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Outsourcing: New Form of Trade?

Outsourcing: New Form of Trade?. Lauren Reid PUBP 710 US and Global Trade Politics. Overview. Definition Major Issues US National Interests Federal and State Restrictions Goal Policy Options and Proposal Concluding Remarks. Defining Outsourcing. Mode 1

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Outsourcing: New Form of Trade?

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  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 seller’s 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/aptir2414_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.pdf 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/showArticle.jhtml?articleID=17501506 http://www.nfap.com/researchactivities/studies/Global_Sourcing_2005B.pdf

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