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Statement Of The National Foreign Trade Council Board Of Directors On Offshore Outsourcing
Date: 2/27/2004

 

The National Foreign Trade Council Board of Directors notes the growing controversy in theUnited States over the movement of jobs offshore. The Board does not view this as a new phenomenon but rather as a continuation of a forty-year trend of global integration that has provided net benefits to the U.S. economy. What is new is that the offshore outsourcing of jobs has moved beyond the manufacturing sector into a growing variety of service sectors, particularly information technology.

The National Foreign Trade Council views this trend as an inevitable component of growing global economic integration. American companies are under increasing competitive pressure to cut costs and improve productivity, and in many cases one way to do that is to transfer some functions outside the United States. While this produces some job reductions here, it also has other, beneficial effects – more competitive companies, lower-priced goods and services for American consumers, and, to the extent offshore outsourcing is part of an overall foreign investment strategy, job creation as well.

These gains, however, are long term and diffuse while the losses tend to be short term and specific. The result is the public controversy we are now experiencing. It is the Council's position that attempting to stop or limit offshore outsourcing would be counter-productive. It would make our companies less competitive and, as a result, would ultimately cost us even more jobs.


A wiser approach is to adjust the circumstances that lead to offshore outsourcing and deal with the immediate consequences for those that are dislocated. To that end, we support a four part approach:


1) Life-long learning; adjustment assistance.

While there is substantial evidence that foreign trade and investment produce more jobs and growth here as well as elsewhere, it is no secret that the new jobs trade creates are rarely taken by the same people who have lost theirs as a result of trade.

Government policy should address the needs of two groups:

  • Those who have lost their jobs and have limited opportunities for reemployment because their relevant skills are limited and/or their communities provide few opportunities.
  • The next generation of workers – our children – who will confront a working environment that will require more sophisticated skills and more agility and flexibility than any preceding generation has confronted.

To address these needs, we support expansion of the existing trade adjustment assistance program, including covering service workers, and we urge Congress and the Administration to devote more resources to education, particularly in math, science and engineering, and training to better equip future generations with the tools they need to deal with the rapidly changing work environment.


2) Incentives to stay here.

The reasons companies move off shore are largely economic. The creation of a more business-friendly climate here in the United States could alter the calculations companies make and lead to more decisions to maintain facilities here. A number of proposals are pending in the Congress in the tax and regulatory reform areas that could be helpful. In the tax area, we favor legislation that will provide tax relief to businesses in ways that enhance their competitiveness but do not discriminate between companies that operate primarily in the U.S. and those that have substantial foreign operations. Our tax laws should not disadvantage U.S. companies competing in the international marketplace. We also support Congressional action on tort reform and class action litigation in order to gain better control of onshore companies' rapidly growing litigation costs.


3) Staying ahead.

America's strength has always been innovation – our originality coupled with our ability to run faster and stay ahead of our competition. Many of the innovations that have made America the world's technology leader began with government support, often coming from the Department of Defense. We endorse public policies that encourage innovation, including expanded government support for R&D that will create new, job-providing industries in biotechnology, nanotechnology, and other sectors we have not even contemplated. We also endorse the President's manufacturing initiative and urge full funding of the proposals contained in that plan.


4) Forward-looking US trade policy.

The U.S. remains one of the most globally competitive economies worldwide. Two central factors are behind this strength: the openness of our economy to international trade and investment and a trade policy that maintains open markets and advances open, rules-based trade in markets overseas through ongoing trade liberalization efforts. It is essential that the US continue to lead in opening markets and establishing transparent, non-discriminatory rules to govern trade and investment. To that end, we reaffirm our support for the Doha round of multilateral trade negotiations as well as for high quality bilateral and regional free trade agreements.


Taken together, we believe these approaches are an effective way to deal with offshore outsourcing constructively as an inevitable consequence of the global economic integration that has been instrumental in our country's economic growth. We urge Congress and the Administration to consider these approaches and to avoid short-sighted protectionist responses.