Outsourcing makes economic sense
by Robert Fulford

(The National Post, 13 March 2004)

The political furor in the United States over outsourcing, a word rarely uttered a few months ago, has begun to look like an updated version of what Americans used to call "nativism," the protection of native-born citizens against competition from immigrant workers.

Generations ago, American demagogues loved to vilify foreigners who came to the United States and took American jobs. Politicians can't do that any longer, for fear of affronting foreign-born citizens, but an attack on outsourcing offends only those who remain abroad, answering phones in call centres or writing programs for dotcom enterprises. Those people don't vote in American elections, so this wretched campaign has proceeded without widespread opposition. It began as a hothouse flower blooming in primary season, like the accusation of federally subsidized pornography that Patrick Buchanan used against the first George Bush in 1992; but this one may last longer.

Like pornography, it's something Washington can't change and shouldn't want to. Outsourcing provides poor countries with some prosperity and the United States with a fresh challenge. Moreover, it follows the logic of economic development. It is in the nature of jobs that they come and go; it is in the nature of towns and regions that they rise and fall. Only mossbacked conservatives believe that a job, once established, must remain in place forever.

Nevertheless, it now seems likely that outsourcing will decide at least a few votes in November. The blame for this should fall first on Senator John Edwards of North Carolina, who argued during the primaries that it's wrong for foreign countries to steal from the South all those textile jobs that the South stole from New England in the 1950s, though he didn't put it quite that way.

By weeping about the closing of his old dad's mill, Edwards proved the demagogic power of making a relatively minor change look like an economic catastrophe. By the end of 2005 the jobs lost to outsourcing in the United States may amount to 600,000 in all, an impressive figure until you remember that there are about 140-million American jobs.

Even so, the story has infected journalism. It now frequently inspires the kind of self-righteous reporting that assumes readers or viewers share the reporter's prejudices. On Thursday, in the Seattle Post-Intelligencer, a news story from the state legislature began: "Despite growing concerns that Washington is hemorrhaging good jobs to cheaper labor markets abroad, lawmakers this week killed a proposal that would have banned outsourcing for state contracts. Supporters of House Bill 3187 said the Legislature's reluctance to control outsourcing is tantamount to a $15 million subsidy for workers in foreign countries paid for with Washington tax dollars."

Given that the state of Washington is probably more dependent on trade than any other, it's an odd place to preach protectionism. No odder, though, than CNN, a self-consciously world-girdling enterprise for two decades. On CNN, Lou Dobbs, till now an amiable reporter with no evident point of view, has suddenly turned into a raging protectionist who treats outsourcing as if it were an invention of the devil.

But Senator John Kerry, denouncing executives who send work overseas as "Benedict Arnold CEOs," has even less business playing with this issue. A lifelong free trader, he knows that New England grew richer after its textile mills closed and it developed more sophisticated industries. Moreover, Kerry loves to evoke John Kennedy's historic presence and this week had the crimson face of Ted Kennedy looking over his shoulder during a speech.

Both of them are violating the principles of President Kennedy, who in 1962 pushed through the Trade Expansion Act that authorized tariff cuts of up to 50 per cent. That led to the history-making sixth round of GATT negotiations at Geneva in the 1960s, which cut industrial tariffs of developed countries by about a third and was called the Kennedy Round in his memory. Democrats have been free traders ever since; Al Gore went on television to savage Ross Perot when Perot campaigned against the North American Free Trade Agreement.

Now that Kerry has switched from free trader to protectionist, what will he do about outsourcing? He wants tax credits for companies that don't move jobs abroad, surely an invitation to corruption; what corporation won't be tempted to grab that reward? Kerry wants to force companies to give three months' notice before they send jobs offshore and eliminate the federal contracts of companies that send work to subcontractors or subsidiaries abroad. He wants a law that will make workers in call-centres announce where they are. ("Hi there. It's Krishna in Bangalore. How can I help you?"). All nonsense, of course, but similar bills are pending in more than 20 state legislatures.

On this page on Thursday my colleague William Watson suggested that outsourcing will also become a factor in Canada's 2004 election, "given our penchant for imitating American trends." He could be right, but that's a horrible idea to contemplate. Outsourcing is an issue for demagogues and paranoids, the kind of molehill that an unscrupulous politician can magnify into a mountain. It's one American fad we should do our best to avoid.

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