Financial Daily from THE HINDU group of publications
Sunday, Feb 22, 2004
Info-Tech - Outsourcing
Outsourcing issue in US driven by politics
Washington , Feb. 21
IT is not a question of whether legislation is coming about on outsourcing, but when this is going to take place. With the issue completely driven by politics, even well meaning Democrats who normally take a strong pro-India stance are forced to come to terms with ground realities.
And the Republicans understand economics well and in normal times could have made an issue out of it in the executive and legislative branches, but cannot do so in an election year.
The Democrats were just waiting for something to happen; and the President's top economic advisor, Mr Greg Mankiw "obliged" when he said that perhaps sending jobs overseas is good for the American economy down the line. And this was enough for top Democrats on Capitol Hill to cry foul and accused the White House of being "insensitive" to job losses of Americans. And the defensive posturing to what Mr Mankiw had said did not make matters any better.
While the Senate Minority Leader, Mr Thomas Daschle, was quick to come up with his Jobs for America Act, the Senator from Connecticut, Mr Christopher Dodd, was not lagging too far behind with his United States Workers Protection Act.
Essentially, the two Bills that have been introduced try to come to terms with the "problem" by placing restrictions and requirements on American companies. For example Mr Daschle would like corporate entities that send jobs overseas to report how many are being sent out, where and why. And companies that laid off 15 or more workers and send the jobs overseas must provide at least three months notice.
The Dodd legislation takes aim at taxpayers' money. The Connecticut Senator, who says that jobs in his state have been affected as a result of outsourcing, targets three areas of Government contracting privatising of federal work, federal procurement of goods and services and State Governments receiving federal funds. Under the Dodd Bill State Governments will have to certify that monies are not going overseas if federal funds are going to come that way.
The Daschle legislation has moved some distance in that it has a Number - it is now called Senate Bill 2090 and has been referred to a Committee which may or may not hold a hearing on the subject. The Committee will then have to mark up the legislation and forward it to the full committee after which Senate which will then have to vote on the Bill after debate and send it to the House for Representatives for its action. Currently, there is no Companion Bill in the House and if one emerges the differences in the languages of the Senate and the House will have to be reconciled in a Conference Committee before a final vote takes place.
It might all seem legislatively complex, but when law makers are keen on something they move it fast in the chambers; and in the present instance it remains to be seen how much the Republicans are willing to concede; and to some extent the time frame depends on the Republicans.
What has also to be taken serious note of is the developments in several states with respect to outsourcing. One count is that as of February this year there are at least 24 state legislatures that have come up with as many as 47 measures on the issue of outsourcing. While the specifics of the proposed legislations vary from State-to-State, it is said that the measures could be broadly bunched into three categories: restricting or prohibiting state government contracts outside of the US; price preference where local companies get a margin; and on data and information privacy where for example call centres would have to identify where they are located.
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