San Jose Mercury News , January 30, 2004 Friday

Offshore job losses on voters' agendas; Kerry, Dean compete to stress hot issue

By KARL SCHOENBERGER, Mercury News

With the next round of presidential primary elections coming up Tuesday, billboards are popping up across South Carolina with a political message that might resonate with any Democratic contender: ''Lost your job to free trade and offshoring yet?''

The issue of employment is high on the agenda in this political season. President Bush can take credit for an economic recovery, but he is vulnerable when it comes to jobs. The stock market is up, but job growth is dismal -- only 1,000 jobs were created in December, a fraction of the 300,000 new jobs the Bush administration projected.

As the temperature rises over disappointing job growth, the practice of ''offshoring'' -- sending jobs overseas to cheap labor markets -- has worked its way into the rhetoric of the presidential campaign trail.

Sen. John Kerry of Massachusetts, the Democratic front-runner after victories in Iowa and New Hampshire, has been denouncing the Bush administration for rewarding ''Benedict Arnold CEOs'' who move ''profits and jobs overseas.'' Howard Dean, the populist former governor of Vermont, has told his audiences 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.''
 
Significance unknown

There's no consensus among economists and experts over the long-term significance of the trend toward offshoring, jargon that combines the words ''offshore'' and ''outsourcing.'' It generally refers to the export of white-collar jobs in information technology and other professional fields such as accounting and banking services.

But blue-collar workers have borne the brunt of the pain. South Carolina, a key battleground state for the Democrats, has been hit hard by overseas outsourcing in the textile industry, and has lost about 64,000 manufacturing jobs over the past three years, according to the American Manufacturing Trade Action Coalition, the Washington-based lobbying group that paid for the billboard ads.

Offshoring statistics are fuzzy at best. One report estimates that 300,000 of the 2.4 million jobs lost since the beginning of the recession in 2001 can be attributed to offshoring. Future projections are all over the map: One predicts 3.3 million service-sector jobs will go overseas in the next 15 years, while a University of California-Berkeley report estimated 14 million U.S. service jobs are at risk.

''I think the issue is going to be exaggerated and manipulated by both sides in the political debate,'' said Dean Davison, an analyst at the Meta Group, a technology research and advisory firm in Stamford, Conn. ''There are distinct differences of opinion in what corporations should do to take responsibility, and what kind of public policy should be implemented.''

Legislation has been introduced in Congress to address the issue, some of it intended to stir up debate rather than win passage. Kerry introduced a bill in November that would require call-center operators to disclose their physical location to consumers who phone in for customer service or technical help, ostensibly to discourage U.S. companies from moving such jobs overseas.

On the other end of the ideological spectrum, Sen. Craig Thomas, R-Wyo., won passage for his amendment to the Senate's omnibus appropriations bill last week that bans some federal contracts to vendors using offshore labor. News of this caused a furor over the weekend in the New Delhi press, on the assumption the lucrative Indian industry in back-office contracting operations was threatened by congressional sanctions. But that was a false alarm.
 
Few firms affected

The ban applies only to a relatively small number of U.S. companies bidding for contracts under a Bush administration program to privatize certain federal government services, such as architectural design work, explained John Palatiello, a Washington-based lobbyist representing domestic companies bidding for privatization contracts. The strategy, he said, was to prevent federal unions from claiming their jobs were being sent overseas.

''The motivation wasn't to stop offshoring per se,'' Palatiello said, ''but rather to get it out of the debate on privatizing federal services.''

Antipathy to offshoring has deep political roots. Manufacturers in the toy and apparel industries have gone overseas for decades to produce their goods from contractors using cheap labor. Gradually, electronics makers and Silicon Valley's computer brands all followed -- and more recently software and professional services.

Presidential wannabe Ross Perot immortalized this inexorable force of globalization as the ''giant sucking sound'' from Mexico when he campaigned against the North American Free Trade Agreement in the 1992 election. Twelve years later, many of those Mexican manufacturing jobs have moved to China.

The fuss over job loss in this presidential election year is of particular concern in India, the nation that is benefiting most from the offshoring boom. A Jan. 19 article in the Times of India, headlined ''Why is the U.S. running scared?'' captured the dismay: ''The issue has become a political hot potato. It has even entered the presidential debate, with Democrat Howard Dean attacking his rival contender Wesley Clark for being soft on it. Why the big hoopla over outsourcing?''

Rafiq Dossani, a consulting professor at Stanford University's Asia/Pacific Research Center, published a study of companies moving operations to India last year. He is a proponent of the business efficiencies of offshore labor markets. But even he is concerned about the long-term political consequences.

''This may be a problem in the minds of some politicians now, even before there's been sufficient analysis of what is going on,'' said Dossani, a New Delhi native. ''But I think over the next five years this is going to have a huge impact. The range of jobs that can be offshored is mind-boggling.''
 

#