Offshore Outsourcing and America’s Competitive Edge:Losing out in the High Technology R&D and Services Sectors

Source: Office of Senator Joe Lieberman, May 11, 2004

I am releasing this white paper in hopes that it will stimulate a deeper review of the long term implications for our policy responses and change the terms of the debate on the offshore outsourcing issue. The issues raised in this report go well beyond the current debate and focus on the next wave of this challenge, which potentially could affect high end R&D research jobs, not just manufacturing and call center jobs.

Seen in this light, the challenge is more fundamental, and requires that we fundamentally rethink America’s competitiveness strategy over the long-term. This report concludes that what we have thought was our nation’s ultimate competitive advantage – our high end R&D prowess – may be challenged.

If this is true – and for now the prognosis is mixed – then our search for effective policy responses has barely begun. This report attempts to take this debate to an entirely new level. It’s not alarmist; its analysis is calm and measured. But the implications of this analysis are profound: it reaches for America’s competitive advantage in an era when the entire world is competing based on free enterprise economics and open trade.

That is a competition on our terms. It’s a competition we have said we wanted and now we have it. The implications of it for us have only barely begun to be sensed. This report aims at an understanding of the global and tidal implications of this new competition. This is a competition that will dominate the 21st Century.

We have seen this global outsourcing phenomena in the manufacturing sector where 2.7 million jobs have disappeared since 2000. Some of these job losses come from productivity gains – American companies are able to produce more with fewer employees. But much of it is believed to come from American companies shifting jobs to offshore locations.

Now the services sector is also starting to be hit by offshore outsourcing. Customer call centers and data entry facilities are increasingly being relocated to where capable labor can be found at lower wage levels. However, offshoring is not limited to these entry level service jobs. Higher skilled professional jobs ranging from engineering, computer chip design, to nanotechnology research are also starting to move overseas. Let me emphasize that we don’t have good data on our current offshore outsourcing problem – business and government are not collecting it. We have only general information; we must now track the real data to understand what we are facing. My point, however, it that we are now seeing signals that our future problem may be significant because it reaches into our innovation capacity.

The fact is, unknown to most workers, our economy and the global economy as a whole is undergoing fundamental structural changes. Most American companies 3engaged in offshoring think they are doing what they need to do to survive. While American companies may be improving their individual competitiveness in the short term, they may be collectively undermining America’s and their own competitiveness for the long haul. Bit by bit, we’re not just moving good jobs overseas, but we may be transporting big blocks of our innovation infrastructure, the talent and technology that fueled our record setting growth and prosperity in the 1990’s.

Full Article: http://lieberman.senate.gov/assets/pdf/off_shoring.pdf