Outsourcing Lands In Political Ring With Both FeetOutsourcing Lands In Political Ring With Both Feet

The debate about offshore outsourcing is getting hot in the run-up to the November elections.

Democratic presidential candidate John Kerry says American companies that move jobs overseas should lose certain tax breaks. At the same time, a group of tech-industry CEOs that includes Dell's Michael Dell, Hewlett-Packard's Carly Fiorina, Intel's Craig Barrett, and IBM's Sam Palmisano released a position paper arguing that the computer industry needs unfettered access to global labor.

Kerry's call came at a rally Wednesday in Bedford, N.H., where he called for a workers' bill of rights. Among other things, Kerry would end certain investment tax credits for U.S. companies that send jobs overseas.

"We're going to end the days when our government encourages big business to turn its back on America's workers," Kerry said. "We need to end an administration that lets companies like Halliburton ship their old boss to the White House and get special treatment while they ship American jobs overseas."

On the other side of the argument, the Computer Systems Policy Project--a pro-industry lobbying group--released a paper arguing that legislative efforts to limit offshore outsourcing would hurt the U.S. economy.

"With the winds of protectionism blowing in Washington, it seemed timely to us to reach out to policy makers on both sides," project executive director Bruce Mehlman says.

In its paper, Choose to Compete, the group notes that 60% of revenue for U.S. IT companies originates outside the country.

"Any trade barriers created by the United States in an attempt to avoid global competition could lead to retaliation from our trading partners and even an all-out trade war," the group warns. It also notes that U.S. IT vendors face "strong foreign competitors equally intent on winning new customers."

Instead of protectionism, the group argues the government should increase investment in university R&D and ensure that America's high schools create better-educated students. "As the U.S. workforce ages and the economy grows, there will be many good jobs in many industries. Who will land these jobs? Not the millions of American students who graduate from high school without basic reading, writing, and mathematics skills," the report states.

There are no signs that the offshore outsourcing is abating. Internet service provider EarthLink Inc. is cutting another 1,300 jobs, or 40% of its workforce, and outsourcing the work of some of its call centers to other locations, including Jamaica, as part of a major restructuring. The company says it will close its call centers in Harrisburg, Penn., and Roseville, San Jose, and Pasadena, Calif., and will reduce its call-center operations in Atlanta before spring. Despite the toll that such moves are taking on U.S. IT workers, some analysts believe legislative attempts to restrict offshore outsourcing will backfire.

Says Martin Wolf of Martin Wolf Securities, "American service providers would have higher costs and less-flexible service than their foreign competitors, would likely lose business as a result, and then be forced to lay off workers anyway."