Wall Street Journal: More Work is Outsourced to U.S. than Away from it

[rchiu]

Originally posted by: gsaldivar
The Wall Street Journal

By Michael M. Phillips
March 15, 2004

More Work is Outsourced to U.S. than Away from it, Data Show

WASHINGTON -- Despite the political outcry over the outsourcing of white-collar jobs to such places as India and Ghana, the latest U.S. government data suggest that foreigners outsource far more office work to the U.S. than American companies send abroad.

The value of U.S. exports of legal work, computer programming, telecommunications, banking, engineering, management consulting and other private services jumped to $131.01 billion in 2003, up $8.42 billion from the previous year, the Commerce Department reported Friday.

Imports of such private services -- a category that encompasses U.S. outsourcing of call centers and data entry to developing nations, among other things -- hit $77.38 billion for the year, up $7.94 billion from 2002. Measuring imports against exports, the U.S. posted a $53.64 billion surplus last year in trade in private services with the rest of the world.

Under government accounting, when a U.S. company opens a technical-support center in India that handles inquiries from the U.S., that is considered a U.S. import of services. When a U.S. lawyer in New York does work for a German auto company or a New York investment banker works on a deal for a Japanese company, that is an export of services.

The numbers suggest that congressional efforts to restrict outsourcing by U.S. companies may backfire, if they provoke retaliation by U.S. trading partners. Economists also say that U.S. service exporters -- insurers, for instance -- might lose some competitive edge if they can't use foreign suppliers for call centers or other back-office operations.

"If you try to protect and limit outsourcing, you will have a negative impact on the exports of service activities, which generate a lot of jobs," said Catherine Mann of the Institute for International Economics, a Washington policy research group.

Despite the developments in services trade, the current-account deficit, the most inclusive measure of the U.S. trade gap, hit another record in 2003, reaching $541.8 billion, or 4.9% of the gross domestic product, up from $480.9 billion in 2002, or 4.6% of GDP. The increase came even though the deficit for the final three months of year narrowed to $127.5 billion, from $135.3 billion in the third quarter.

The white-collar trade issue has risen to the top of the political agenda and has led to legislative proposals to prevent outsourcing, or expose it when it occurs. Sen. John Kerry of Massachusetts, the likely Democratic presidential nominee, wants U.S. companies to reveal to callers that their telephone inquiries are going overseas. Others in Congress legislation to restrict government contractors from sending work abroad.

Politicians have largely ignored the jobs created in the U.S. when Americans sell white-collar services to foreign customers.

"I can understand why members of Congress are responding to what a lot of constituents feel, and I can understand why their constituents feel that way because there has been so much publicity about the potential loss of jobs," said J. Robert Vastine, president of the Coalition of Service Industries. But, he said, "a lot of it is hype, and one of the big problems in this debate is there hasn't been enough analysis."

In addition to hiring more U.S. businesses to provide services, foreigners doubled last year the amount of money invested in U.S. companies, plants, offices, stores and other facilities. That foreign direct investment swelled to $81.98 billion in 2003, from $39.63 billion in 2002, the government said.

Write to Michael M. Phillips at michael.phillips@wsj.com

Copyright 2004 Dow Jones & Company

Just wanna point out the flaw just by looking at the dollar without the sense.

Let say China hired one McKinsey Management Consultant or Goldman Sachs investment banker for their expertise, let's say those people's salary is 200k a year, does it mean it is OK for US to loss 5 40K middle income jobs to China/India?

US exports high dollar consulting, investment and legal service all over the world, and in total dollar wise, the export of those high value services can offset the import of lower value services. But you can't just look at outsourcing from monetary point of view. One person gets a high paying job doesn?t' offsets 5 people loosing middle paying jobs in terms of social costs.

The government certainly needs to beware of the possible consequence to the high dollar export services when trying to find a solution for outsourcing. But it is not an excuse not to find a solution to the social cost incurred by outsourcing

EDIT: Title does not accurately reflect the stats. More dollar outsourced to US doesn't equals to more jobs (works) outsourced to US.

 

[gsaldivar]

Just wanna point out the flaw...One person gets a high paying job doesn?t' offsets 5 people loosing middle paying jobs in terms of social costs.

That's true, but the WSJ article doesn't even mention social costs. It simply states that a higher value of work is outsourced TO the U.S. than FROM the U.S.

Title does not accurately reflect the stats. More dollar outsourced to US doesn't equals to more jobs (works) outsourced to US.

The title is accurate.

The article makes no assertion as to the proportion/number of jobs exchanged, it's simply an illustration of the value of work that is exchanged.

If you assume a fixed value of work outsourced TO the U.S., then the lower the "quality" of job (i.e. lower paying) - the more jobs will be created. Conversely, the higher the "quality" of job (i.e. higher paying) - the fewer jobs will be created.

Since it's fairly obvious that American workers are less competitive internationally at lower "quality" jobs, it should follow that the jobs outsourced TO the U.S. from other countries are generally higher "quality" (higher paying).

:beer: