IHT: Technology firms defend moving U.S. jobs overseas

[Owen Densmore]

Well, apparently sending jobs off-shore *is* going to be an election
year issue after all:
   http://www.iht.com/cgi-bin/generic.cgi?template=articleprint.tmplh

I presume this is just part of the recent economic rebound being
job-free, thus getting lots of focus.

Owen Densmore          908 Camino Santander       Santa Fe, NM 87505
[hidden email]    Cell: 505-570-0168         Home: 505-988-3787
AIM:owendensmore   http://complexityworkshop.com  http://backspaces.net

[Owen Densmore]

On Jan 7, 2004, at 8:17 AM, Owen Densmore wrote:
> Well, apparently sending jobs off-shore *is* going to be an election
> year issue after all:
>   http://www.iht.com/cgi-bin/generic.cgi?template=articleprint.tmplh
>
> I presume this is just part of the recent economic rebound being
> job-free, thus getting lots of focus.


Well, the link did not work after I tried it later, so here's the text
itself.  I append a second article also on similar topics.

Owen Densmore          908 Camino Santander       Santa Fe, NM 87505
[hidden email]    Cell: 505-570-0168         Home: 505-988-3787
AIM:owendensmore   http://complexityworkshop.com  http://backspaces.net


Technology firms defend moving U.S. jobs overseas
TED BRIDIS, AP Technology Writer
Wednesday, January 7, 2004

(01-07) 10:10 PST WASHINGTON (AP) --

Worried about possible government reaction to the movement of U.S.
technology jobs overseas, leading American computer companies are
defending recent shifts in employment to Asia and elsewhere as
necessary for future profits and warning policy makers against
restrictions.

"There is no job that is America's God-given right anymore," said Carly
Fiorina, chief executive for Hewlett-Packard Co. "We have to compete
for jobs."

In a report released Wednesday, the companies said government efforts
to preserve American jobs through limits on overseas trade would
backfire and "could lead to retaliation from our trading partners and
even an all-out trade war."

"Countries that resort to protectionism end up hampering innovation and
crippling their industries, which leads to lower economic growth and
ultimately higher unemployment," said the Washington-based Computer
Systems Policy Project, whose member companies include Intel Corp.,
IBM, Dell Inc. and Hewlett-Packard.

Intel chief executive Craig Barrett said the United States "now has to
compete for every job going forward. That has not been on the table
before. It had been assumed we had a lock on white-collar jobs and
high-tech jobs. That is no longer the case."

Barrett complained about federal agriculture subsidies he said were
worth tens of billions of dollars while government investments in
physical sciences was a relatively low $5 billion. "I can't understand
why we continue to pour resources into the industries of the 19th
century," Barrett said.

The effort by the technology industry represents an early response to
their growing concerns that U.S. lawmakers may clamp down on the
practice, known as "offshoring," especially during an election year.
Already, some Democratic candidates have criticized the practice.

Democratic front-runner Howard Dean said during a debate last month
that America needs a president "who doesn't think that big corporations
who get tax cuts ought to be able to move their headquarters to Bermuda
and their jobs offshore."

Sen. John Kerry, D-Mass., introduced a bill in November requiring
service representatives to disclose their physical location each time a
customer calls to make a purchase, inquire about a transaction or ask
for technical support. The proposal targets the increasingly popular
decisions by companies to move their call centers overseas to
capitalize on low labor costs.

A Commerce Department report last month said increasing numbers of
technology jobs are moving from the United States to Canada, India,
Ireland, Israel, the Philippines and China -- and predicted that "many
U.S. companies that are not already offshoring are planning to do so in
the near future."

The subject has been the focus of several congressional hearings, and
some lawmakers have asked the General Accounting Office for a study on
the economic implications of moving technology jobs offshore.

The technology group argued in its new report that moving jobs to
countries such as China or India -- where labor costs are cheaper --
helps companies more readily break into foreign markets and hire
skilled and creative employees in countries where students perform far
better than U.S. students in math and science.

"Americans who think that foreign workers are no match for U.S. workers
in knowledge, skills and creativity are mistaken," the trade group's
report said.

Even as technology companies lobby against limits on offshore
employment, they are urging the Bush administration to approve new tax
credits on research and development spending, spend more on university
research on physical science and adjust tax depreciation schedules for
technology purchases. They said they also want improvements in
education, especially in elementaries through high schools.

A vocal critic of technology companies moving jobs overseas, Marcus
Courtney of Seattle, dismissed the latest report. "This is not a recipe
for job creation in this country," said Courtney, president of the
Washington Alliance of Technology Workers. "This is a recipe for
corporate greed. They're lining up at the public trough to slash their
labor costs."






Exporting jobs is not free trade
Rethinking protectionism
By Charles Schumer and Paul Craig Roberts (NYT)
Wednesday, January 7, 2004


NEW YORK: I was brought up, like most Englishmen, to respect free trade
not only as an economic doctrine which a rational and instructed person
could not doubt but almost as a part of the moral law," wrote John
Maynard Keynes in 1933. And indeed, to this day, nothing gets an
economist's blood boiling more quickly than a challenge to the doctrine
of free trade.

Yet in that essay of 70 years ago, Keynes himself was beginning to
question some of the assumptions supporting free trade. The question
today is whether the case for free trade made two centuries ago is
undermined by the changes now evident in the modern, global economy.

Two recent examples illustrate this concern. Over the next three years,
a major New York securities firm plans to replace its team of 800
American software engineers, who each earns about $150,000 per year,
with an equally competent team in India earning an average of only
$20,000.

Second, within five years the number of radiologists in the United
States is expected to decline significantly because MRI data can be
sent over the Internet to Asian radiologists capable of diagnosing the
problem at a small fraction of the cost.

These anecdotes suggest a seismic shift in the world economy brought on
by three major developments. First, new political stability is allowing
capital and technology to flow far more freely around the world.
Second, strong educational systems are producing tens of millions of
intelligent, motivated workers in the developing world, particularly in
India and China, who are as capable as the most highly educated workers
in the developed world but available to work at a tiny fraction of the
cost. Last, inexpensive, high-bandwidth communications make it feasible
for large work forces to be located and effectively managed anywhere.

We are concerned that the United States may be entering a new economic
era in which American workers will face direct global competition at
almost every job level - from the machinist to the software engineer to
the Wall Street analyst.

Any worker whose job does not require daily face-to-face interaction is
now in jeopardy of being replaced by a lower-paid, equally skilled
worker thousands of miles away. American jobs are being lost not to
competition from foreign companies, but to multinational corporations,
often with American roots, that are cutting costs by shifting
operations to low-wage countries.

Most economists want to view these changes through the classic prism of
"free trade," and they label any challenge as protectionism. But these
new developments call into question some of the key assumptions
supporting the doctrine of free trade.

The case for free trade is based on the British economist David
Ricardo's principle of "comparative advantage" - the idea that each
nation should specialize in what it does best and trade with others for
other needs. If each country focused on its comparative advantage,
productivity would be highest and every nation would share part of a
bigger global economic pie.

However, when Ricardo said that free trade would produce shared gains
for all nations, he assumed that the resources used to produce goods -
what he called the "factors of production" - would not be easily moved
over international borders.

Comparative advantage is undermined if the factors of production can
relocate to wherever they are most productive: in today's case, to a
relatively few countries with abundant cheap labor. In this situation,
there are no longer shared gains - some countries win and others lose.

When Ricardo proposed his theory in the early 1800's, major factors of
production - soil, climate, geography and even most workers - could not
be moved to other countries. But today's vital factors of production -
capital, technology and ideas - can be moved around the world at the
push of a button. They are as easy to export as cars.

This is a very different world than Ricardo envisioned. When American
companies replace domestic employees with lower-cost foreign workers in
order to sell more cheaply in home markets, it seems hard to argue that
this is the way free trade is supposed to work. To call America's
economic recovery "jobless" is inaccurate. Lots of new jobs are being
created, just not in the United States.

In the past, we have supported free trade policies. But if the case for
free trade is undermined by changes in the global economy, American
policies should reflect the new realities.

While some economists and elected officials suggest that all America
needs is a robust retraining effort for laid-off workers, we do not
believe retraining alone is an answer, because almost the entire range
of "knowledge jobs" can be done overseas.

Likewise, we do not believe that offering tax incentives to companies
that keep American jobs at home can compensate for the enormous wage
differentials driving jobs offshore.

America's trade agreements need to reflect the new reality. The first
step is to begin an honest debate about where the American economy
really is and where the United States is headed as a nation.

Old-fashioned protectionist measures are not the answer, but the new
era will demand new thinking and new solutions. And one thing is
certain: real and effective solutions will emerge only when economists
and policymakers end the confusion between the free flow of goods and
the free flow of factors of production.

Charles Schumer is the senior senator from New York. Paul Craig Roberts
was assistant secretary of the Treasury for economic policy in the
Reagan administration.

[Belinda Wong-Swanson-2]

IEEE-USA Forums Focus on Government's Role in Globalization
The need for more government funding of research and development, the
role of government policies in the future of technology, and the impact of
globalization are topics that IEEE-USA is emphasizing at a series of
one-day forums it is holding in high-tech centers across the United States.
Read more at
<http://www.theinstitute.ieee.org/portal/index.jsp?pageID=institute_level1_a
rticle&TheCat=2201&article=tionline/legacy/inst2004/jan04/1w.featureglobal.x
ml>



Belinda Wong-Swanson, Principal
Innov8 LLC, 624 Agua Fria, Santa Fe, NM 87501
www.innov8llc.com
email: [hidden email]
tel: [phone]
fax: [phone]

-----Original Message-----
From: [hidden email] [mailto:[hidden email]]On
Behalf Of Owen Densmore
Sent: Wednesday, January 07, 2004 11:58 AM
To: The Friday Morning Complexity Coffee Group
Subject: Re: [FRIAM] IHT: Technology firms defend moving U.S. jobs
overseas


On Jan 7, 2004, at 8:17 AM, Owen Densmore wrote:
> Well, apparently sending jobs off-shore *is* going to be an election
> year issue after all:
>   http://www.iht.com/cgi-bin/generic.cgi?template=articleprint.tmplh
>
> I presume this is just part of the recent economic rebound being
> job-free, thus getting lots of focus.


Well, the link did not work after I tried it later, so here's the text
itself.  I append a second article also on similar topics.

Owen Densmore          908 Camino Santander       Santa Fe, NM 87505
[hidden email]    Cell: 505-570-0168         Home: 505-988-3787
AIM:owendensmore   http://complexityworkshop.com  http://backspaces.net


Technology firms defend moving U.S. jobs overseas
TED BRIDIS, AP Technology Writer
Wednesday, January 7, 2004

(01-07) 10:10 PST WASHINGTON (AP) --

Worried about possible government reaction to the movement of U.S.
technology jobs overseas, leading American computer companies are
defending recent shifts in employment to Asia and elsewhere as
necessary for future profits and warning policy makers against
restrictions.

"There is no job that is America's God-given right anymore," said Carly
Fiorina, chief executive for Hewlett-Packard Co. "We have to compete
for jobs."

In a report released Wednesday, the companies said government efforts
to preserve American jobs through limits on overseas trade would
backfire and "could lead to retaliation from our trading partners and
even an all-out trade war."

"Countries that resort to protectionism end up hampering innovation and
crippling their industries, which leads to lower economic growth and
ultimately higher unemployment," said the Washington-based Computer
Systems Policy Project, whose member companies include Intel Corp.,
IBM, Dell Inc. and Hewlett-Packard.

Intel chief executive Craig Barrett said the United States "now has to
compete for every job going forward. That has not been on the table
before. It had been assumed we had a lock on white-collar jobs and
high-tech jobs. That is no longer the case."

Barrett complained about federal agriculture subsidies he said were
worth tens of billions of dollars while government investments in
physical sciences was a relatively low $5 billion. "I can't understand
why we continue to pour resources into the industries of the 19th
century," Barrett said.

The effort by the technology industry represents an early response to
their growing concerns that U.S. lawmakers may clamp down on the
practice, known as "offshoring," especially during an election year.
Already, some Democratic candidates have criticized the practice.

Democratic front-runner Howard Dean said during a debate last month
that America needs a president "who doesn't think that big corporations
who get tax cuts ought to be able to move their headquarters to Bermuda
and their jobs offshore."

Sen. John Kerry, D-Mass., introduced a bill in November requiring
service representatives to disclose their physical location each time a
customer calls to make a purchase, inquire about a transaction or ask
for technical support. The proposal targets the increasingly popular
decisions by companies to move their call centers overseas to
capitalize on low labor costs.

A Commerce Department report last month said increasing numbers of
technology jobs are moving from the United States to Canada, India,
Ireland, Israel, the Philippines and China -- and predicted that "many
U.S. companies that are not already offshoring are planning to do so in
the near future."

The subject has been the focus of several congressional hearings, and
some lawmakers have asked the General Accounting Office for a study on
the economic implications of moving technology jobs offshore.

The technology group argued in its new report that moving jobs to
countries such as China or India -- where labor costs are cheaper --
helps companies more readily break into foreign markets and hire
skilled and creative employees in countries where students perform far
better than U.S. students in math and science.

"Americans who think that foreign workers are no match for U.S. workers
in knowledge, skills and creativity are mistaken," the trade group's
report said.

Even as technology companies lobby against limits on offshore
employment, they are urging the Bush administration to approve new tax
credits on research and development spending, spend more on university
research on physical science and adjust tax depreciation schedules for
technology purchases. They said they also want improvements in
education, especially in elementaries through high schools.

