job loss, job degradation in the United States.

And in fact, and the assertion has been that U.S. multinationals are outsourcing and then using those export platforms to cater to

demand in the United States when in fact 90 percent of U.S. outsourced investment is used to serve demand abroad. Only about 10% of it comes back.

So outsourcing is not a bad thing, but Americans think it's a bad thing. The use of the term

insourcing reinforces that misconception. So we need to be clear about

what we're describing here. And a related issue outsourcing that is companies that

use foreign affiliates in order to do some work.

Quite often, very little value is added in those,

the processes that are done overseas?

This is true.

A lot of it is, you know, sales follow-up.

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