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Top White House Aide Defends Outsourcing
Published on Saturday, January 24, 2004 by The Business Times (Singapore)
Top White House Aide Defends Outsourcing
Call against Bill to prohibit government jobs from being sent overseas
 

NEW YORK -- Contracting jobs overseas is 'simply the latest manifestation of free trade', a top White House economic aide said in defense of a practice used by American companies.

'Public policy needs to help workers find new jobs, not retreat from the principles of free trade that have benefited the US and economies around the world,' Greg Mankiw, chairman of President George W Bush's Council of Economic Advisers, said in a question-and-answer forum on the White House web site.

A US$328 billion spending Bill the US Senate approved on Thursday will prohibit contractors to the government from doing that work overseas, a provision that may affect companies such as International Business Machines Corp.

The measure now goes to Mr Bush, who said he would sign it.

The contracting provision will become the first federal law that limits such work from being done outside the US since the practice became a political force a year ago.

The precedent is raising the hackles of the Chamber of Commerce and other business groups that say it would undercut the ability of US companies to compete with overseas rivals.

Supporters say the Bill is necessary in order to protect unionized government jobs from being sent overseas, in the way corporations have sent software developers, call center operators and accountants to low-cost countries.

In the next decade, as many as six million positions held by US workers may be sent to India and other nations by companies in search of a low-cost, technology-savvy, English-speaking workforce, Goldman Sachs Group Inc said in a September report.

Senator John Kerry of Massachusetts, winner of Monday's Democratic presidential caucuses in Iowa, said he would require overseas call centers to disclose their location and would provide tax credits to companies that maintain US factories.

Mr Mankiw, asked in the online forum if outsourcing benefits the US, said that it reflects free trade principles.

'When a good is produced more cheaply abroad, it makes more sense to import it than make it domestically,' he said.

Meanwhile, independent market analyst Datamonitor has said that the rate at which call center jobs will flow out of rich countries will not be as alarming in the coming years as feared.

The company said some 241,000 such jobs will move offshore in 2007, with many of them going to Mexico, South Africa and Malaysia which are becoming popular offshore locations.

But it also said that the total number of call center jobs should grow to 4.78 million agent positions globally by 2007, compared to 4.2 million in 2003.

Of these, the number of positions offshore will have grown only to 5 per cent, compared to 2.6 per cent at present.

'The focus has shifted towards selling outsourcing rather than selling offshore,' said Ryan Powell, author of the report entitled Global Offshore Call Center Outsourcing: Who will be the next India?

'Once firms have outsourced to a third party, it becomes much more acceptable to move that work offshore,' he added.

Mexico, South Africa and Malaysia are growing in stature at the expense of India and the Philippines whose share of the offshore market will drop to 64 per cent in 2007 compared with 70 per cent in 2002, the report forecast. - Bloomberg, Reuters

Copyright Singapore Press Holdings 2004

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