Politicians, Vendors Square Off Over Outsourcing

The political debate over offshore outsourcing is growing more intense as the November elections edge closer.

Democratic presidential candidate John Kerry has unveiled a plan that would end some investment tax credits for companies that send jobs overseas. Meanwhile, a group representing leading technology-industry CEOs released a position paper arguing that the computer industry needs unfettered access to global labor markets.

Kerry presented his "workers' bill of rights" plan while stumping in Bedford, N.H., on Jan. 7. He charged that current polices give companies "special treatment while they ship American jobs overseas."

A paper released the same day by the Computer Systems Policy Project, a lobbying group that includes Dell's Michael Dell, Hewlett-Packard's Carly Fiorina, Intel's Craig Barrett, and IBM's Sam Palmisano, argues that legislative efforts to limit offshore outsourcing would hurt the U.S. economy. "With the winds of protectionism blowing in Washington, it seemed timely to us to reach out to policy makers on both sides," says the group's executive director, Bruce Mehlman, who previously served as assistant secretary of commerce for technology policy in the Bush administration.

The group's paper claims that 60% of revenue for U.S. technology companies originates outside the country. "Any trade barriers created by the United States in an attempt to avoid global competition could lead to retaliation from our trading partners and even an all-out trade war," the group warns.Instead of enacting protectionist measures, the government should increase investment in research and development at the university level and ensure that America's high schools churn out students prepared for advanced training, the group argues. "As the U.S. workforce ages and the economy grows, there will be many good jobs in many industries. Who will land these jobs? Not the millions of American students who graduate from high school without basic reading, writing, and mathematics skills," the report says.

Other Democratic presidential candidates have weighed in on the broader issue of job creation. Retired Gen. Wesley Clark says U.S. companies should be given tax credits as an incentive to keep jobs at home. Connecticut Sen. Joe Lieberman says he'll push to open foreign markets "for all services that can be delivered via E-commerce," to level the playing field between U.S. service companies and foreign competitors.

The Bush administration favors tax incentives that would stimulate private-sector research and development to promote job growth in emerging areas like nanotechnology, according to deputy assistant secretary of commerce Chris Israel, who spoke on the subject late last year at a lunch in New York City.

Legislators in Indiana, Michigan, and New Jersey already are trying to limit offshore outsourcing. Indiana last month pulled an outsourcing contract from Indian firm Tata Consultancy Services after Republican state Sen. Jeff Drozda raised questions about the deal.

Despite the impact that offshore outsourcing is having on job opportunities for U.S. technology workers, some financial analysts believe legislative attempts to restrict the practice will backfire. Says Martin Wolf of Martin Wolf Securities, "American service providers would have higher costs and less-flexible service than their foreign competitors, would likely lose business as a result and then be forced to lay off workers anyway."