[FRIAM] IHT: Technology firms defend moving U.S. jobs overseas

[Owen Densmore]

On Jan 7, 2004, at 8:17 AM, Owen Densmore wrote:
> Well, apparently sending jobs off-shore *is* going to be an election
> year issue after all:
>   http://www.iht.com/cgi-bin/generic.cgi?template=articleprint.tmplh
>
> I presume this is just part of the recent economic rebound being
> job-free, thus getting lots of focus.


Well, the link did not work after I tried it later, so here's the text
itself.  I append a second article also on similar topics.

Owen Densmore          908 Camino Santander       Santa Fe, NM 87505
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Technology firms defend moving U.S. jobs overseas
TED BRIDIS, AP Technology Writer
Wednesday, January 7, 2004

(01-07) 10:10 PST WASHINGTON (AP) --

Worried about possible government reaction to the movement of U.S. 
technology jobs overseas, leading American computer companies are 
defending recent shifts in employment to Asia and elsewhere as 
necessary for future profits and warning policy makers against 
restrictions.

"There is no job that is America's God-given right anymore," said Carly 
Fiorina, chief executive for Hewlett-Packard Co. "We have to compete 
for jobs."

In a report released Wednesday, the companies said government efforts 
to preserve American jobs through limits on overseas trade would 
backfire and "could lead to retaliation from our trading partners and 
even an all-out trade war."

"Countries that resort to protectionism end up hampering innovation and 
crippling their industries, which leads to lower economic growth and 
ultimately higher unemployment," said the Washington-based Computer 
Systems Policy Project, whose member companies include Intel Corp., 
IBM, Dell Inc. and Hewlett-Packard.

Intel chief executive Craig Barrett said the United States "now has to 
compete for every job going forward. That has not been on the table 
before. It had been assumed we had a lock on white-collar jobs and 
high-tech jobs. That is no longer the case."

Barrett complained about federal agriculture subsidies he said were 
worth tens of billions of dollars while government investments in 
physical sciences was a relatively low $5 billion. "I can't understand 
why we continue to pour resources into the industries of the 19th 
century," Barrett said.

The effort by the technology industry represents an early response to 
their growing concerns that U.S. lawmakers may clamp down on the 
practice, known as "offshoring," especially during an election year. 
Already, some Democratic candidates have criticized the practice.

Democratic front-runner Howard Dean said during a debate last month 
that America needs a president "who doesn't think that big corporations 
who get tax cuts ought to be able to move their headquarters to Bermuda 
and their jobs offshore."

Sen. John Kerry, D-Mass., introduced a bill in November requiring 
service representatives to disclose their physical location each time a 
customer calls to make a purchase, inquire about a transaction or ask 
for technical support. The proposal targets the increasingly popular 
decisions by companies to move their call centers overseas to 
capitalize on low labor costs.

A Commerce Department report last month said increasing numbers of 
technology jobs are moving from the United States to Canada, India, 
Ireland, Israel, the Philippines and China -- and predicted that "many 
U.S. companies that are not already offshoring are planning to do so in 
the near future."

The subject has been the focus of several congressional hearings, and 
some lawmakers have asked the General Accounting Office for a study on 
the economic implications of moving technology jobs offshore.

The technology group argued in its new report that moving jobs to 
countries such as China or India -- where labor costs are cheaper -- 
helps companies more readily break into foreign markets and hire 
skilled and creative employees in countries where students perform far 
better than U.S. students in math and science.

"Americans who think that foreign workers are no match for U.S. workers 
in knowledge, skills and creativity are mistaken," the trade group's 
report said.

Even as technology companies lobby against limits on offshore 
employment, they are urging the Bush administration to approve new tax 
credits on research and development spending, spend more on university 
research on physical science and adjust tax depreciation schedules for 
technology purchases. They said they also want improvements in 
education, especially in elementaries through high schools.

A vocal critic of technology companies moving jobs overseas, Marcus 
Courtney of Seattle, dismissed the latest report. "This is not a recipe 
for job creation in this country," said Courtney, president of the 
Washington Alliance of Technology Workers. "This is a recipe for 
corporate greed. They're lining up at the public trough to slash their 
labor costs."






