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Study calls for middle solution to offshoring

Institute linked to Democratic Party defends global trade but calls for more help for displaced workers.

Neither the right wing nor the left wing of the political spectrum has set a correct course for how to manage "offshoring," according to a new report from a think tank linked to the Democratic Party.

The report, released Tuesday from the Progressive Policy Institute, blasts the Bush administration for failing to support workers and criticizes the political left's inclination to erect trade walls with legislation to restrict offshoring. Instead, it calls for a "third way" to deal with the shift of information-based service sector jobs to low-wage nations--one focused on creating knowledge-based jobs while ensuring free trade.

"If we are to successfully compete in the global economy--and preserve support for globalization itself--then it is time for something completely different," Rob Atkinson, the institute's vice president, said in a statement.

Offshore outsourcing, which refers to farming out tasks to lower-wage nations such as India or the Philippines, has become a hot-button issue over the past year or so. Defenders of the practice--including President Bush's top economic advisor--say it ultimately assists the U.S. economy. But critics say it costs U.S. workers jobs and threatens the country's long-term tech leadership. The exact scale of the trend remains unclear.

Large outsourcing deals--which can involve work transferred abroad or to another company within the United States--rose in the second quarter and are set to surge further, according to a recent study from research firm TPI.

The report from the Progressive Policy Institute suggested that offshoring will expand. "Even with strong job growth in the last few months, this issue is not going away, because it stems from the inexorable trend of U.S. jobs--even middle- and higher-wage jobs--being opened up to international competition," it said.

The report accuses the Bush administration of having done little to address offshoring and in some cases of having made matters worse. It says the administration's economic policy "consists primarily of cutting taxes, particularly for the wealthy," even as it has tried to cut funding for the International Labor Organization's efforts to raise labor standards. In addition, it criticizes the administration for denying laid-off service workers Trade Adjustment Assistance benefits.

The institute's report also blames the administration for "flaccid attempts to prevent other nations from manipulating currencies and stealing U.S. intellectual property."

The White House did not immediately respond to a request for comment.

A number of states have proposed measures to keep government work from flowing offshore. And Democratic presidential candidate John Kerry has called for federal contract work to be performed by American workers "wherever possible."

The new report argues against such proposals. They raise taxpayer costs and run the risk of triggering a destructive trade war, the institute said.

Kerry hasn't called for an end to global trade but "will end special tax giveaways to companies that ship jobs abroad," according to his Web site.

The new report echoes this stance in its recommendations and also calls for serious federal efforts to enforce global trade rules against product and service piracy, to open foreign markets to U.S. goods and services, and to stop currency manipulation. China has been accused of manipulating its currency to boost exports.

The report also suggests that the United States develop a "national competitiveness strategy," which should include "increased and more focused federal investments in research," more funding for math and science education, and to make it easier for foreign scientists and engineers to work in the United States.

In addition, the institute calls for "a new bargain with American workers."

"If workers accept a rapidly changing and highly competitive economy, government policy should empower individuals with effective tools to adapt to change," the report said. For example, the report said, companies should be forced to provide at least three months' advance notice of layoffs due to offshoring, and Trade Adjustment Assistance benefits should be extended to service workers.

The institute is a project of the The Third Way, a foundation whose chairman, Al From, founded the Democratic Leadership Council.