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Offshoring and the 2004 elections

With a presidential race heating up, CNET News.com's Declan McCullagh says IT offshoring may become a major campaign issue.

Union activists are planning to inject the controversial topic of overseas outsourcing of technology jobs into the 2004 presidential race.

The Democratic presidential contenders already have been trading barbs over the loss of U.S.-based manufacturing jobs. At debates last week in Iowa and on National Public Radio, the Democratic hopefuls sparred over who had the best solutions, with Dennis Kucinich painting himself as the most radical opponent of free trade, which he believes is "a disaster for our economy."

"Not a one of these candidates has been willing to take the position that I've taken in saying that my first act in office will be to cancel NAFTA (North American Free Trade Agreement) and the WTO (World Trade Organization)," Kucinich said, referring to agreements intended to increase overseas trade. "We've lost over 3 million manufacturing jobs in this country. The president has that authority."

In sounding protectionist themes, Dick Gephardt came a close second, saying: "I don't think we can beat George Bush if we maintain a position on trade like George Bush. And I think Howard and John and Joe frankly have shared the same position that George Bush has--on NAFTA, on China. I was against those treaties. I think it's the wrong way to go."

Howard Dean scrambled toward the middle ground, saying it was possible to be sort-of protectionist while sort-of embracing free trade. "There's no reason we can't do both," Dean said.

So far, the Democratic presidential debates and the candidates themselves have focused on manufacturing jobs. They haven't spent

While the Democrats may differ on details, nearly all share the same perspective.
much time talking about what happens as white collar jobs such as engineering and software design flow offshore. IBM will move as many as 4,730 U.S. programming jobs to India, China and elsewhere, The Wall Street Journal reported last month, which would be just a small part of what Forrester Research has described as an exodus of 3.3 million U.S. service industry jobs over the next 15 years.

"At this point, the presidential candidates seem only to be grasping that jobs in the manufacturing sector are going overseas," said Marcus Courtney, a union organizer with the Washington Alliance of Technology Workers, part of the Communications Workers of America. "They don't seem to grasp that the economy has changed and that service jobs at every level, including highly paid engineering jobs, are going overseas just like the manufacturing jobs did."

In 6 to 7 weeks, after the bruising first round of elections thins the ranks of candidates, the Washington Alliance of Technology Workers plans to join with other labor and left-wing activists to bring IT outsourcing into the election. "After both the Iowa caucuses and the New Hampshire primary, the field of presidential candidates is going to be shortened," Courtney said. "It's going to be much easier for us to target messages to those candidates when the field likely will be cut in half."

Courtney acknowledges it's no easy task. "Trying to make an issue in a national election is difficult to do. I think this issue has all of the elements that should be a national issue. We're going to do everything in our power to make it happen overnight. We're going to start out focusing on the primary. That's going to give us steam by the time it comes to November. We'll have 9 months or 8 months to gain the momentum necessary to make it a significant issue."

A review of the Democratic candidates' positions showed that while all of them complained about free trade resulting in manufacturing job loss, only John Kerry talked about IT offshoring. "In the U.S. alone, the value of IT services provided by offshore labor will double to $16 billion next year and triple again to $46 billion by 2007," Kerry's campaign Web site says. Kerry also introduced legislation in November that would require employees of offshore call centers to identify their locations.

Elizabeth Drake, an international policy analyst at the Washington, D.C., headquarters of the AFL-CIO, said of overseas IT outsourcing: "It definitely could become an issue. There's definitely a lot more media coverage of the trend in outsourcing. We're hearing more from our own members, especially in California and the upper northwest where there are more technology jobs. I'm sure that's going to bubble up as the campaigns go forward."

Election endgame
One thing that both Courtney and Drake left unsaid is that the topic of IT outsourcing won't do much to divide the Democrats: While they may differ on details, nearly all share the same perspective. (Joe Lieberman was the only contender to remind his audience that protectionist policies would lead to reduced exports and hurt American farmers. "You break NAFTA, you're going to cut out tens of thousands of jobs here in Iowa," Lieberman noted.)

If IT outsourcing becomes a political issue at all in 2004--which depends on everything from the economy to the occupation of Iraq--look for it to happen in the months leading up to the November general election.

That would present a challenge for President George W. Bush, who generally hews closely to the Republican Party's position on free trade. Bush's most significant departure, imposing steel tariffs in an effort to curry favor for votes in Pennsylvania and West Virginia, was rescinded last month.

The Bush administration has signaled that it is more interested in creating an economic climate that creates jobs.
When discussing outsourcing last fall, the Bush administration signaled that it was more interested in creating an economic climate that creates jobs rather than imposing protectionist measures to slow overseas job migration. Commerce Department officials have, properly, shied away from saying that such protectionist steps would be wise.

It is a sign of where the Bush crowd has stood in the past that Bruce Mehlman, who until November was defending free trade as an assistant Commerce secretary in the Bush administration, is now running the Computer Systems Policy Project, a collection of chief executives from companies including Intel, Hewlett-Packard, IBM and Dell. Last week, Mehlman's group published an impassioned defense of outsourcing, saying that U.S. companies need "workers here and in distant places to survive, innovate and grow in a fiercely competitive global marketplace." The paper warned that attempts to "protect specific sectors and markets and limit international trade and collaboration...often backfire. Countries that resort to protectionism end up hampering innovation and crippling their industries."

If that sounds a little defensive, there's good reason. Don Boudreaux, chairman of the economics department at George Mason University, said "there's more open hostility toward free trade now than at any time than I remember in my adult life. Part of this may be because Web sites make public displays of ignorance a lot cheaper than in the past. But I sense that there's a slight shift in public sentiment toward more skepticism of free trade. I think the reason is that white-collar workers are more at risk from international competition than in the past."

If the Democratic candidates get their way, IT workers would still lose out eventually, Boudreaux said. "The productivity and the output and the profits and growth of the IT industry would shrink, maybe not immediately. The immediate impact is that you protect the jobs of certain workers. But when firms are hindered by such policies and are not able to improve efficiencies, there will be less investment. (You'd have) lower tax rates from industry, lower job growth in industry. You do not make a country more prosperous by protecting workers in that country or firms in that country from competition. Competition is key to economic growth and vitality."

That's a classic argument, and I happen to believe it's correct. But if 2004 yields an economic recovery with fewer jobs than expected, it may be a hard one for Bush to make on the campaign trail this fall.