Outsourcing: New Form of Trade

1
Outsourcing New Form of Trade?

• Lauren Reid
• PUBP 710
• US and Global Trade Politics

2
Overview

• Definition
• Major Issues
• US National Interests
• Federal and State Restrictions
• Goal
• Policy Options and Proposal
• Concluding Remarks

3
Defining Outsourcing

• Mode 1
• Service recipient and provider remain in their
  locations
• Example accounting, administration
• Mode 2
• Buyer is moved to the sellers location
• Ex tourism, health tourism
• Mode 3
• Commercial presence is established in another
  country by the service provider
• Ex banking, research and development
• Mode 4
• Seller relocates to the consumer
• Ex temporary migrant programs

4
Mode 1

• Controversy
• All components
• FDI v. Offshore Outsourcing
• Economic Impact
• Seller Growth in India
• Buyer US Job Losses(?)
• Proximity Reallocation
• These complaints reduce to the conventional
  witticism Trade is good but imports are bad
  Jagdish Bhagwati, 2004

5
Mode 1 (Cont.)

• Aggregate Economic Welfare
• Now Tradable
• Expansion of Skills Abroad
• Productivity Gain
• Employment Level
• Macro Policy v. Trade Policy
• Absolute Advantage v. Comparable Advantage
• Job Quality
• Higher-Value Jobs
• Innovation
• Dislocation

6
Effects

• Imports
• Lower import prices, increase gain
• Increase capital inflow and real stockholder
  income
• Domestic competition reduces prices which affect
  wages and profits
• Exports
• Increase in export prices increase trade gains
• Fall in export prices decreases trade gains
• Net Gains Over Time

7
US National Interests

• Policies
• Politics
• Stalemate
• Low Business Costs
• Domestic Jobs
• Candidates Positions
• Barack Obama / Joe Biden
• John McCain / Sarah Palin

8
Federal Restrictions

• Prevention of Civilian Federal Agencies (2004)
• Amendment to Corporate Tax Bill
• Exemption from Defense Contracting
• ITAA Reciprocated Restrictions
• Under language in the fiscal 2004 omnibus
  spending package passed in late January,
  contractors winning public-private job
  competitions must work within the U.S. unless
  federal employees previously performed the jobs
  overseas.
• - Amelia Gruber

9
State Restrictions

• Anti-Outsourcing Trend (2005)
• Categories
• State Contract Restriction
• Limit Offshore Call Centers
• Personal Data Sharing

10
Goal?

• Overall Economic Well-Being
• Global Scope
• Increase US Demand
• Regional Jobs and Industries
• Re-Election Politics

11
Policy Options

• Promote Exports
• Promote Innovation
• Address Domestic Hardships
• Incentivize Firms
• Impose Barriers

12
Global Scope Policy Proposal

• Consistent, Effective Language
• Public Information
• No Protectionism
• Promote Exports
• Promote Innovation
• Address Domestic Hardships
• Incentivize Firms

13
Policy Implementation

• State or Federal
• Determine Appropriate Funding
• Evaluation

14
Caveats and Conclusion

• Comparable Data
• Limited Access
• Further Research
• Global, Long-Term Scale

15

• Questions and Comments

16
Resource Links

• http//intranet.unescap.org/tid/publication/aptir2
  414_polbrief.pdf
• http//www.bls.gov/bdm/home.htm
• http//www.jstor.org/stable/pdfplus/3216794.pdf
• http//www.mackinac.org/archives/2004/s2004-06.pdf
  
• http//www.acm.org/globalizationreport/chapter8.pd
  f
• http//www.tradewatch.org/trade/offshoring/other/
• https//www.policyarchive.org/handle/10207/2129
• https//www.policyarchive.org/handle/10207/3947
• https//www.policyarchive.org/handle/10207/3947
• http//www.rediff.com/money/2008/feb/27bpo.htm
• http//www.informationweek.com/news/management/sho
  wArticle.jhtml?articleID17501506
• http//www.nfap.com/researchactivities/studies/Glo
  bal_Sourcing_2005B.pdf