Free Trade in Business, Professional, and Technical Services: The Outsourcing Debate

1
Free Trade in Business, Professional, and
Technical Services The Outsourcing Debate

• WTO Consultation Center
• Shanghai/ December 1, 2004
• Remarks by Robert Vastine
• President, Coalition of Service Industries of the
  United States
• www.uscsi.org

2
What is Outsourcing

• Outsourcing Imports
• Insourcing Exports
• Consists of Business, Professional and Technical
  Services (BPT)
• Once performed in-house in US
• Or contracted from other US suppliers
• Conducted electronically
• Covered mainly by commitments in Mode 1

3
US Trade in BPT Services

• US highly competitive
• Positive balance of 48 billion in 2003
• Exports of 134 billion
• Consists of RD, management/consulting, legal,
  architectural/engineering, software programming
  and design, call centers, medical records
  transcription, financial back office services

4
Why is Outsourcing a Problem?

• Inescapable aspect of a globalized economy
• Business will import call center services just
  like auto parts
• NOT a new phenomenon for services
• Occurred in manufacturing for decades
• Hit people not previously subject to import
  competition
• Just as dot-com bubble burst
• Highly paid, skilled people out of work

5
The Political Responses

• Old fashioned protectionist responses to limit
  imports (outsourcing)
• Federal level
• Government procurement
• Consumer/employee rights
• Data privacy
• Tax related legislation
• Immigration proposals
• 49 bills introduced, none enacted

6
Political Responses, cont.

• State-level responses similar
• 196 bills in 40 state legislatures
• Four states have enacted restrictions
• Bottom line very limited damage
• Result of concerted industry effort
• Coalition for Economic Growth and Jobs
• 200-plus industry associations and companies

7
Commitments to Trade in BPT

• US has very extensive Mode 1 commitments
• China has committed in many services
• Except
• Advertising - only through agents in China
• Architecture - foreign firms must partner with
  Chinese firms

8
Doha Round Goals China Join Government
Procurement Agreement

• China and US are exporters (insourcers) of BPT
  services
• Share offensive objectives
• Should cooperate to seek extensive Mode 1
  commitments by other WTO Members
• China needs world class software industry
• Will make China attractive to outsourcers
• China should abandon its effort to favor Chinese
  software suppliers
• Will hurt Chinese competitiveness
• CHINA SHOULD JOIN GPA
• Its in CHINAs interest

9
Conclusion

• Outcry against outsourcing took business and US
  administration by surprise
• US administration took correct position
• Industry organized
• Mounted successful offense
• Now advance international agenda with high level
  of WTO commitments