Media Warns of Trade War

Business coalition battles backlash

Mar 1, 2004

With overseas outsourcing a hot US election-year issue, big business is
quietly mounting an offensive against state and federal efforts to keep jobs at
home and otherwise restrain globalization.

Some of the best-financed trade groups in the U.S. have formed a coalition to
beat back federal legislation that would restrict foreign outsourcing by
government contractors and limit visas for non-American workers with technology
skills.

Calling itself the Coalition for Economic Growth and American Jobs, the new
entity comprises about 200 trade groups–including the U.S. Chamber of
Commerce, the Business Roundtable, the American Bankers Association, the
National Association of Manufacturers and the Information Technology Association
of America—as well as individual companies.

The Wall Street Journal, USA

HSBC to move 6,000 jobs...

Mar 1, 2004

BHSBC Holdings, the world’s second-largest bank by market value, said today
it plans to move 6,000 jobs to support centers in India, China and Malaysia by
the end of 2004 as it shifts work to lower-cost sites in Asia. At the end of
2003, the lender employed 8,000 people at such centers.

"It’s our duty to our shareholders, and frankly also to the markets in
which we operate, to be making use of our resources in the most optimal way,
said CEO Stephen Green in Hong Kong. "One of the things we do is to create
jobs in environments where there’s a shortage of them," he added. HSBC,
said that its 2003 profit rose 41% to $8.77 billion, buoyed by its purchase of
Household International last year, and as other financial institutions are
moving jobs to Asia, where labour is cheaper, to save on costs.

Last year (2003), the UK lender said it plans to cut 4,000 jobs in the UK and
move the positions to Asia. It opened its first processing centre in Guangzhou,
China, in 1996 and started moving back-office employees to India in 2000.

Agencies, HK

Meeting Needs is Key to Growth

Mar 2, 2004

HOW concerned should advanced nations be about the outsourcing of
manufacturing to China or software development to India? Fear of jobs lost to
low-wage nations strikes a populist chord, but misses a vital point: developed
nations’ prosperity hinges primarily on entrepreneurship.

After all, no economy can raise living standards forever through innovations
that make production of existing goods more efficient. In the short run, more
efficiency reduces the cost of a good or service, so people consume more of it.

Eventually, though, consumers refuse to buy more even if prices continue to
fall. After that, further efficiencies require shedding workers.

Creating and satisfying new consumer desires keeps the system going by
absorbing the labour and purchasing power released by the increasingly efficient
satisfaction of old ones.

At the other end of this process, producers who satisfy old desires continue
economising, because they compete for employees and consumers with producers who
satisfy new desires.

Similarly, outsourcing to low-wage countries improves living standards only
if the human capital released can be used to make new goods and services.
Otherwise, outsourcing merely reduces demand for domestic labour, just like
other efficiency gains.

Business Day, Johannesburg, SA

Two-Way Street

Mar 11, 2004

The January 31 issue of The Economist described the consequences of high-tech
jobs moving overseas. The story says: "With the trans-Atlantic shift in
R&D goes many high-value jobs, as well as a greater share of the industry’s
profits". This trend has led to an "increasing concern" in the
industry, with some executives speaking out against the outsourcing trend. Old
news, you might say.

The twist here is that the article is about biotech research jobs being
outsourced to the US from Europe. But the language is eerily familiar: replace
"biotech" with "infotech", switch the roles of Europe &
US. This could pass for yet another Silicon Valley requiem.

Articles like this should remind us that trade is a two-way street. The money
paid to foreign producers, whether businesses or workers, typically comes back
home to buy domestic goods and services, thereby generating domestic employment.
That is true whether it is European companies paying American biotech
researchers, or US companies paying Indian programmers.

The New York Times, USA

Alan Greenspan

Ban on Outsourcing Jobs Could Ignite Trade War: Fed chief

Mar 12, 2004

Federal Reserve chairman Alan Greenspan yesterday criticized the
"alleged cures" that political candidates are proposing for
joblessness–including limits on moving jobs offshore–saying they will erode
America’s living standards and do little to reduce unemployment. Although
"new-job creation is lagging badly" for the moment, he said, the best
way for Congress to help Americans get and keep good-paying jobs is to improve
their math and technical skills so companies won’t be tempted to outsource to
better-trained workers in China and India.

The Miami Herald, USA

Benefits fall far short of losses

Mar 10, 2004

White-collar outsourcing has a greater impact on our economy than does
overseas manufacturing. Those lower-paying manufacturing jobs provided money
mostly for food and rent. The professional jobs provided income that is spent on
high-ticket consumer goods and services that provide employment to those who
once worked in the manufacturing industry.

Every lost professional job probably represents a loss of two lower-income
jobs. Additionally, these professional positions helped the US economy by
requiring the purchase of computers, software and educational products and
services sold at US prices. Outsourcing will be a drain on America’s
intellectual capital. While the US lost its dominance in manufacturing, we saw a
rise in technological superiority. China, India and Russia have always been able
to educate computer scientists. However, due to political and cultural
environments, these nations never produced an IBM, Microsoft or an Oracle.

Every engineering or programming job outsourced robs our nation of its
potential for technological breakthroughs. As the market for these jobs
diminishes, these professions will become unattractive to American college
students.

The argument that American companies need outsourcing to be competitive is
completely false. Manufacturing requires a person to be paid for every piece
manufactured. Software companies pay one time for the product to be created.
With Internet downloads, creating copies and delivering software has virtually
no cost.

Having software coded in India for $125,000 instead of for $500,000 in the US
would barely affect a company’s profit margins when it sells the software for
millions or even billions of dollars.

Outsourcing technology jobs is the ultimate expression of greed. To say it
helps the nation is a lie.

Atlanta Journal-Constitution, USA