Exporting jobs is not free trade
Rethinking protectionism
By Charles Schumer and Paul Craig Roberts (NYT)
Wednesday, January 7, 2004


NEW YORK: I was brought up, like most Englishmen, to respect free trade 
not only as an economic doctrine which a rational and instructed person 
could not doubt but almost as a part of the moral law," wrote John 
Maynard Keynes in 1933. And indeed, to this day, nothing gets an 
economist's blood boiling more quickly than a challenge to the doctrine 
of free trade.

Yet in that essay of 70 years ago, Keynes himself was beginning to 
question some of the assumptions supporting free trade. The question 
today is whether the case for free trade made two centuries ago is 
undermined by the changes now evident in the modern, global economy.

Two recent examples illustrate this concern. Over the next three years, 
a major New York securities firm plans to replace its team of 800 
American software engineers, who each earns about $150,000 per year, 
with an equally competent team in India earning an average of only 
$20,000.

Second, within five years the number of radiologists in the United 
States is expected to decline significantly because MRI data can be 
sent over the Internet to Asian radiologists capable of diagnosing the 
problem at a small fraction of the cost.

These anecdotes suggest a seismic shift in the world economy brought on 
by three major developments. First, new political stability is allowing 
capital and technology to flow far more freely around the world. 
Second, strong educational systems are producing tens of millions of 
intelligent, motivated workers in the developing world, particularly in 
India and China, who are as capable as the most highly educated workers 
in the developed world but available to work at a tiny fraction of the 
cost. Last, inexpensive, high-bandwidth communications make it feasible 
for large work forces to be located and effectively managed anywhere.

We are concerned that the United States may be entering a new economic 
era in which American workers will face direct global competition at 
almost every job level - from the machinist to the software engineer to 
the Wall Street analyst.

Any worker whose job does not require daily face-to-face interaction is 
now in jeopardy of being replaced by a lower-paid, equally skilled 
worker thousands of miles away. American jobs are being lost not to 
competition from foreign companies, but to multinational corporations, 
often with American roots, that are cutting costs by shifting 
operations to low-wage countries.

Most economists want to view these changes through the classic prism of 
"free trade," and they label any challenge as protectionism. But these 
new developments call into question some of the key assumptions 
supporting the doctrine of free trade.

The case for free trade is based on the British economist David 
Ricardo's principle of "comparative advantage" - the idea that each 
nation should specialize in what it does best and trade with others for 
other needs. If each country focused on its comparative advantage, 
productivity would be highest and every nation would share part of a 
bigger global economic pie.

However, when Ricardo said that free trade would produce shared gains 
for all nations, he assumed that the resources used to produce goods - 
what he called the "factors of production" - would not be easily moved 
over international borders.

Comparative advantage is undermined if the factors of production can 
relocate to wherever they are most productive: in today's case, to a 
relatively few countries with abundant cheap labor. In this situation, 
there are no longer shared gains - some countries win and others lose.

When Ricardo proposed his theory in the early 1800's, major factors of 
production - soil, climate, geography and even most workers - could not 
be moved to other countries. But today's vital factors of production - 
capital, technology and ideas - can be moved around the world at the 
push of a button. They are as easy to export as cars.

This is a very different world than Ricardo envisioned. When American 
companies replace domestic employees with lower-cost foreign workers in 
order to sell more cheaply in home markets, it seems hard to argue that 
this is the way free trade is supposed to work. To call America's 
economic recovery "jobless" is inaccurate. Lots of new jobs are being 
created, just not in the United States.

In the past, we have supported free trade policies. But if the case for 
free trade is undermined by changes in the global economy, American 
policies should reflect the new realities.

While some economists and elected officials suggest that all America 
needs is a robust retraining effort for laid-off workers, we do not 
believe retraining alone is an answer, because almost the entire range 
of "knowledge jobs" can be done overseas.

Likewise, we do not believe that offering tax incentives to companies 
that keep American jobs at home can compensate for the enormous wage 
differentials driving jobs offshore.

America's trade agreements need to reflect the new reality. The first 
step is to begin an honest debate about where the American economy 
really is and where the United States is headed as a nation.

Old-fashioned protectionist measures are not the answer, but the new 
era will demand new thinking and new solutions. And one thing is 
certain: real and effective solutions will emerge only when economists 
and policymakers end the confusion between the free flow of goods and 
the free flow of factors of production.

Charles Schumer is the senior senator from New York. Paul Craig Roberts 
was assistant secretary of the Treasury for economic policy in the 
Reagan administration.