A vocal critic of technology companies moving jobs overseas, Marcus
Courtney of Seattle, dismissed the latest report. "This is not a recipe
for job creation in this country," said Courtney, president of the
Washington Alliance of Technology Workers. "This is a recipe for
corporate greed. They're lining up at the public trough to slash their
labor costs."






Exporting jobs is not free trade
Rethinking protectionism
By Charles Schumer and Paul Craig Roberts (NYT)
Wednesday, January 7, 2004


NEW YORK: I was brought up, like most Englishmen, to respect free trade
not only as an economic doctrine which a rational and instructed person
could not doubt but almost as a part of the moral law," wrote John
Maynard Keynes in 1933. And indeed, to this day, nothing gets an
economist's blood boiling more quickly than a challenge to the doctrine
of free trade.

Yet in that essay of 70 years ago, Keynes himself was beginning to
question some of the assumptions supporting free trade. The question
today is whether the case for free trade made two centuries ago is
undermined by the changes now evident in the modern, global economy.

Two recent examples illustrate this concern. Over the next three years,
a major New York securities firm plans to replace its team of 800
American software engineers, who each earns about $150,000 per year,
with an equally competent team in India earning an average of only
$20,000.

Second, within five years the number of radiologists in the United
States is expected to decline significantly because MRI data can be
sent over the Internet to Asian radiologists capable of diagnosing the
problem at a small fraction of the cost.

These anecdotes suggest a seismic shift in the world economy brought on
by three major developments. First, new political stability is allowing
capital and technology to flow far more freely around the world.
Second, strong educational systems are producing tens of millions of
intelligent, motivated workers in the developing world, particularly in
India and China, who are as capable as the most highly educated workers
in the developed world but available to work at a tiny fraction of the
cost. Last, inexpensive, high-bandwidth communications make it feasible
for large work forces to be located and effectively managed anywhere.

We are concerned that the United States may be entering a new economic
era in which American workers will face direct global competition at
almost every job level - from the machinist to the software engineer to
the Wall Street analyst.

Any worker whose job does not require daily face-to-face interaction is
now in jeopardy of being replaced by a lower-paid, equally skilled
worker thousands of miles away. American jobs are being lost not to
competition from foreign companies, but to multinational corporations,
often with American roots, that are cutting costs by shifting
operations to low-wage countries.

Most economists want to view these changes through the classic prism of
"free trade," and they label any challenge as protectionism. But these
new developments call into question some of the key assumptions
supporting the doctrine of free trade.

The case for free trade is based on the British economist David
Ricardo's principle of "comparative advantage" - the idea that each
nation should specialize in what it does best and trade with others for
other needs. If each country focused on its comparative advantage,
productivity would be highest and every nation would share part of a
bigger global economic pie.

However, when Ricardo said that free trade would produce shared gains
for all nations, he assumed that the resources used to produce goods -
what he called the "factors of production" - would not be easily moved
over international borders.

Comparative advantage is undermined if the factors of production can
relocate to wherever they are most productive: in today's case, to a
relatively few countries with abundant cheap labor. In this situation,
there are no longer shared gains - some countries win and others lose.

When Ricardo proposed his theory in the early 1800's, major factors of
production - soil, climate, geography and even most workers - could not
be moved to other countries. But today's vital factors of production -
capital, technology and ideas - can be moved around the world at the
push of a button. They are as easy to export as cars.

This is a very different world than Ricardo envisioned. When American
companies replace domestic employees with lower-cost foreign workers in
order to sell more cheaply in home markets, it seems hard to argue that
this is the way free trade is supposed to work. To call America's
economic recovery "jobless" is inaccurate. Lots of new jobs are being
created, just not in the United States.

In the past, we have supported free trade policies. But if the case for
free trade is undermined by changes in the global economy, American
policies should reflect the new realities.

While some economists and elected officials suggest that all America
needs is a robust retraining effort for laid-off workers, we do not
believe retraining alone is an answer, because almost the entire range
of "knowledge jobs" can be done overseas.

Likewise, we do not believe that offering tax incentives to companies
that keep American jobs at home can compensate for the enormous wage
differentials driving jobs offshore.

America's trade agreements need to reflect the new reality. The first
step is to begin an honest debate about where the American economy
really is and where the United States is headed as a nation.

Old-fashioned protectionist measures are not the answer, but the new
era will demand new thinking and new solutions. And one thing is
certain: real and effective solutions will emerge only when economists
and policymakers end the confusion between the free flow of goods and
the free flow of factors of production.

Charles Schumer is the senior senator from New York. Paul Craig Roberts
was assistant secretary of the Treasury for economic policy in the
Reagan administration.





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